Question: Lang Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 72,000 units per year.
| Revenue (34,000 units × $9) |
$ |
306,000 |
|
| Unit-level variable costs |
|
|
|
| Materials cost (34,000 × $2) |
|
(68,000 |
) |
| Labor cost (34,000 × $1) |
|
(34,000 |
) |
| Manufacturing overhead (34,000 × $0.20) |
|
(6,800 |
) |
| Shipping and handling (34,000 × $0.28) |
|
(9,520 |
) |
| Sales commissions (34,000 × $1) |
|
(34,000 |
) |
|
|
|
|
| Contribution margin |
|
153,680 |
|
| Fixed expenses |
|
|
|
| Advertising costs |
|
(29,000 |
) |
| Salary of production supervisor |
|
(66,000 |
) |
| Allocated companywide facility-level expenses |
|
(83,000 |
) |
|
|
|
|
| Net loss |
$ |
(24,320 |
) |
a. Should Lang accept the special order? yes or no?
b. Lang has an opportunity to buy the 34,000 calculators it currently makes from a reliable competing manufacturer for $4.80 each. The product meets Lang's quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
make or buy
b2. Calculate the totel cost for lang to make and buy the 34000 calculators
Total cost make buy
b3.Should lang buy the calculators or continue to make them, if the volume of sales were increased to 72,000 units
buy or make
c1. calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.)
c2. Should it be eliminated from the company's operations?
yes or no