Xenon Autocar Company Manufactures Automobiles

question 81

Essay

Xenon Autocar Company manufactures automobiles. The Fastback Car Division sells its cars for $50,000 each to the general public. The fastback cars have manufacturing costs of $25,000 each for variable and $15,000 each for fixed costs. The division's total fixed manufacturing costs are $75,000,000 at the normal volume of 5,000 units.
The Coupe Car Division has been unable to meet the demand for its cars this year. It has offered to buy 1,000 cars from the Fastback Car Division at the full cost of $40,000. The Fastback Car Division has excess capacity and the 1,000 units can be produced without interfering with the current outside sales of 5,000. The 6,000 volume is within the division's relevant operating range.
Explain whether the Fastback Car Division should accept the offer.

Grasp the journal entry recording of bond issuance and retirement and its impact on financial statements.

Analyze the effects of mortgage notes payable on financial statements.

Understand the treatment and impact of leases in financial accounting.

Calculate and interpret the times interest earned ratio.

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Definitions:

Assignment

The act of handing over ownership, obligations, or properties from one entity to another.

Personal

Relating to or affecting an individual directly and privately, not related to one's professional or public life.

Lawsuit

A legal action or proceeding involving a dispute between two or more parties that is resolved in a court of law.

Right To Payment

A legal entitlement to receive a certain amount of money, often as compensation for goods provided, services rendered, or as restitution for harm or damage.