Managerial accounting Case 14-62
Managerial Accounting and Control
Decision Making: Relevant Costs and Benefits
Case 14-62
Roy Kondoy
Shella Faye
Sportway Corporation
• Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores
• Products: 60% purchased, 40% manufactured
• The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes
• Sportway is able to manufacture and sell 8,000 tackle boxes annually, making full use of its direct-labor capacity at available work stations
• Bo Vonderweidt, the production manager, wanted to put forward his suggestion to add a new product line, skateboards
• Meg Thomas, the company president, is not sure about is whether the skateboard line will be better for them than their tackle boxes.
Ba ck gr ou nd of th e St ud y
The selling price and costs associated with Sportway’s tackle boxes are as follows:
Selling price per box…………………………………..
$86.00
Costs per box:
Molded plastic box …………………………… $ 8.00
Hinges, latches, handle …………………….. 9.00
Direct labor ($15.00 per hour) …………. 18.75
Manufacturing overhead …………………. 12.50
Selling and administrative cost …………. 17.00 65.25
Profit per box ……………………………………………….
$20.75
Ba ck gr ou nd of th e st ud y
• Sportway’s sales manager believes the firm could sell 12,000 tackle boxes if it had sufficient manufacturing capacity
• The company has looked into the possibility of purchasing the tackle boxes for distribution
• Maple Products would be able to provide up to 9,000 tackle boxes per year at a price of $68.00
• Bo Vonderweidt, Sportway’s production manager, concludes that the company could make better use of its Plastics
Department by manufacturing skateboards
• Vonderweidt believes that Sportway could expect to sell
17,500 skateboards annually at a price of $45.00 per skateboard Ba ck gr ou nd of th e st ud y
Vonderweidt worked out the following estimates with the assistant controller:
Selling price per skateboard ….…………………
Decision Making: Relevant Costs and Benefits
Case 14-62
Roy Kondoy
Shella Faye
Sportway Corporation
• Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores
• Products: 60% purchased, 40% manufactured
• The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes
• Sportway is able to manufacture and sell 8,000 tackle boxes annually, making full use of its direct-labor capacity at available work stations
• Bo Vonderweidt, the production manager, wanted to put forward his suggestion to add a new product line, skateboards
• Meg Thomas, the company president, is not sure about is whether the skateboard line will be better for them than their tackle boxes.
Ba ck gr ou nd of th e St ud y
The selling price and costs associated with Sportway’s tackle boxes are as follows:
Selling price per box…………………………………..
$86.00
Costs per box:
Molded plastic box …………………………… $ 8.00
Hinges, latches, handle …………………….. 9.00
Direct labor ($15.00 per hour) …………. 18.75
Manufacturing overhead …………………. 12.50
Selling and administrative cost …………. 17.00 65.25
Profit per box ……………………………………………….
$20.75
Ba ck gr ou nd of th e st ud y
• Sportway’s sales manager believes the firm could sell 12,000 tackle boxes if it had sufficient manufacturing capacity
• The company has looked into the possibility of purchasing the tackle boxes for distribution
• Maple Products would be able to provide up to 9,000 tackle boxes per year at a price of $68.00
• Bo Vonderweidt, Sportway’s production manager, concludes that the company could make better use of its Plastics
Department by manufacturing skateboards
• Vonderweidt believes that Sportway could expect to sell
17,500 skateboards annually at a price of $45.00 per skateboard Ba ck gr ou nd of th e st ud y
Vonderweidt worked out the following estimates with the assistant controller:
Selling price per skateboard ….…………………