If fastenalt does not have excess capacity to accept hanks

Assignment Help Accounting Basics

Reference no: EM13592092

Fastenalt is an industrial supply manufacturer that provides HVAC Specialty Thermostats to manufacturers and retailers. Fastenalt has experienced substantial growth in the past three years and is known for its high quality thermostats and reliable on-time delivery. These characteristics have resulted in high customer satisfaction. Fastenalt focuses on the strategic objectives of quality, reliability and growth. Fastenalt's operating capacity is 4,000 thermostats per month and is currently selling 3,500 thermostats each month. Fastenalt has received a request for a special order of 800 specialty thermostats for $150,000 from Hank's Retailer. Hank's is the largest hardware retailer in the metropolitan area and surrounding region. Hank's is not a current customer of Fastenalt's. Production costs for the thermostats would be the same however Fastenalt would incur additional set-up costs of $20,000 to complete Hank's order. No marketing costs would be associated with the special order. If Fastenalt accepts the special offer, Hank's requires that Fastenalt fill the entire order of 800 units.
The following information is for Fastenalt's current operations:

Sales & production data for 4,000 Specialty Thermostats
Amounts per unit (Thermostat)
Sales price $250.00
Direct materials 64.00
Direct labor 50.00
Variable overhead 35.00
Fixed overhead 25.00
Variable marketing 15.00
Fixed marketing 12.00

Required: Complete each of the following questions. CLEARLY SHOW CALCULATIONS TO SUPPORT EACH ANSWER. - NO SUPPORTING CALULATIONS = NO CREDIT.

1. Does Fastenalt have the capacity to accept the special order from Hank?

2. If Fastenalt accepts Hank's special order, what is Fastenal's cost from lost sales of current customers?

3. Using a relevant cost analysis should Fastenalt accept Hank's special order?

4. If Fastenalt does not have excess capacity to accept Hank's offer, what is the minimum price Fastenalt should accept from Hank's for the special order?

5. If Fastenalt has excess capacity, what is the minimum price Fastenalt should accept from Hank's for the special order?

6. Refer back to Fastenalt's original capacity of 4,000 units. Discuss the strategic implications of accepting Hank's offer.

7. Discuss the strategic implications of rejecting Hank's offer.

Reference no: EM13592092

Questions Cloud

Excello telecommunications has been profitable for many : write a 1200- to 1500-word paper explaining the legal aspects financial standards involved and ethicality of the

You are a manager of a large home improvement store what : you are a manager of a large home improvement store. what are the five factors that you believe are most critical to

Bailey company sells 25424 units at 1500 per unit variable : bailey company sells 25424 units at 15.00 per unit. variable costs are 8.00 per unit and fixed costs are 8.00. the

Oneill co has 296467 in accounts receivable on january 1 : oneill co. has 296467 in accounts receivable on january 1. budgeted sales for january are 835975. oneill expects to

If fastenalt does not have excess capacity to accept hanks : fastenalt is an industrial supply manufacturer that provides hvac specialty thermostats to manufacturers and retailers.

A lease agreement calls for quarterly lease payments of : a lease agreement calls for quarterly lease payments of 5600 over a 15-year lease term with the first payment at july 1

Charles austin of the controllers office of thompson : charles austin of the controllers office of thompson corporation was given the assignment of determining the basic and

Win corporation sells a single product budgeted sales for : win corporation sells a single product. budgeted sales for the year are anticipated to be 675521 units estimated

Southern company is preparing a cash budget for april the : southern company is preparing a cash budget for april. the company has 12000 cash at the beginning of april and

User Account

All Pages