Answered You can hire a professional tutor to get the answer.
Fillmore Steel Company of Texas manufacturers Part 748 (a component used in the Diesel engines).
In addition, the company incurs $1.00 per unit on Freight and also pays 5% (on selling price) as sales commissions. The regular selling price of Part 748 is $34.00 per unit. The manufacturing overhead rate is $24.00 per hour which 1/3 is variable and 2/3 is FIXED. It requires 1/2 hour to manufacture one unit. The direct materials and direct labor are considered as VARIABLE costs.
Hunai Manufacturing Company of Tokyo, Japan has approached the Fillmore Steel Company for the purchase of 30,000 units of Part 748 next month at $20.00 per unit, FOB shipping point. Fillmore Steel Company will NOT pay any sales commission on this special order. However, an additional FIXED cost of $13,000 for the month will have to be incurred for additional administrative and clerical work. This cost is exclusively related to the special order.
The management of Fillmore Steel Company has approached you to solve this problem.
REQUIRED:
- A income statement to analyze accept/reject alternative.
- What is the minimum price at which Part 748 can be sold to Belfast Company by maintaining the current level of net income?
- Calculate the contribution margin per unit nd the break-even level (in units) disregarding the purchase offer from Hunai Manufacturing Company.
- In case, if this special order is to be accepted, how best you can convince the regular customers, who paying $34.00 for Part 748.
PLEASE show all calculations as this is a case project for an oral presentation. Thanks.
