please answer only last two sub parts thnku 4. Leaton Co introduced a new product, LD to its range lastyear. The machine used to mould each item is a bottleneckin the production process meaning that a maximum of 7000units per annum can be manufactured.The LD product has been a huge success in the market place andas a result, all items manufactured are sold. The marketingdepartment has prepared the following demand forecast forfuture years as a result of feedback from customers.Year1 2 3 4Demand (units) 8000 10000 12000 6000The directors are now considering investing in a second machinethat will allow the company to satisfy the excess demand. Thefollowing information relating to this investment proposal hasnow been prepared:Initial investment$30000Maximum additional output 7000 unitsCurrent selling price$80 per unitVariable operating costs$36 per unitFixed operating costsS18000 per year If production remained at 6000 units, the current selling pricewould be expected to continue throughout the remainder of thelife of the product. However, if production is increased, it isexpected that the selling price will fall to $72 per unit for allunits sold. Again, this will last for the remainder of the life ofthe product.No terminal value or machine scrap value is expected at the endof four years, when production of LD is planned to end. Forinvestment appraisal purposes, Leaton uses a nominal (money)discount rate of 12% per year and a target return on capitalemployed of 22% per year. Ignore taxationRequired(a) Calculate the following values for the investmentproposal.(i) Net Present Value;(ii) Internal Rate of Return;(iii) Return on Capital Employed (Accounting Rate ofReturn) based on initial investment; and(iv) Discounted Payback Period

Discounted Payback Period: It is the time taken to have equal amount of discounted value of…

Answered: 4. Leaton Co introduced a new product,…

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 40P

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Macom Manufacturing has total contribution margin of $61,250 and net income of $24,500 for the month of June. Marcus expects sales volume to increase by 10% in July. What are the degree of operating leverage and the expected percent change in income for Macom Manufacturing? 0.4 and 10% 2.5 and 10% 2.5 and 25% 5.0 and 50%
Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.
Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and sell 49,300 units at a price of 12.50 each. Beginning inventory of finished goods is 42,500, and ending inventory of finished goods is expected to be 34,000. Total selling expense is projected at 26,000, and total administrative expense is projected at 134,000. Required: 1. Prepare an income statement in good form. Be sure to include the percent of sales column. 2. What if the cost of goods sold percentage for the past few years was 65 percent? Explain how management might react.
Klamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?
A company produces two products. E and F in batches of 100 units. The production and cost data are: The company can only perform 12,000 set-ups each period yet there is unlimited demand for each product. What is the differential profit from producing product E instead of product F for the year? A. $216,000 B. $204,000 C. $12,000 D. $54,000
Katayama Company produces a variety of products. One division makes neoprene wetsuits. The divisions projected income statement for the coming year is as follows: Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. Repeat, using the contribution margin ratio. 2. The divisional manager has decided to increase the advertising budget by 140,000 and cut the average selling price to 200. These actions will increase sales revenues by 1 million. Will this improve the divisions financial situation? Prepare a new income statement to support your answer. 3. Suppose sales revenues exceed the estimated amount on the income statement by 612,000. Without preparing a new income statement, determine by how much profits are underestimated. 4. How many units must be sold to earn an after-tax profit of 1.254 million? Assume a tax rate of 34 percent. (Round your answer up to the next whole unit.) 5. Compute the margin of safety in dollars based on the given income statement. 6. Compute the operating leverage based on the given income statement. (Round to three significant digits.) If sales revenues are 20 percent greater than expected, what is the percentage increase in profits?
Assume that at the beginning of 20x2, Cicleta trained the 2 assembly workers in a new approach that had the objective of increasing the efficiency of the assembly process. Cicleta also began moving toward a JIT purchasing and manufacturing system. When JIT is fully implemented, the demand for expediting is expected to be virtually eliminated. It is expected to take two to three years for full implementation. Assume that receiving cost is a step-fixed cost with steps of 1,500 orders. The other three activities employ resources that are acquired as used and needed. At the end of 20x2, the following results were reported for the four activities: Required: 1. Prepare a trend report that shows the non-value-added costs for each activity for 20x1 and 20x2 and the change in costs for the two periods. Discuss the reports implications. 2. Explain the role of activity reduction for receiving and for expediting. What is the expected value of SQ for each activity after JIT is fully implemented? 3. What if at the end of 20x2, the selling price of a competing product is reduced by 27 per unit? Assume that the firm produces and sells 20,000 units of its product and that its product is associated only with the four activities being considered. By virtue of the waste-reduction savings, can the competitors price reduction be matched without reducing the unit profit margin of the product that prevailed at the beginning of the year? If not, how much more waste reduction is needed to achieve this outcome? In this case, what price decision would you recommend?
X Co introduced a new product, Y, to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of 5,000 units per annum can be manufactured. The Y product has been a huge success in the marketplace and as a result, all items manufactured are sold. The marketing department has prepared the following demand forecast for future years as a result of feedback from customers. Year 1 2 3 4 Demand(Units) 7,000 9,000 11,000 4,000 The directors are now considering investing in a second machine that will allow the company to satisfy the excess demand. The following information relating to this investment proposal has now been prepared: Initial investment Rs20,000 Maximum additional output 5,000 units Current selling price Rs50 per unit Variable operating costs Rs28 per unit Fixed operating costs Rs15,000 per year If production remained at…
The Variable Speed Company manufactures a line of high quality tools. The company sold 1,130,000 hammers at a price of $5.3 per unit last year. The company estimates that this volume represents a 25% share of the current hammers market. The market is expected to increase by 5%. Marketing specialists have determined that, as a result of a new advertising campaign and packaging, the company will increase its share of this larger market to 30%. Due to changes in prices, the new price for the hammer will be $5.60 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. What are the estimated sales revenues in the coming year? Multiple Choice $7,546,140. $7,593,600. $7,973,280. $8,372,044.
The Pakistan Cables (Pvt) Ltd., a manufacturer of quality electric cables, has experienced asteady growth in its sales for the past five years. Increased competition, however, has led theCEO to believe that an aggressive advertising campaign will be necessary next year to maintainthe company’s present growth.To prepare for next year’s advertising campaign, the accountant presents the following data forthe current year i.e. 2020:Variable Cost:Direct Labor Rs. 8.00 per unitDirect Material 3.25 per unitVariable FOH 2.50 per unitPage 4 of 4Fixed Cost:Manufacturing 25,000Marketing 40,000Administrative 70,000Sales Price Per Unit 25Expected Sales, 2020 (20,000 units) 500,000The company set the 2021 sales target at a level of Rs. 550,000 or 22,000 units.Required:1. The projected Net Income for 2020.2. The breakeven point in units for 2020.3. The net income for 2021 if an additional fixed marketing expense of Rs. 11,250 isspent for advertising in 2021. All other cost remains constant.4. The…
Company A raises the price of its Widget product from $100 to $110. As a result of the price increase, the demand for this Widget product drops from 90,000 units sold per year to 75,000 units sold per year. Management, therefore, has determined that the product has a…. : High Elasticity of Demand Low Elasticity of Demand
A company is planning a new product. Market research suggests that demand for the product would last for 5 years. At a selling price of OMR 21.00 per unit they expect to sell 4,000 units in the first year, 6,000 units in the second year and 10,000 units in each of the other 3 years. The company wishes to achieve a mark-up of 50% on cost. It is estimated that the lifetime costs of the product will be as follows: Manufacturing costs – OMR 12.00 per unit Design and development costs – OMR 120,000 End of life costs – OMR 60,000 You are required to calculate:- The target cost for the product per unit and in total

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