tpx The following information applies to the questions displayed below packaged
ID: 2570759 • Letter: T
Question
tpx The following information applies to the questions displayed below packaged sets. All games are in CD format, and some utlize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufectuned all the CDs itself as well as the accessories and packaging for all of its products The gaming market has traditionaily been targeted at teenagers and young and elementary capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profrability and the curriculums has led to a significant increase in sales to younger children. MSI has always games for younger children but now wants to expand its business to ponts MSI has not sold its to correspond to her t but its Marketing Department identifed that possibility during a recent meeting The teacher has offered to buy 1,000 copies of the CD at a price of $6.00 each, MSI could easily modity one of its existing would cost approximately $330. A summary of the information related to production of MSiTs current history program follows S 1.19 0.41 2.23 1.90 Sales price per unit 3Explanation / Answer
Req 1: Variable cost per unit: Direct material 1.19 Labour cost 0.41 Variable overheads per unit 2.23 Variable cost per unit 3.83 Selling price of special order $ 6 per unit Contribution per unit (Selling price - Variabe cost) ( 6-3.83 ) = $ 2.17 per unit Total contribution earned from 1000 special orders ( 1000*2.17) 2170 Less:Modifications cost 330 Incremental profit earned from Special order 1840 Profit increased by $ 1840 Req 2: MSI should accept the order. YES Req 3: Now, if Selling price of special order $ 5.50 per unit Then contribution earned per unit ( 5.50 - 3.87 ) = $ 1.67 per unit Total contribution earned from 1000 special orders ( 1000*1.67) 1670 Less:Modifications cost 330 Incremental profit earned from Special order 1340 Profit increased by $ 1340 Req 4: Contribution earned from existing customer: Selling price to existing customer 14 Less: Variable cost per unit 3.83 Contribution earned per unit 10.17 Now, Selling price for special order should have been: Variable cost per unit 3.83 Contribution per unit lost from existing customer 10.17 Per unit Modification cost (330/1000) 0.33 Selling price for special order 14.33
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