Reference no: EM131287134
Mason textile company manufactures high quality bed sheets and sells them in sets to a well known retail company for 64$ a set. Mason has sufficient capacity to produce 150000 sets of sheets anually. the retail company currently purchases 100000 sets each year. mason unit level cost is 36$ per set and its fixed cost is 840000 per year. a motel chain has offered to purchase 15000 sheet sets from mason for 45$ per set. If mason accepts the order the contract will prohibit the motel chain from reselling the bed sheets.
Required: should mason accept or reject the special order? support your answer with appropriate computation.
Part b
Bradley coorporation is considering the elimination of one of its segments. the following fixed costs pertain to the segment. If the segment is eliminated the building it uses will be sold
annual advertising expense $180000
MARKET VALUE OF BUILDING 30000
ANNUAL DEPRECIATION OF BUILDING 20000
ANNUAL MAINTNANCE COST ON EQUIPMENT 26000
ANNUAL REAL ESTATE TAXES ON BUILDING 8000
ANNUAL SUPERVISORY SALARY 72000
ANNUAL ALLOCATION OF COMPANY WIDE FACILITY LEVEL COST 30000
ORIGINAL COST OF BUILDING 75000
CURRENT BOOK VALUE OF BUILDING 54000
Required: Based on the information determine the amount of avoidable cost associated with the segment.
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