Reference no: EM132082277

Question: Treasure Island Beach Equipment, Inc., manufactures deluxe beach cabanas in Tampa, Florida. Its manufacturing plant has the capacity to produce 2,300 cabanas each month. Current monthly production is 1,725 cabanas. The company normally charges $590 per cabana. Variable costs and fixed costs for the current activity level of 75 percent of capacity are shown in the table below. Management has just received a special one-time order for 575 cabanas at $365 per cabana. For this particular order, no variable marketing costs will be incurred. Samantha Peters, the assistant controller, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Peters suggested to her supervisor, Katie Maas, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. Maas insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Peters later discovered that Maas is a sister-in-law of the owner of the current raw-material supply vendor. Current Product Costs (at 75% of Capacity) Variable costs: Manufacturing: Direct labor $ 241,500 Direct material 232,875 Marketing 129,375 Total variable costs $ 603,750 Fixed costs: Manufacturing $ 206,850 Marketing 155,400 Total fixed costs $ 362,250 Total costs $ 966,000 Variable cost per unit $ 350 Fixed cost per unit 210 Average unit cost $ 560

1. Which of the following costs will be relevant to Peters' analysis of the special order being considered by Treasure Island Beach Equipment, Inc.? . fixed marketing cost . Variable costs of labor and material. .Fixed manufacturing costs. .Variable marketing cost.

2.

2-a. Should management accept the special order? Yes No

2-b. Compute the new average unit cost for (a) current monthly production alone; (b) the special order alone; and (c) total combined production. current monthly production ___ the special order _____ total combination production ___

3. Identify the considerations that Peters should include in her analysis of the special order(Select all that apply.)

a. The future customer potential of the buyer of the special order, generating additional revenues.

b. Acceptance of the special order could result in higher bonuses for the department's staff.

c. Possible problems with other customers who pressure the company for similar treatment.

4. Which of the following statements are true regarding Peterson's possible response to the ethical conflict arising out of the controller's insistence that the company avoid competitive bidding? (Select all that apply.)

a. She should never go to the next-higher managerial level as this would mean by passing of levels of authority and create further damage to her relations with the manager.

b. Ethical conflicts are a part of everyday office life and is no cause for resigning.

c. She should follow the company's established policies on such matters.

d. The ethical requirement of competence would imply that Peters should try and resolve the conflict herself instead of discussing with other advisors.

e. If the ethical conflict still exists after exhausting all avenues of internal review, she may have to resign from the company and submit an informative memorandum to the board of directors.

f. She should clarify relevant concepts by confidential discussions with an objective advisor to obtain an understanding of possible courses of action.