A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates: Total annual costs (in rupees) Variable cost percentage Material 193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate Total Fixed Cost

A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates: Total annual costs (in rupees) Variable cost percentage Material 193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate Total Fixed Cost

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 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates:      Total annual costs (in rupees)                Variable cost percentage Material                                              193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate Total Variable Cost
A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates:      Total annual costs (in rupees)                Variable cost percentage Material                                              193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate Selling Price
A company produces mineral water. Based on the projected annual sales of 40,000 bottles of mineral water, cost studies have produced the following estimates:      Total annual costs (in rupees)                Variable cost percentage Material                                              193,600 100 Labour 90,000 70 Overhead 80,000 64 Administration 30,000 30 The production will be sold through dealers who would receive a commission of 8% of sale price. Management to realize a profit of 10 percent of sales. Required: Calculate the break-even point in rupees if sale price is fixed at Rs. 11 per bottle.
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
Charlevoix Cases makes mobile phone cases. The company has collected the following price and cost characteristics: Sales price $ 12.00 per case Variable costs 5.50 per case Fixed costs 403,000 per year Assume that the company plans to sell 77,000 units annually. Consider requirements (b), (c), and (d) independently of each other. Required: What will be the operating profit? What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? Note: Do not round intermediate calculations. What is the impact on operating profit if variable costs per unit decrease by 20 percent? Increase by 10 percent? Note: Do not round intermediate calculations. Suppose that fixed costs for the year are 20 percent lower than projected and variable costs per unit are 20 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much? Note: Do not round intermediate…
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per unit equal $3.20. The company expects short-term fixed costs to be $7,200 for the coming month, at the projected sales level of 20,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning (that is, a CVP) model, which can be used to evaluate different scenarios.What is Capital One's current break-even point in terms of number of units for the month?
Sweet Sugar is a manufacturer which producing candy in various flavour. The sales price for each flavour is RM 50 per normal pack. Planned production and sales for the next year are as is 80,000 packs. The management has provided the following information: Variable cost: Direct material (ingredients) RM 6.50 Direct labour RM 16.00 Variable production overheads RM 5.00 Fixed cost: Fixed production overheads RM 50,000 per year Required: Calculate the following breakeven analysis: Contribution Margin (per unit) Contribution Margin (RM) Contribution / Sales Ratio Break Even Point (Unit) Break Even Point (RM) Margin of safety (Unit) Margin of safety (RM)
Sweet Sugar is a manufacturer which producing candy in various flavour. The sales price for each flavour is RM 50 per normal pack. Planned production and sales for the next year are as is 80,000 packs. The management has provided the following information: Variable cost: Direct material (ingredients) RM 6.50 Direct labour RM 16.00 Variable production overheads RM 5.00 Fixed cost: Fixed production overheads RM 50,000 per year Required: Calculate the following breakeven analysis: Break Even Point (Unit) Break Even Point (RM) Margin of safety (Unit) Margin of safety (RM) Explain THREE limiting assumptions of cost volume profit. Roose manufactures a product called Wye. The owners of Roose are preparing the budgets for the…
Marigold Corp.wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2 per 12 oz. bottle. The following data has been collected: Annual sales Projected selling and administrative costs Desired profit The target cost per bottle is O $0.16. O $0.20. $0.80. O $0.64. 55000 bottles $8900 $66000
The company believes that it can successfully sell the product for $45 a bottle. The company’s target operating income is 30% of revenue. Calculate the target full cost of producing the 400,000 units. Does the cost estimate meet the company’s requirements? Is value engineering needed?
A company is planning a new product. Market research information suggests that the product should sell 20,000 units at $35.00/unit. The company seeks to make a margin of 20% on sales. It is estimated that the lifetime costs of the product will be as follows: a. Research and development costs $60,000 b. Manufacturing costs $25/unit c. Decommissioning Costs $40,000 What is the Target Cost per unit? What is the original lifecycle cost per unit?