15. ERD Company manufactures and sells two types of beach towels, standard and deluxe. ERD expects the following operating results next year for each type of towel: Standard Deluxe Sales P450,000 P50,000 Variable expenses (total) P360,000 P20,000 If ERD expects to incur P57,600 in fixed expenses next year, its break-even point must be:

15. ERD Company manufactures and sells two types of beach towels, standard and deluxe. ERD expects the following operating results next year for each type of towel: Standard Deluxe Sales P450,000 P50,000 Variable expenses (total) P360,000 P20,000 If ERD expects to incur P57,600 in fixed expenses next year, its break-even point must be:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

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Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
A company is spending 70,000 per year for inspecting, 60,000 per year for purchasing, and 56,000 per year for reworking products. What is a good estimate of non-value-added costs? a. 126,000 b. 70,000 c. 56,000 d. 130,000
Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Tamarisk Inc is a company that manufactures and sells a single product. Unit sales for each of the 4 quarters of 2020 are projected as follows: q1 = 96,000 units q2 = 180,000 units q3 = 660,000 units q4 = 144,000 annual total = 1,080,000 units Tamarisk incurs variable mfg costs of $0.40 per unit and variable non-mfg costs of $0,35 per unit. Tamarisk will incur fixed mfg costs of $864,000 and fixed non-mfg costs of $1,296,000. Tamarisk will sell its product for $4 per unit. Compute Tamarisk's profit margin on sales for each of the four quarters of 2020 under both the integral and discrete approaches.
Sparrow Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $8.00 a unit. The unit cost for Sparrow Co. to make the part is $9.00, which includes $0.60 of fixed costs. If 4,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it? a.$12,000 decrease b.$4,000 increase c.$20,000 decrease d.$1,600 increase
Ziga Company manufactures lamps and expects to sell 350,000 units in 2022 at P21 per unit. Planned per unit manufacturing costs at the level of production are as follows: Variable manufactuing costs P9.00 Fixed manufacturing costs 5.00 Earning in 2020, a new customer approaches Ziga Co. offers to buy 15,000 lamps at P11.00 per unit. Ziga can produce additional units with no change in fixed manufacturing cost or per unit variable cost. The only additional fixed cost for this order is for packing and shipping, estimated at P30,000. Required: Determine whether Ziga should accept the special order (filling the special order will not affect the regular sales). What is the total profit of Ziga if the special order is accepted. Show supporting computations. If the new customer’s offer to buy 15,000 lamps is accepted, what is the minimum price per unit charge by Ziga if the company expects a profit of…
For the year just ended, Lotlot Company had direct costs of P1 Million based on a production set up for the period. If the alternative set up were adopted, direct costs could have been P850,000. In addition, Lotlot fixed costs were P100,000. The incremental costs was P250,000 P150,000 P100,000 P50,000
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A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20, including fixed costs, and P12, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? P150,000 cost increase P 90,000 cost decrease P150,000 cost increase P 90,000 cost increase
A company that manufactures and sells a single product. Unit sales for each of the four quarters of 2020 are projected as follows: Quarter Units First 65600 Second 123000 Third 451000 Forth 98400 Total 738000 Teal incurs vairiable manufacturing costs of $0.40 per unit and variable non-manufacturing costs of $0.40 per unit. Teal will incur fixed manufacturing costs of $590,400 and fixed non-manufacturing costs of $885,600. Teal will sell its product for $4 per unit. A) Determine the Net Income using the Integral approach and the Discrete approach for each quarter on 2020 B) Using the information above, determine the Profit margins for each quarter of 2020 using both the Integral approach and the Discrete approach.
Frank Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit. The unit cost for Frank Co. to make the part is $30, which includes $4 of fixed costs. If 20,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it? a. $40,000 decrease b. $50,000 increase c. $20,000 increase d. $30,000 increase