Farmer Inc manufacuring automation machinary according to customer specification the company operated at 75 percent of practical capacity during the year just ended with the following result
- sales revenu $25,000,000
- less sales commision 10% 2500000
- net sales $ 22,500,000
- expenses
- unit level cost $ 15,750,000
- facility level cost 2,250,000
- total cost $ 18,000,000
- income befor tax 4,500,000
- income tax 40% 1,800,000
- net income 2,700,000
Farmer expected to continue operation at 75 percent of capacity recently submitted abid of $ 135,238 on some custom designed machinery to APA Inc to drive the bid amout farmer use a pricing formula based on last yearoperating result
- estimated materials unit level $ 29,200
- estimated labor unit level 56,000
- facility cost at 14.29% of unit level 12,171
- estimated total cost excluding sales commission$ 97,371
- add 25% markup for profit and tax 24,343
- suggested price with profit befor sales commission $ 121,714
- suggested total price $ 121,714/9 to adjusted for 10% commisssion $ 135, 238
A calculate the impact the order will have on farmer's net incom if APA accepts the $ 135, 238 bid
B assume that APA has rejected farmer's bid but has stated that it is willing to pay $ 127,000 for the machinery should farmer manufacture the machinery for the counteroffer of the $ 127,000 show your calculation
c at what bid price will farmer break even on the order
D explain how the profit performance in the coming year effected if farmer accepted allof its work at price similar to APA $ 127,000 counteroffer inn B.