Earl Massey, director of marketing, wants to reduce the selling price of his company’s products by 15% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost margin.” Before this action is taken, what other factors does the company need to consider?
Q: Paola Farms, Inc. produces a crop of chickens at a total cost of $66,000. The production generates…
A: To answer this question two scenarios has to be considered.First when chicken is sold to a…
Q: Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount…
A: Bonds are issued as debt instruments. When the stated interest rate is less than the market interest…
Q: Assess the external and internal factors that influence credit policy and decision making within a…
A: Credit analysis is a type of financial analysis that measures an issuer's ability to meet its debt…
Q: Collision and comprehensive: Multiple Choice O O Only pay the insurer Only pay the insured Are…
A: The purchase of collision insurance is often only possible in conjunction with the purchase of…
Q: Global Corp. expects sales to grow by 6% next year. Assume that Global pays out 50% of its net…
A: The amount of money that an individual or group holds in a business is referred to as the equity of…
Q: Use the Information provided below to prepare the statement of comprehensive income for the year…
A: Statement of Comprehensive Income Regular operating earnings and other statement of income are both…
Q: During July, the following purchases and sales were made by Martine Company. There was no beginning…
A: The answer is: (B) $ 1,039 The calculation will be as follows: July 13 Sold 78 units Out of July…
Q: On December 31, 2023, Li-Wu Company had 100,000 shares of common stock outstanding and 30,000 shares…
A: To determine a company's basic EPS, take its net income and deduct any preferred dividends, then…
Q: Ursula is employed by USA Corporation. USA Corporation provides medical and health, disability, and…
A: Gross income refers to the total income earned by an individual on a pay check before taxes and…
Q: French Impressionists is an independent cinema located in Melbourne. The cinema specialises in…
A: AASB (Australian Accounting Standards Board) is an Australian Government Agency which develops and…
Q: A company uses 1,500 units of Zeron per year. Each unit has an invoice cost of P222, including…
A: As per the guidelines, only one question is allowed to be answered. Please resubmit the remaining…
Q: CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years…
A: Using an asset temporarily in exchange for money is the subject of a lease between two parties. Many…
Q: Accounting of accrued loan interest of €500 2. Of the total amount of €3,500 that referred to…
A: The journal entries are the first step of accounting to record the transactions as they are…
Q: what is a portfolio as a profiling and self-reflection according to KODE model?
A: A portfolio as a profiling and self-reflection according to KODE model is a collection of a person's…
Q: Guadalupe Mountains Inc. produces and sells decorative jewelry for $120 per unit. During the month,…
A: Variable Cost :— It is the cost that changes with change in units. Variable cost per unit is…
Q: Selected current year-end financial statements of Cabot Corporation follow. (All sales were on…
A: Calculating a company's financial position or productivity in comparison to that of other businesses…
Q: Statement of Cash Flows-Direct Method The comparative balance sheet of Suffridge Inc. for December…
A: In this question, we will calculate cash flow with the direct method Cash Flow from Operating…
Q: Majestic Corporation manufactures wheelbarrows and uses budgeted machine hours to allocate variable…
A: The unit cost is calculated as total cost divided by number of units produced. The overhead is…
Q: 2 3 4 5 6 Sales 7 Espresso 8 Drip Coffee 9 Food/Beverage 10 Merchandise 11 Computer 12 Total Sales…
A: Total sales are defined as the amount an entity collects by trading all of its products. It means if…
Q: The annual maintenance cost of a machine shop is P69, 994. If the cost of making a forging is P56…
A: The break even sales are the sales where business earns no profit no loss during the period. The…
Q: Selected comparative financial statements of Korbin Company follow. 2021 2020 2019 KORBIN COMPANY…
A: The current ratio measures the organization's ability to meet the short-term liabilities due within…
Q: Required information [The following information applies to the questions displayed below.] In 2022,…
A: Under U.S law, the government gives a deduction to all parents who have dependent children.…
Q: John Red is the managing partner of a partnership that has just finished building 60-room motel.…
A: The total 60 rooms are rented for 16000 room-nights in the year. So we will…
Q: The income statement for Bradford Machine Company for 2019 appears below. BRADFORD MACHINE COMPANY…
A: Break even point is the one at which the company do not earn any revenue. It could just cover its…
Q: Fillmore, Inc., expects sales of its housing for electric motors to be $82,000, $72,000, and $89,000…
A: A budget is an estimate of future income and expenses. It shows the roadmap of the organization.…
Q: Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales for Item PK95 are as…
A: FIFO Method :— In this method, beginning inventory and old purchases is used first for output or…
Q: B. C. D&R Corporation has annual revenues of $375,000, an average contribution margin ratio of 32%,…
A: Break Even Point (BEP) :— It is the point at which total cost is equal to total revenue. At this…
Q: cash transactions. (List all debit entries before credit entries. Credit account titles are…
A: Petty cash is a fund maintained for minor expenses. It is cash kept aside for small cash needs…
Q: ASSETS Non-current assets Fixed assets Current assets Inventories (all Trading inventory) Accounts…
A: Cash Flow Statement - A company's strength, profitability, and long-term outlook can all be…
Q: What employability skills do you need to get a business administration job (list three skills)
A: In order to get a business administration job, employability skills are important. Three skills that…
Q: Selected current year-end financial statements of Cabot Corporation follow. (All sales were on…
A: Since you have posted a question with multiple sub-parts, we will do the first three sub-parts for…
Q: An employee opens customer payments, records them, and delivers the deposit to the bank is pressure,…
A: Fraud triangle is a theory used in auditing according to which there are three elements to cause the…
Q: The Pineapple Industry Association (PIA) is a government owned enterprise which is legislated to…
A: The budgetary process involves the following steps: 1. Planning: The first step in the budgetary…
Q: QS 5-26B (Algo) Estimating inventories-gross profit method LO P4 Confucius Bookstore's inventory is…
A: INTRODUCTION: The cost of goods sold is the entire amount paid by your company as a cost directly…
Q: Erle Company manufactures a mobile fitness device called the Jogging Mate. The company uses…
A: Labor spending variance = Actual cost - Standard cost Labor rate variance = (Actual rate - Standard…
Q: a. Define the term constructive receipt. Explain its importance. b. Explain three restrictions on…
A: Receipts - The act of transferring anything of value from one party to another is acknowledged in…
Q: Imagine Corporation prepares an aging schedule for its accounts receivable at the end of each month…
A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a…
Q: TCA Cable has fixed operating costs of $2.6 million, and its variable cost ratio is 0.30. TCA has…
A: Fixed operating costs are those indirect costs which are incurred by the entity to generate the…
Q: Does the IRS acquiesce in decisions of U.S. district courts? O A. Yes. However, the IRS can only…
A: The answer for the multiple choice question and relevant explanation are presented hereunder : What…
Q: lext Books The marketing department of Jessi Corporation has submitted the following sales forecast…
A: Jessi Corporation Sales Budget Q1 Q2 Q3 Q4 Year Budgeted Unit Sales 12400 13400 15400 14400…
Q: 17. Capital expenditures are not immediately expensed because these items: A)do not extend the life…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Required information [The following information applies to the questions displayed below] Sye Chase…
A: The revenue and expense entries are closed using income summary account. The income summary accounts…
Q: Digital Technology wishes to determine its coefficient of variation as a company over time. The firm…
A: Coefficient of variation is the ratio of the standard deviation and the mean , it provides the…
Q: What is the difference between the effective interest method and the straight line method when…
A: Lets understand the basics. When face value of instrument is less than the issue price of the…
Q: Shimmer Incorporated is a calendar-year-end, accrual-method corporation. This year, it sells the…
A: Taxable income is the base income upon which tax is levied. It includes some or all items of income…
Q: REQUIRED Use the information provided below to prepare the Statement of Comprehensive Income for the…
A: Comprehensive income: It is the net income generated by a company from all sources and operations.…
Q: Ricardo owns a small unincorporated business. His 15-year-old daughter Jane works in the business on…
A: Ricardo owns a small unincorporated business. His 15-year-old daugtter Jane works in the business on…
Q: the inancial State Data from the current year-end balance sheets Assets Cash Accounts receivable,…
A: Credit risk is the risk involved on part of the borrower of the possibility of not repaying the loan…
Q: SEARCH Split Company produces three products — X, Y, and Z — from a joint process. Each…
A: JOINT PRODUCT Joint Product as two or more products seperated in the course of Processing each…
Q: =t of $37,000 n sales price in cost of the boat.
