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Yoshi Company manufactures three different models of colour plasma screens: PS1, PS2, and PS3. Data on the three

models is presented below:

PS1

PS2

PS3

Selling Price

$360

$540

$480

Unit variable cost

$240

$360

$340

Annual production units

4,800

3,200

4,200

Machine-hours per unit

6

12

8

Avoidable fixed costs if product line is eliminated

$46,800

$38,200

$52,500

Yoshi's production capacity is 90,000 machine-hours per year.

Chiyo Company has offered to purchase 4,800 units of a simpler version of PS3 for $435. Yoshi estimates that this version of the PS3 would result in variable costs of $305 per unit to manufacture and 7 machine hours per unit, plus an additional fixed cost of $62,000 for a new assembly machine. The order has to be either taken in full or rejected totally. If Yoshi takes the special order, it will not produce and sell PS3 to compete with Chiyo.3.jpgShould Yoshi accept the special order from Chiyo? What is the incremental operating income/loss for accepting this order?

3.jpg

Yoshi Company manufactures three different models of colour plasma screens: P81,
P82, and PS3. Data on the three models is presented below: PS1 P82 P33
Selling Price $360 $540 $480
Unit variable cost $240 $360 $340
Annual production units 4,800 3,200 4,200
Machine-hours per unit 6 12 8
Avoidable fixed costs if $46,800 $38,200 $52,500
product line is eliminated Yoshi’s production capacity is 90,000 machine-hours per year. Chiyo Company has offered to purchase 4,800 units of a simpler version of P83 for
$435. Yoshi estimates that this version of the PS3 would result in variable costs of $305
per unit to manufacture and 7 machine hours per unit, plus an additional fixed cost of
$62,000 for a new assembly machine. The order has to be either taken in full or rejected
totally. If Yoshi takes the special order, it will not produce and sell PS3 to compete with
Chiyo. Required:
Note: Show all of your work in performing your calculations.

Top Answer

Steps are: Check whether machine hours are key factor. If yes. Then calculate cont. Per hour per... View the full answer

15760630549858777357636159229168.jpg

calculation of MIC hours
aquired .
is 1 = 480 0x 6
is z
28 80 0
3200 X 12
3840 0
4200 x 8
3 360 0
MIC has. Rug
100, 80 0
MIC Is available
90, 00 0
Shortage
10,800
Theyyove MIC hours are key factor...

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