Problem 14-55

Revenue $68,400 $62,500 $52,000 Less: Relevant costs Direct Materials $6,200 $2,850 - Direct Labor $4,200 $3,300 - Sales commisions $2,052 $1,250 $1,560 Sales discount - $1,250 - Variable manufacturing costs $2,100 $1,650 - Net benefit $53,848 $52,200 $50,440 2. If Kaytell makes Miami Industries a counteroffer, what is the lowest price Miami should accept for the rewo Contribution from 1st alternative sale $53,848 Contribution from 2nd alternative sale $52,200 Direct Materials $6,200 Direct Labor $4,200 Variable manufacturing costs $2,100 Total $64,700 Lowest sales price $66,701 3. Discuss the influence fixed manufacturing-overhead cost should have on the sales price quoted by Miami In 1. Determine the dollar contribution each of the three alternatives will add to Miami Industries' before-tax profit. 1st alternative 2nd alternative 3rd alternative Miami Industries should consider a minimum acceptable sale price of $66,701. This price ensures that the com machine, and it reaches a point of indifference between selling the machine to Kaytell and converting it into a Miami Industries' management to prefer the conversion of the machine to a standard model. Fixed manufacturing overhead costs should not influence the sales price quoted by Miami Industries for speci should primarily be on marginal costs and revenues. The decision to accept or reject a special order should be contributes positively to covering fixed costs, as fixed costs are incurred irrespective of the order's acceptance
orked machinery from Kaytell? Explain your answer. ndustries for special orders. mpany secures at least the second-best offer for the a standard model. Any price below $66,701 would lead ial orders. When evaluating special orders, the focus e based on whether the order covers variable costs and e.
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