Reference no: EM132912396
Question - SKS makes both X-wing and Y-wing starfighters. X-Wing starfighters are more expensive and have significantly higher labour costs. You have the following planned production information for 2013 on each:
Sky Fighters
|
X-Wing
|
Y-Wing
|
Sales price
|
180
|
120
|
Labour
|
72
|
29
|
Material
|
41
|
36
|
Planned production
|
100,000
|
50,000
|
Total indirect production costs are expected to be $1,500,000 this year. They are most closely related to labour costs.
Fixed costs for 2021 are expected to be 5,000,000 and are allocated evenly to each product line.
a) Create a contribution margin income statement for 2021?
b) The New Republic is concerned about increases in the cost of unobtainium which is needed to make starcraft. They want SKS to make a small number (1,000) of experimental starfighters based on the Y-wing but using only $20 of material. All other costs will be the same as the Y-Wing. The New Republic is willing to pay $60 for each experimental starfighter, code named Zatz-wing.
Based on cost and profit, advise the president of SKS, GEORGE LUCUS, if he should accept the order? Show all work.