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Tony Hawk Inc. (Hawk) is a wholesale distributor supplying moderately priced sporting equipment to large chain stores. Hawk manufacturers and sells 20,000 tackle boxes annually, making full use of its direct labour capacity at available workstations.
Following are the selling price and costs associated with Hawk's tackle boxes: Selling price per box $86.00
Costs per box: Direct material $17.00 Direct labour 18.75
Fixed manufacturing overhead:
Depreciation on equipment ($65,000 / 20,000) 3.25 Production supervisor's salary ($185,000 / 20,000) 9.25 Selling and administrative costs 17.00 65.25 Profit per box $20.75
REQUIRED:
Problem 1: Determine whether Tony Hawk Inc. should accept the supplier's offer to provide 20,000 tackle boxes at $54 per box.
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