∙ Sales units equal production units each year . What is the estimated life-cycle operating income for the first year ? Please check the attached excel sheet for computations 4 . ( TCO 8 ) Sportswear Company manufactures socks . The Athletic Division sells its socks for $ 6 a pair to outsiders . Socks have manufacturing costs of $ 2.50 each for variable and $ 1.50 for fixed . The division ' s total fixed manufacturing costs are $ 105,000 at the normal volume of 70,000 units . The European Division has offered to buy 15,000 socks at the full cost of $ 4 . The Athletic Division has excess capacity and the 15,000 units can be produced without interfering with the current outside sales of 70,000 . The 85,000 volume is within the division ' s relevant operating range . Explain whether the Athletic Division should accept the offer . Support your decision showing all calculations . ( Points : 25 ) ========================================= ACCT 434 Final Exam Set 5
compete . Marketing believes that the new price will increase sales by 25 % a year . The plant manager thinks that production can increase by 25 % with the same level of fixed costs . The company Question 2 : What is the annual operating income from Deluxe if the price is reduced to $ 4,000 and sales in units increase by 25 %? ( TCO 7 ) Grace Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines . Information for one new product , traditional parchment grade cards , is as follows :
∙ Sixteen times each year , a new card design will be put into production . Each new design will require $ 600 in setup costs .
∙ The parchment grade card product line incurred $ 75,000 in development costs and is expected to be produced over the next four years .
∙ Direct costs of producing the designs average $ 0.50 each .
∙ Indirect manufacturing costs are estimated at $ 50,000 per year .
∙ Customer service expenses average $ 0.10 per card .
∙ Current sales are expected to be 2,500 units of each card design . Each card sells for $ 3.50 .
∙ Sales units equal production units each year . What is the estimated life-cycle operating income for the first year ? Please check the attached excel sheet for computations 4 . ( TCO 8 ) Sportswear Company manufactures socks . The Athletic Division sells its socks for $ 6 a pair to outsiders . Socks have manufacturing costs of $ 2.50 each for variable and $ 1.50 for fixed . The division ' s total fixed manufacturing costs are $ 105,000 at the normal volume of 70,000 units . The European Division has offered to buy 15,000 socks at the full cost of $ 4 . The Athletic Division has excess capacity and the 15,000 units can be produced without interfering with the current outside sales of 70,000 . The 85,000 volume is within the division ' s relevant operating range . Explain whether the Athletic Division should accept the offer . Support your decision showing all calculations . ( Points : 25 ) ========================================= ACCT 434 Final Exam Set 5