Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) The Minnetonka Corporation, that manufactures and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. Company is considering production of cross-country skis.

After considerable research, a cross-country ski line has been developed. Because of conservative nature of the company management, though, Minnetonka's president has decided to introduce only one kind of the new skis for this coming winter. If product is a success, further expansion in future years will be initiated.

Ski selected is a mass-market ski with special binding. It will be sold to wholesalers for $80 per pair. Because of availability capacity, no extra fixed charges will be incurred to manufacture the skis. A $100,000 fixed charge will be absorbed by the skis, though, to assign a fair share of the company's present fixed costs to new product.

Using estimated sales and production of 10,000 pair of skis as expected volume, accounting department has developed the following cost per pair of skis and bindings:

Direct Labor: $35

Direct Material: $30

Total Overhead: $15

Total: $80

Minnetonka has approached subcontractor to describe possibility of purchasing bindings. Purchase price of the bindings from subcontractor would be $5.25 per binding, or $10.50 per pair. If Minnetonka Corporation accepts the purchase proposal, it is forecasted that direct-labor and variable-overhead costs would be decreased by 10% and direct-material costs would be reduced by 20%.

1. Should Minnetonka Corporation make or buy bindings? Illustrate computations to support your answer.

2. What would be maximum purchase price acceptable to Minnetonka Corporation for the bindings? Support your answer with an suitable explanation.

3. Instead of sales of 10,000 pair of skis, revised estimates show sales volume at 12,500 pair. At this new volume, extra equipment, at the annual rental of $10,000 should be acquired to manufacture bindings. This incremental cost would be the only additional fixed cost needed even if sales increased to 30,000 pair. (This 30,000 level is goal for third year of production.) Under these situations, should Minnetonka Corporation make or buy bindings? Illustrate calculations to support your answer.

4. What qualitative factors (i.e. issues with vendors, customers, or within product itself) should Minnetonka Corporation consider in finding whether they muts make or buy bindings?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M921470

Have any Question? 


Related Questions in Accounting Basics

Your city has decided to build a new library the projected

Your city has decided to build a new library. The projected cost is $2 million. A bond issue for $1.2 million has been authorized, and the remainder is supposed to come from a contribution of $800,000 from the general fu ...

Business assignmentthe comany i have choosen is upsresearch

Business Assignment The comany i have choosen is UPS. Research a company that interests you from the Fortune 500. (A list will be provided). Analyze what they do. What business are they in? What industry? How have they b ...

Assignmentexercise 1 treatment of nsf checkthe bank

Assignment Exercise 1 Treatment Of NSF check The bank statement of Stone Supplies included a $300 NSF check that one of Stone's customer had written to pay for services that were provided by Stone. Required a. Show the e ...

Discussionpart 1 please respond the following question no

Discussion PART 1 PLEASE RESPOND THE FOLLOWING QUESTION NO LESS THEN 350 WORDS (ORIGINAL WORK, NO PLAGIARISM, 1 Reference "Negative Cash Flow" Please respond to the following: • Assess how the free cash-flow method can b ...

Assignemntselect a research issue problem or opportunity

Assignemnt Select a research issue, problem, or opportunity that could benefit from hypothesis testing. It may be an issue related to your work or it may a more global type of problem. Develop a research hypothesis that ...

Question 1 buttercup corporation issued 300

Question 1 Buttercup Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare Buttercup's journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manu ...

To write discussion post to given answerrequirementsdo not

To write discussion post to given answer Requirements: Do not use any direct quotes and/or cut and pasted information (i.e. your discussion is to be 100% your thoughts, ideals and insights). You can agree or disagree wit ...

Question 1medeco bought goods for 250 on credit medeco

Question 1 Medeco bought goods for $250 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount it should pay? A. $2 ...

Problem -a list of transactions appears below indicate

Problem - A list of transactions appears below. Indicate which accounting elements of the business are affected by placing in the respective columns the amount and the + (increasing) - (decrease) sign or NA, if the eleme ...

Discussionpart 1 please respond the following question no

Discussion Part 1 please respond the following question no less then 350 words (original work, no plagiarism, 1 reference "S Corporation" Please respond to the following: • Per the text and IRC, losses and deductions of ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro