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

Assignmentduring your examination of the accounts

Assignment During your examination of the accounts receivable of Hope Ranch, a new client, you notice that one account is much larger than the rest, and you therefore decide to examine the evidence supporting this custom ...

Problem -using the following proforma information regarding

Problem - Using the following proforma information regarding GE, Inc. based on analysts' forecast in early 2016:   2016E 2017E Next 3 years EPS 1.29 1.56 Growth at 7.59% DPS 0.92 1.11 Growth at 10% The book value of GE's ...

Assignmentas my town is very small and i was unable to find

Assignment As my town is very small and I was unable to find the CAFR, but I was able to find reports for my nearest city (and the one I work in), Concord, NH, for the fiscal year ending June 30, 2015. One thing that I f ...

Assignment accounting qualitybased on the requirements of

Assignment: Accounting Quality Based on the requirements of the Sarbanes-Oxley Act and SEC reporting requirements for publically traded companies, Write a five page paper in which you: 1. Assess the roles of the Board of ...

Write a 700- to 1050-word paper including the followingthe

Write a 700- to 1,050-word paper including the following: The purpose of accounting and financial reporting within your organization or an organization with which you are familiar. A description of the people, processes, ...

Focus of the final paperyouve just been hired onto abc

Focus of the Final Paper You've just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has an ...

Accountingcase to assess assurance of learning goal ethical

Accounting Case to assess Assurance of Learning Goal (Ethical Perspectives) Michael Greer is the Marketing Vice President for Atlantic Lubricants headquartered in Boston with extensive operations in New York City that se ...

Part a -exercise 1 - california graphics is a us

Part A - Exercise 1 - California Graphics is a U.S. corporation with $200 million of U.S.-source income and $10 million of foreign-source income. In addition, California Graphics has three-quarters ownership of a Canadia ...

Accounting discussion questionaccounts receivable bad debt

Accounting Discussion Question "Accounts Receivable Bad Debt Expense (Direct Write Off Method Vs Allowance Method)": • Discuss the primary advantages and disadvantages of applying the direct write-off over the allowance ...

Introductory accounting assignment question 1 - the

INTRODUCTORY ACCOUNTING ASSIGNMENT QUESTION 1 - The information given below was extracted from the books of KAISER TRADERS. REQUIRED: 1.1: Compare the Bank Statement with the Cash Receipts Journal and Cash Payments Journ ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen