On March 1, Marquette is approached by the developer of a large subdivision who wants to install an invisible fence in the yard of 1,200 homes he is constructing. The developer will contract with Marquette for the 1,200 fences on the condition that they are delivered within 30 days (March 31). This is not good timing for Marquette since they have recently signed a contract with Home Warehouse, a national home improvement chain and have been working at 100% capacity for several months. If Marquette accepts the builder’s order, it will lose 1,200 units that would normally be sold to one of its existing customers. When they tell the developer that they do not believe they can fill his order, he offers to reimburse the company for his “share” of the fixed manufacturing costs and will pay a $5,000 “bonus” on delivery. Since the sale to the developer will not incur any variable marketing costs, Marquette reconsiders accepting the developer’s order. What impact will accepting this order have on Marquette’s income in March? Should Marquette accept the order from the developer? Why or Why not? (Show all supporting calculations).
On March 1, Marquette is approached by the developer of a large subdivision who wants to install an invisible fence in the yard of 1,200 homes he is constructing. The developer will contract with Marquette for the 1,200 fences on the condition that they are delivered within 30 days (March 31). This is not good timing for Marquette since they have recently signed a contract with Home Warehouse, a national home improvement chain and have been working at 100% capacity for several months. If Marquette accepts the builder’s order, it will lose 1,200 units that would normally be sold to one of its existing customers. When they tell the developer that they do not believe they can fill his order, he offers to reimburse the company for his “share” of the fixed manufacturing costs and will pay a $5,000 “bonus” on delivery. Since the sale to the developer will not incur any variable marketing costs, Marquette reconsiders accepting the developer’s order. What impact will accepting this order have on Marquette’s income in March? Should Marquette accept the order from the developer? Why or Why not? (Show all supporting calculations).
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 4CMA: Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold...
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- On March 1, Marquette is approached by the developer of a large subdivision who wants to install an invisible fence in the yard of 1,200 homes he is constructing. The developer will contract with Marquette for the 1,200 fences on the condition that they are delivered within 30 days (March 31). This is not good timing for Marquette since they have recently signed a contract with Home Warehouse, a national home improvement chain and have been working at 100% capacity for several months. If Marquette accepts the builder’s order, it will lose 1,200 units that would normally be sold to one of its existing customers. When they tell the developer that they do not believe they can fill his order, he offers to reimburse the company for his “share” of the fixed
manufacturing costs and will pay a $5,000 “bonus” on delivery. Since the sale to the developer will not incur any variable marketing costs, Marquette reconsiders accepting the developer’s order. What impact will accepting this order have on Marquette’s income in March? Should Marquette accept the order from the developer? Why or Why not? (Show all supporting calculations).
(NOTE: ignore taxes or other costs not specifically mentioned in the questions.)
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