Question

Please finish part 1 (a)

Show your work how to get that number and type your answer(no hand writing plz)

Waterways Corporation is considering various business opportunities. It wants to make the best use of its production facilities to maximize income. This problem asks you to help Waterways do incremental analysis on these various opportunities.

Part 1 Waterways mass-produces a special connector unit that it normally sells for $3.90. It sells approximately 35,000 of these units each year. The variable costs for each unit are $2.30. A company in Canada that has been unable to produce enough of a similar connector to meet customer demand would like to buy 15,000 of these units at $2.60 per unit. The production of these units is near full capacity at Waterways, so to accept the offer from the Canadian company would require temporarily adding another shift to its production line. To do this would increase variable manufacturing costs by $0.30 per unit. However, variable selling costs would be reduced by $0.20 a unit. An irrigation company has asked for a special order of 2,000 of the connectors. To meet this special order, Waterways would not need an additional shift, and the irrigation company is willing to pay $3.10 per unit. Instructions Given the information above:

(a) What are the consequences of Waterways agreeing to provide the 15,000 units to the Canadian company? Would this be a wise “special order” to accept?

(b) Should Waterways accept the special order from the irrigation company?

(c) What would be the consequences of accepting both special orders?

Answer 1

1a , ANS :

Waterways Corporation is a private corporation formed for the purpose of providing

the products and the services needed to irrigate farms, parks, commercial projects, and private

homes. It has a centrally located factory in a U. S. city that manufactures the products it markets

to retail outlets across the nation. It also maintains a division that provides installation and war-

ranty servicing in six metropolitan areas. .The mission of Waterways is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its cus-

tomers, provide rapid and responsible service, and serve the community and the employees who

represent them in each community.The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products.

Waterways was founded by Will Winkman who is the company president and chief executive

officer (CEO). Working with him from the company’s inception was Will’s brother, Ben, whose

sprinkler designs and ideas about the installation of proper systems have been a major basis of

the company’s success. Ben is the vice president who oversees all aspects of design and produc-

tion in the company.

The factory itself is managed by Todd Senter who hires his line managers to supervise the

factory employees. The factory makes all of the parts for the irrigation systems. The purchasing

department is managed by Hector Hines.

The installation and training division is overseen by vice president Henry Writer, who su-

pervises the managers of the six local installation operations. Each of these local managers hires

his or her own local service people. These service employees are trained by the home office un-

der Henry Writer’s direction because of the uniqueness of the company’s products.

There is a small Human Resources department under the direction of Sally Fenton, a vice

president who handles the employee paperwork, though hiring is actually performed by the sep-

arate departments. Sam Totter is the vice president who heads the sales and marketing area; he

oversees 10 well-trained salespeople.

The accounting and finance division of the company is headed by Abe Headman, who is the

chief financial officer (CFO) and a company vice president; he is a member of the Institute of

Management Accountants and holds a certificate in management accounting.He has a small staff

of Certified Public Accountants, including a controller and a treasurer, and a staff of accounting

input operators who maintain the financial records.