Mission Electronics manufactures and sells basic DVD players for sale under vari
ID: 2421606 • Letter: M
Question
Mission Electronics manufactures and sells basic DVD players for sale under various generic store brand names. The cost of one of their models follows:
Pacific Cash & Carry, a chain of low-price electronic sales and rental outlets, has asked Mission to supply them with 38,000 players for a special promotion Pacific is planning. Pacific has offered to pay Mission a unit price of $54 per DVD player. The regular selling price is $79. The special order would require some modification to the basic model. These modifications would add $5.90 per unit in material cost, $3.40 per unit in labor cost, and $2.40 in variable overhead cost. Although Mission has the capacity to produce the 38,000 units without affecting its regular production of 469,000 units, a one-time rental of special testing equipment to meet Pacific’s requirements would be needed. The equipment rental would be $68,800 and would allow Mission to test up to 69,000 units.
Prepare a schedule to show the impact of filling the Pacific order on Mission’s profits for the year.(Enter your answers in thousands of dollars. Round your answers to 1 decimal place.)
Mission Electronics manufactures and sells basic DVD players for sale under various generic store brand names. The cost of one of their models follows:
Explanation / Answer
filling the Pacific order will decrease missison profits by $8000 Statement showing computations Particulars Amount Sales = 38000 *54 2,052,000.00 Costs: Materials = 38000 *(19.90 + 5.90) 980,400.00 Labour = 38000* (13.90 + 3.40) 657,400.00 Variable Overhead = 38000*(6.90 + 2.40) 353,400.00 Rental 68,800.00 Total Costs 2,060,000.00 Income = 2052000 - 2060000 (8,000.00)