The Bolger Corporation has the capacity to produce 50,000 straw hats with its pr

Question

The Bolger Corporation has the capacity to produce 50,000 straw hats with its present facilities. There are no beginning or ending inventories. The following information is available: Total sales $1,200,000, Normal selling price per hat $30, Variable production costs per hat $13, Avoidable fixed manufacturing overhead $28,000, Unavoidable fixed manufacturing overhead, $100,000 Unavoidable fixed selling & administrative costs $56,000. Lahr Company wants to buy 10,000 straw hats but cannot spend more than $15 per hat. Should Bolger sell the hats to Lahr Company for $15 per hat? No, the offered price is half the normal selling price and Bolger Corp. would lose $26,000 operating income. Yes, Bolger Corp's operating income will increase by $20,000 total. Yes, Bolger Corp's operating income will increase by $13,000 total. margin on each hat sold.

Explanation / Answer

Sales (10000*15) 150000 less:expenses variable production (10000*13) 130000 contribution margin 20,000 yes,Bolgers Corps operating income will increase by $20,000 total

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