Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by...

80.2K

Verified Solution

Question

Accounting

imageimageimageimageimageimageimageimage Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 2,100 of the US umbrellas at a price of $17 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose that the special order had been to purchase 2,600 umbrellas for $15.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Complete this question by entering your answers in the tabs below. Compute the incremental profit (or loss) from accepting the special order. Suppose that the special order had been to purchase 2,600 umbrellas for $15.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. Complete this question by entering your answers in the tabs below. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order. Mohave Corp. is considering eliminating a product from its Sand Trap line of beach umbrellas. This collection is aimed at people who spend time on the beach or have an outdoor patio near the beach. Two products, the Indigo and Verde umbrellas, have impressive sales. However, sales for the Azul model have been dismal. Mohave's information related to the Sand Trap line is shown below. *Allocated based on total sales revenue Mohave has determined that eliminating the Azul model would cause sales of the Indigo and Verde models to increase by 10 percent and 15 percent, respectively. Variable costs for these two models would increase proportionately. Although the direct fixed costs could be eliminated, the common fixed costs are unavoidable. The common fixed costs would be redistributed to the remaining two products. Required: 1-a. Complete the table given below, assuming Mohave Corp. drops the Azul line. 1-b. Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? 2. Should Mohave drop the Azul model? 3-a. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. 3-b. Should Mohave drop the Azul model? 3-c. What is the increase or decrease in the net operating income of Mohave? Complete the table given below, assuming Mohave Corp. drops the Azul line. (Do not round intermediate calculations. Round Common Fixed Costs to the nearest whole dollar.) Complete this question by entering your answers in the tabs below. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. What is the increase or decrease in the net operating income of Mohave

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students