divisions as an investment center. Division A is currently selling 30,000 units of Part X annually, although it has sufficient production capacity to produce 42,000 parts per year. Variable manufacturing costs amount to P36 per part, while the total fixed costs amount to P180,000. These 30,000 parts are sold to outside market at P76 per part. Division S, also a part of the Krafts, Inc., has indicated that they would like to get from Division A 3,000 parts at a price of P74. Per part because they presently buying the parts from

divisions as an investment center. Division A is currently selling 30,000 units of Part X annually, although it has sufficient production capacity to produce 42,000 parts per year. Variable manufacturing costs amount to P36 per part, while the total fixed costs amount to P180,000. These 30,000 parts are sold to outside market at P76 per part. Division S, also a part of the Krafts, Inc., has indicated that they would like to get from Division A 3,000 parts at a price of P74. Per part because they presently buying the parts from

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2.6P: Break-even sales under present and proposed conditions Kearney Company, operating at full capacity,...

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Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Abilene Industries manufactures and sells three products (XX, W, and ZZ). The sales price and unit variable cost for the three products are as follows: Their sales mix is reflected as a ratio of 4:2:1. Annual fixed costs shared by the three products are $345.000 per year. What are total variable costs for Abilene with their current product mix? Calculate the number of units of each product that will need to be sold in order for Abilene to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.
Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and variable costs for the current year are as follows: Bolgers total fixed costs aggregate to 360,000. Bolgers labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10-per-unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, the break-even point would: a. decrease by 1,000 units. b. decrease by 125 units. c. increase by 375 units. d. increase by 500 units.
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.
Refer to Cornerstone Exercise 10.1. Forchen, Inc., requires an 8 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions?
Break-even sales under present and proposed conditions Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows: The division of costs between fixed and variable is as follows: Management is considering a plant expansion program that will permit an increase of $8,631,000 (35.000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs. Instructions Determine the maximum operating income possible with the expanded plant.
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
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
Refer to Exercise 20.10. Assume the economic lot size for small casings is 120,000 and that of the large casings is 40,000. Morrison Manufacturing sells an average of 9,600 small casings per workday and an average of 3,200 large casings per workday. It takes Morrison two days to set up the equipment for small or large casings. Once set up, it takes three workdays to produce a batch of small casings and five days for large casings. There are 250 workdays available per year. Required: 1. What is the reorder point for small casings? Large casings? 2. Using the economic order batch size, is it possible for Morrison to produce the amount that can be sold of each casing? Does scheduling have a role here? Explain. Is this a push- or pull-through system approach to inventory management? Explain.