Reference no: EM13577836

Farmer Inc manufacuring automation machinary according to customer specification the company operated at 75 percent of practical capacity during the year just ended with the following result

• sales revenu                            $25,000,000
• less sales commision 10%           2500000
• net sales $ 22,500,000
• expenses
• unit level cost                          $ 15,750,000
• facility level cost                       2,250,000
• total cost $                              18,000,000
• income befor tax                        4,500,000
• income tax 40%                         1,800,000
• net income                                2,700,000

Farmer expected to continue operation at 75 percent of capacity recently submitted abid of $ 135,238 on some custom designed machinery to APA Inc to drive the bid amout farmer use a pricing formula based on last yearoperating result

1. estimated materials unit level $ 29,200
2. estimated labor unit level 56,000
3. facility cost at 14.29% of unit level 12,171
4. estimated total cost excluding sales commission$ 97,371
5. add 25% markup for profit and tax 24,343
6. suggested price with profit befor sales commission $ 121,714
7. suggested total price $ 121,714/9 to adjusted for 10% commisssion $ 135, 238

A calculate the impact the order will have on farmer's net incom if APA accepts the $ 135, 238 bid

B assume that APA has rejected farmer's bid but has stated that it is willing to pay $ 127,000 for the machinery should farmer manufacture the machinery for the counteroffer of the $ 127,000 show your calculation

c at what bid price will farmer break even on the order

D explain how the profit performance in the coming year effected if farmer accepted allof its work at price similar to APA $ 127,000 counteroffer inn B.