Elements of “churning”

1. List and explain the elements of “churning.”

2. What are the four major elements of securities fraud?

3. What is the difference between horizontal and vertical price-fixing?

Capellen Manufacturing Corporation produces and sells quality wooden wall clocks that are priced at $340 each. Capellen has just received a request for a specia

l order for 1,500 clocks at a price of $215 each. The current unit cost to produce a clock is $210 (direct materials, $90; direct labor, $70; unitrelated overhead, $50). Capellen has the capacity to produce the special order; however, four additional production runs will be required costing $1,500 each. Should the order be accepted? Why or why not?

 

Solution: