Respuesta :
Top company would accept the order as it increases the total profit of the corporation by $90000
How to illustrate the information?
As a company as a whole, Tops corporation will accept orders if the contribution margin increases by accepting orders.
a. The contribution margin will be:
= sales price - variable cost of manufacturing department - variable cost of marketing department
= $400 - [$2400*1000/10000units] - $70
= $400 - $240 - $70
= $90
Therefore, the increase in profit will be:
= $90 × 1000
= $90000
Top company would accept the order.
b. The marketing department will accept the order as it increases its profit by $400000-$370000 = 30000.
c. The manufacturing division manager would accept the order as it increases its profit by $60000. This was gotten as:
= (300 × 1000) - (240 × 1000)
= 300000 - 240000
= 60000
The other parts of the question include:
The company has just received an offer to buy 1,000 units of the product this month at a price of $400 per unit. The Marketing Division manager suggests that for the special order only, the transfer price be set at 50 percent of the sales price, or $200 per unit. Instead, assume the transfer price is unchanged from the current transfer price.
Required:
a. Does Tops Corporation want to accept this order?
b. Will the Marketing Division manager be willing to accept this order?
c. Will the Manufacturing Division manager be willing to accept this order?
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