1. Gaelic Industries Inc., operating at full capacity, sold 22,350 units at a price of $150 per unit during 2010. Its income statement for 2010 is as follows:
Sales.......................... $3,352,500
Cost of goods sold............ 2,200,000
Gross Profit............................... 1,152,500
Expenses:
Selling expenses......................... $250,000
Administrative expenses.................. 250,000
Total expenses........................ 500,000
Income from operations..................... $ 652,500
The division of costs between fixed and variable is as follows:
Fixed Variable
Cost of sales 60% 40%
Selling expenses 50% 50%
Administrative expenses 55% 45%
Management is considering a plant expansion program that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $242,500, but will not affect the relationship between sales and variable costs.
1. Determine for 2010 the total fixed costs and the total variable costs.
2. Determine for 2010 (a) the unit variable cost and (b) the unit contribution margin.
3. Compute the break-even sales (units) for 2010.
4. Compute the break-even sales (units) under the proposed program.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $652,500 of income from operations that was earned in 2010.
6. Determine the maximum income from operations possible with the expanded plant.
7. If the proposal is accepted and sales remain at the 2010 level, what will the income or loss from operations be for 2011?
8. Based on the data given, would you recommend accepting the proposal? Explain.
Click here for the solution: Gaelic Industries Inc., operating at full capacity, sold 22,350 units at a price of $150 per unit during 2010
Showing posts with label per unit. Show all posts
Showing posts with label per unit. Show all posts
Friday, October 9, 2015
Sunday, October 4, 2015
The Cycle Division of TravelVelocity Company has the following per unit data related to its most recent cycle called Roadbuster
ACC 560 Week 5 Assignment
E8-12 The Cycle Division of TravelVelocity Company has the following per unit data related to its most recent cycle called Roadbuster.
Selling price $2,200
Variable cost of goods sold
Body frame $300
Other variable costs 900 1,200
Contribution margin $1,000
Presently, the Cycle Division buys its body frames from an outside supplier. However TravelVelocity has another division, FrameBody, that makes body frames for other cycle companies. The Cycle Division believes that FrameBody's product is suitable for its new Roadbuster cycle. Presently, FrameBody sells its frames for $350 per frame.The variable cost for FrameBody is $250. The Cycle Division is willing to pay $275 to purchase the frames from FrameBody.
Instructions:
a) Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,000 frames from FrameBody, determine the following: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody; and (3) effect on the income of TravelVelocity.
b)Assume that FrameBody does not have excess capacity and therefore would lose sales if the frames were sold to the Cycle Division. If the Cycle Division buys 1,000 frames from FrameBody, determine the following: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody; and (3) effect on the income of TravelVelocity.
Click here for the solution: The Cycle Division of TravelVelocity Company has the following per unit data related to its most recent cycle called Roadbuster
E8-12 The Cycle Division of TravelVelocity Company has the following per unit data related to its most recent cycle called Roadbuster.
Selling price $2,200
Variable cost of goods sold
Body frame $300
Other variable costs 900 1,200
Contribution margin $1,000
Presently, the Cycle Division buys its body frames from an outside supplier. However TravelVelocity has another division, FrameBody, that makes body frames for other cycle companies. The Cycle Division believes that FrameBody's product is suitable for its new Roadbuster cycle. Presently, FrameBody sells its frames for $350 per frame.The variable cost for FrameBody is $250. The Cycle Division is willing to pay $275 to purchase the frames from FrameBody.
Instructions:
a) Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,000 frames from FrameBody, determine the following: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody; and (3) effect on the income of TravelVelocity.
b)Assume that FrameBody does not have excess capacity and therefore would lose sales if the frames were sold to the Cycle Division. If the Cycle Division buys 1,000 frames from FrameBody, determine the following: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody; and (3) effect on the income of TravelVelocity.
Click here for the solution: The Cycle Division of TravelVelocity Company has the following per unit data related to its most recent cycle called Roadbuster
Sunday, September 27, 2015
Companion Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $68 per unit
EX 9-6 Companion Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $68 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials $25.00
Direct labor 32.00
Factory overhead (40% of direct labor) $12.80
Total cost per unit $69.80
If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.
a. Prepare a differential analysis report, dated October 11, 2010, for the make-or-buy decision.
b. On the basis of the data presented, would it be advisable to make the carrying cases or to continue buying them?
Click here for the solution: Companion Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $68 per unit
Direct materials $25.00
Direct labor 32.00
Factory overhead (40% of direct labor) $12.80
Total cost per unit $69.80
If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.
a. Prepare a differential analysis report, dated October 11, 2010, for the make-or-buy decision.
b. On the basis of the data presented, would it be advisable to make the carrying cases or to continue buying them?
Click here for the solution: Companion Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $68 per unit
Friday, September 25, 2015
The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit
ACC 560 Week 7 Assignment
E11-5 The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.
Instructions:
a) Compute the total materials variance and the price and quantity variances.
b) Repeat the question above, assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.
Click here for the solution: The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit
E11-5 The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.
Instructions:
a) Compute the total materials variance and the price and quantity variances.
b) Repeat the question above, assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.
Click here for the solution: The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit
Monday, August 17, 2015
Lobster Company had a beginning inventory on January 1 of 150 units of Product BU-54 at a cost of $20 per unit
P6-3B Lobster Company had a beginning inventory on January 1 of 150 units of Product BU-54 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15, 400 units at $23 Sept. 4, 350 units at $26 July 20, 250 units at $24 Dec. 2, 100 units at $29 1,000 units were sold. Lobster Company uses a periodic inventory system.
Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?
Click here for the solution: Lobster Company had a beginning inventory on January 1 of 150 units of Product BU-54 at a cost of $20 per unit
Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?
Click here for the solution: Lobster Company had a beginning inventory on January 1 of 150 units of Product BU-54 at a cost of $20 per unit
Monday, August 3, 2015
Inman Manufacturing Company makes a product that it sells for $ 60 per unit
P11-28 Determining the break- even point and preparing a contribution margin income statement
Inman Manufacturing Company makes a product that it sells for $ 60 per unit. The company incurs variable manufacturing costs of $ 24 per unit. Variable selling expenses are $ 12 per unit, annual fixed manufacturing costs are $ 189,000, and fixed selling and administrative costs are $ 141,000 per year.
Required
Determine the break- even point in units and dollars using the following approaches.
a. Equation method.
b. Contribution margin per unit.
c. Contribution margin ratio.
d. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Click here for the solution: Inman Manufacturing Company makes a product that it sells for $ 60 per unit
Inman Manufacturing Company makes a product that it sells for $ 60 per unit. The company incurs variable manufacturing costs of $ 24 per unit. Variable selling expenses are $ 12 per unit, annual fixed manufacturing costs are $ 189,000, and fixed selling and administrative costs are $ 141,000 per year.
Required
Determine the break- even point in units and dollars using the following approaches.
a. Equation method.
b. Contribution margin per unit.
c. Contribution margin ratio.
d. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Click here for the solution: Inman Manufacturing Company makes a product that it sells for $ 60 per unit
Tuesday, July 14, 2015
Chico's has sales of 15,000 units at a price of $20 per unit
E13-3 Chico's has sales of 15,000 units at a price of $20 per unit. The firm incurs fixed operating costs of $30,000 and variable operating costs of $12 per unit. What is Chico's degree of operating leverage (DOL) at a base level of sales of 15,000 units?
Click here for the solution: Chico's has sales of 15,000 units at a price of $20 per unit
Click here for the solution: Chico's has sales of 15,000 units at a price of $20 per unit
Sunday, July 12, 2015
Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit
P6-3A Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit. During the year, purchases were:
Feb. 20 600 units at $9 Aug 12 300 units at $11
May 5 500 units at $10 Dec 8 200 units at $12
Instructions
a. Determine the cost of goods available for sale
b. Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
c. Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement.
Click here for the solution: Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit
Feb. 20 600 units at $9 Aug 12 300 units at $11
May 5 500 units at $10 Dec 8 200 units at $12
Instructions
a. Determine the cost of goods available for sale
b. Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
c. Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement.
Click here for the solution: Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit
Saturday, June 27, 2015
(Basics of CVP Analysis) Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit
Problem 6-19 Basics of CVP Analysis
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable costs are $8 per unit, and fi xed costs total $180,000 per year.
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable costs are $8 per unit, and fi xed costs total $180,000 per year.
Required:
Answer the following independent questions:
1. What is the product’s CM ratio?
2. Use the CM ratio to determine the break-even point in sales dollars.
3. Due to an increase in demand, the company estimates that sales will increase by $75,000 during the next year. By how much should net operating income increase (or net loss decrease) assuming that fixed costs do not change?
4. Assume that the operating results for last year were:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000
Variable expenses . . . . . . . . . . . . . . . . . . . 160,000
Contribution margin . . . . . . . . . . . . . . . . . . 240,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . 180,000
Net operating income . . . . . . . . . . . . . . . . $ 60,000
a. Compute the degree of operating leverage at the current level of sales.
b. The president expects sales to increase by 20% next year. By what percentage should net operating income increase?
5. Refer to the original data. Assume that the company sold 18,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising, would cause annual sales in units to increase by one-third. Prepare two contribution format income statements, one showing the results of last year’s operations and one showing the results of operations if these changes are made. Would you recommend that the company do as the sales manager suggests?
6. Refer to the original data. Assume again that the company sold 18,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase annual sales by 25%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.
Answer the following independent questions:
1. What is the product’s CM ratio?
2. Use the CM ratio to determine the break-even point in sales dollars.
3. Due to an increase in demand, the company estimates that sales will increase by $75,000 during the next year. By how much should net operating income increase (or net loss decrease) assuming that fixed costs do not change?
4. Assume that the operating results for last year were:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000
Variable expenses . . . . . . . . . . . . . . . . . . . 160,000
Contribution margin . . . . . . . . . . . . . . . . . . 240,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . 180,000
Net operating income . . . . . . . . . . . . . . . . $ 60,000
a. Compute the degree of operating leverage at the current level of sales.
b. The president expects sales to increase by 20% next year. By what percentage should net operating income increase?
5. Refer to the original data. Assume that the company sold 18,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising, would cause annual sales in units to increase by one-third. Prepare two contribution format income statements, one showing the results of last year’s operations and one showing the results of operations if these changes are made. Would you recommend that the company do as the sales manager suggests?
6. Refer to the original data. Assume again that the company sold 18,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase annual sales by 25%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.
Click here for the solution: (Basics of CVP Analysis) Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit
Wednesday, June 17, 2015
Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Problem 11-28 Determining the Break-even Point and Preparing a Contribution Margin Income Statement
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
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