Reference no: EM132841144

Question - Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is:

Variable cost per screen $118

Fixed cost per screen 31**Based on a capacity of 820,000 screens per year.

Total cost per screen $149

The net operating income associated with the Quark Division's HDTV is computed as follows:

Selling price per unit $576

Variable cost per unit:

Cost of the screen $190

Variable cost of electronic parts 239

Total variable cost 429

Contribution margin 147

Fixed costs per unit 89**Based on a capacity of 230,000 units per year.

Net operating income per unit $58

Required -

1. Assume the Quark Division has enough idle capacity to fill the 5,100-unit order. Is the division likely to accept the $407 price or to reject it?

2. Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $407 price?

3. Assume the Quark Division has idle capacity but that the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $407 unit price?