What should ellen electric do in this situation explain

Reference no: EM13592367

Department A Department B Department C Total
Sales $300,000 $280,000 $120,000 $700,000

Variable Expenses
160,000 175,000 105,000 440,000

Contribution Margin
140,000 105,000 15,000 260,000

Fixed Expenses
65,000 35,000 40,000 140,000

Net Income
$75,000 $70,000 $(25,000) $120,000

Ellen Electric has an offer from a potential supplier to provide 40,000 units at $65 each that Ellen Electric now manufactures at a total cost of $75 per unit. The manufacturing costs for 40,000 units are: direct materials $900,000; direct labor $450,000; variable overhead $900,000; and fixed overhead $750,000. All costs except $500,000 in fixed overhead will be avoided if the parts are purchased.

Required:
(A) What should Ellen Electric do in this situation? Explain fully and show your computations.Would your answer change if Ellen Electric could use the capacity that would become available to produce additional income of $125,000? Explain.

Reference no: EM13592367

Questions Cloud

Marsden manufactures a cat food product called special : marsden manufactures a cat food product called special export. marsden currently has 10000 bags of special export on

The distance along the ground form the airplane to the : an airpleane is flying at a height of 2 miles above the ground. the distance along the ground form the airplane to the

Deloise company purchased a new machine on september 1 2012 : deloise company purchased a new machine on september 1 2012 at a cost of 91920. the company estimated that the machine

The angle of depression from the bird to the feet of an : a bird sits on top of a lamppost. the angle of depression fromt he bird to the feet of an observer standing away

What should ellen electric do in this situation explain : department a department b department c total sales 300000 280000 120000 700000 variable expenses 160000 175000 105000

Rental co exchanged 400 shares of wood co common stock : rental co. exchanged 400 shares of wood co. common stock which rental was holding as an investment for equipment from

Problem 10--payback period and simple rate of returngocke : problem 10--payback period and simple rate of return.gocke company is considering purchasing a machine that would cost

How much higher or lower would the companys first-year net : reeses tot toy boxes uses variable costing to manage its internal operations. the following data relate to the companys

Assume januarys processing time will be the same as : the james company collected the following information in days for november and december.novemeber decembertransporting

User Account

All Pages