Cayman Products manufactures and sells to wholesalers approximately 300,000 pack

Question

Cayman Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $4 per package. Annual costs for the production and sale of this quantity are shown in the table.

A new wholesaler has offered to buy 50,000 packages for $3.44 each. These markers would be marketed under the wholesaler%u2019s name and would not affect Cayman Products%u2019 sales through its normal channels. A study of the costs of this additional business reveals the following:

Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at one-and-one-half times the usual labor rate.

25% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 75% of the annual overhead cost is variable with volume.

Cayman Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $4 per package. Annual costs for the production and sale of this quantity are shown in the table.

Explanation / Answer

ANSWER KEY
CAYMAN PRODUCTS
COMPARATIVE INCOME STATEMENTS
NORMAL VOLUME NEW BUSINESS COMBINED
SALES
COST & EXPENSES
DIRECT MATERIALS
DIRECT LABOR
OVERHEAD
SELLING EXPENSES
ADMINISTRATIVE EXPENSES
TOTAL COST AND EXPENSES
SUPPORTING COMPUTATIONS
NORMAL VOLUME
NORMAL DIRECT MATERIALS COST
UNITS OF OUTPUT
COST PER UNIT
NEW BUSINESS VOLUME
NEW DIRECT LABOR COST

NORMAL DIRECT LABOR COST
UNITS OF OUTPUT
COST PER UNIT
OVERTIME PER UNIT
NEW BUSINESS DIRECT LABOR COST PER UNIT
NEW BUSINESS DIRECT LABOR COST

TOTAL OVERHEAD
FIXED OVERHEAD
VARIABLE OVERHEAD
UNITS OF OUTPUT
COST PER UNIT
NEW BUSINESS VOLUME
NEW BUSINESS VARIABLE OVERHEAD COST

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.