Relevant

d) Break even sales change that would change the profits by the same amount as a reduction in price.

1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years?

Only the incremental costs and benefits are relevant. In particular, only the variable manufacturing overhead and the cost of the special tool are relevant overhead costs in this situation. The other manufacturing overhead costs are fixed and are not affected by the decision.

There are many trade-offs for each of the decisions that a company makes within all three types of these cost types when quality consideration is used. If the company decides to put more time into training employees properly on operating machines and

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

b-A discussion of how various major types of costs incurred by Home Depot were likely affected?

3. Andy is trying to decide which one of two job offers he will accept.

b) Additional sales dollars must be produced to cover each $1.00 of incremental advertising for Rash-Away

The stocking quantity and expected profits are higher in the second scenario because of the extra time spent to improve the quality of profile section. By spending the extra time to improve the profile section, Anna Sheen increased the overall quality of her newspaper, which will, most likely, lead to an increased probability of demand for her newspaper around the area. This increased demand will raise Anna Sheen’s stocking quantity and the daily expected profits that are associated with that individual stocking quantity.

Professional fees Property taxes on factory building Raw materials used Rent on production equipment Research and development Sales commissions Utility costs—factory Wages—factory Totals © 2008 For Instructor Use Only Direct Materials Product Costs Direct Manufacturing Labor Overhead Period

2. If the department that produces Item 345 was a profit center and if you were the manager of that department, would it be to your financial advantage to lower the price?

(b) Calculate by how much the proposed addition will either increase or reduce operating income. Show all work.

If Jones-Blair cut prices by 20%, they would need to maintain the profit of $1.14M to keep the status quo. The contribution margin right now is 35%, if the prices were cut by 20%, the contribution margin decreases to 15%. 35% is converted into .35 and 20% is converted into .20. The required sales in order to maintain the status quo if prices were reduced by 20% is 28M. This is found by finding the gross margin which is current sales multiplied by the contribution margin, 12M * .35 = 4.2M. We would then need to maintain the same gross margin to find out the required sales, (12M + x) * .15 = 4.2M. Computation equates x to be $16M. The $16M that is required to maintain the same gross margin, added to the $12M of the current sales equals $28M. In order to maintain the current profit, Jones-Blair would have to increase sales by $16M, more than double the current amount. If chosen, this alternative would be a very poor choice.

The above graph suggests that volume based computation of overhead costs does not reflect the real overhead costs based on actual production per product line (computed maximum in excess over actual). On the other hand, if we follow the allocation of overhead costs based on prime costs as illustrated in Exhibit 2 of the case, we need to consider other quantitative factors: 1. No data is available to determine the amount of raw materials used in producing each of the products. While we can assume that the production of small, colored glass ornaments uses fewer raw materials (e.g. glass) than large, colored glass ornaments, the amount of glass used to produce specialty ornaments cannot be derived from the facts of the case. 2. There is also no data available to determine the number of direct labor hours consumed for producing each product type, although evidently, specialty ornaments use more direct labor hours. Based on the above considerations, we deem it inaccurate to base overhead on prime costs, a common practice in traditional costing. In addition,