A: Answer : Calculate Acquisition cost of boat : Purchase price $4,500,000 Add : Cost to bring…
Earl Massey, director of marketing, wants to reduce the selling price of his company’s products by 15% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost margin.” Before this action is taken, what other factors does the company need to consider?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- The president of Poleski would like to know the effect that each of the following suggestions for improving performance would have on contribution margin per unit, sales needed to break even, and projected net income for next year. Each change should be considered independently. Reset the Data Section to its original values after each suggestion is analyzed. Fill in the table following the suggestions with the results of your analysis. a. The president suggests cutting the products price. Since the market is relatively sensitive to price, . . . a 10% cut in price ought to generate a 30% increase in sales (to 156,000 units). How can you lose? b. The sales manager feels that putting all sales personnel on straight commission would help. This would eliminate 77,000 in fixed sales salaries expense. Variable sales commissions would increase to 2.00 per unit. This move would also increase sales volume by 30%. c. Poleskis head of product engineering wants to redesign the package for the product. This will cut 1.00 per unit from direct materials and 0.50 per unit from direct labor, but will increase fixed factory overhead by 100,000 for additional depreciation on the new packaging machine. The package redesign would not affect sales volume. d. The firms consumer marketing manager suggests undertaking a new advertising campaign on Facebook. This would cost 30,000 more than is currently planned for advertising but would be expected to increase sales volume by 30%. e. The production superintendent suggests raising quality and raising price. This will increase direct materials by 1.00 per unit, direct labor by 0.50 per unit, and fixed factory overhead by 110,000. With improved quality, . . . raise the price to 18.50 and advertise the heck out of it. If you double your current planned advertising, Ill bet you can increase your sales volume by 30%.Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?Baghdad Company produces a single product. They have recently received the result of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. If they enact the 10% price increase, what will be their new break-even point in units and dollars? Their most recent CVP analysis is:
- Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its products from those of its competitors. Because of this strategy, you project that next year the firm will generate 6.0% revenue growth from price increases and 3.0% revenue growth from sales volume increases. Assume that the firms production cost structure involves strictly variable costs. (That is, the cost to produce each unit of product remains the same.) Should you project that the firms gross profit will increase next year? If you project that the gross profit will increase, is the increase a result of volume growth, price growth, or both? Should you project that the firms gross profit margin (gross profit divided by sales) will increase next year? If you project that the gross profit margin will increase, is the increase a result of volume growth, price growth, or both?Danna Wise, president of Tidwell Company, recently returned from a conference on quality and productivity. At the conference, she was told that many American firms have quality costs totaling 20 to 30% of sales. The quality experts at the conference convinced her that a company could increase its profitability by improving quality. However, she was of the opinion that the quality of Tidwell Company was much less than 20%probably more in the 4 to 6% range. However, because the potential for increasing profits was so great if she was wrong, she decided to request a preliminary estimate of the total quality costs currently being incurred. She asked her controller for a summary of quality costs, with the costs classified into four categories: prevention, appraisal, internal failure, or external failure. She also wanted the costs expressed as a percentage of both sales and profits. The controller had his staff assemble the following information from the past year, 20X1: a. Sales revenue, 37,240,000; net income, 4,000,000. b. During the year, customers returned 40,000 units needing repair. Repair cost averages 9 per unit. c. Twelve inspectors are employed, each earning an annual salary of 80,000. The inspectors are involved only with final inspection (product acceptance). d. Total scrap is 200,000 units. Of this total, ninety percent is quality related. The cost of scrap is about 10 per unit. e. Each year, approximately 800,000 units are rejected in final inspection. Of these units, seventy-five percent can be recovered through rework. The cost of rework is 1.80 per I unit. f. A customer cancelled an order that would have increased profits by 600,000. The customers reason for cancellation was poor product performance. g. The company employs 10 full-time employees in its complaint department. Each earns 48,600 a year. h. The company gave sales allowances totaling 180,000 due to substandard products being sent to the customer. i. The company requires all new employees to take its 4-hour quality training program. The estimated annual cost of the program is 120,000. Required: 1. Prepare a simple quality cost report classifying costs by category. 2. Compute the quality cost-sales ratio. Also, compare the total quality costs with total profits. Should Danna be concerned with the level of quality costs? 3. Prepare a pie chart for the quality costs. Discuss the distribution of quality costs among the four categories. Are they properly distributed? Explain. 4. Discuss how the company can improve its overall quality and at the same time reduce total quality costs. 5. By how much will profits increase if quality costs are reduced to 3% of sales?Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 8% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is shown. If they enact the 8% price increase, what will be their new break-even point in units and dollars?
- Wayne Johnson, president of Banshee Company, recently returned from a conference on quality and productivity. At the conference, he was told that many American firms have quality costs totaling 20 to 30 percent of sales. He, however, was skeptical about this statistic. But even if the quality gurus were right, he was sure that his companys quality costs were much lowerprobably less than 5 percent. On the other hand, if he was wrong, he would be passing up an opportunity to improve profits significantly and simultaneously strengthen his competitive position. The possibility was at least worth exploring. He knew that his company produced most of the information needed for quality cost reportingbut there never was a need to bother with any formal quality data gathering and analysis. This conference, however, had convinced him that a firms profitability can increase significantly by improving qualityprovided the potential for improvement exists. Thus, before committing the company to a quality improvement program, Wayne requested a preliminary estimate of the total quality costs currently being incurred. He also indicated that the costs should be classified into four categories: prevention, appraisal, internal failure, or external failure. He has asked you to prepare a summary of quality costs and to compare the total costs to sales and profits. To assist you in this task, the following information has been prepared from the past year, 20x5: a. Sales revenue, 15,000,000; net income, 1,500,000. b. During the year, customers returned 90,000 units needing repair. Repair cost averages 1 per unit. c. Four inspectors are employed, each earning an annual salary of 60,000. These four inspectors are involved only with final inspection (product acceptance). d. Total scrap is 150,000 units. Of this total, 60 percent is quality related. The cost of scrap is about 5 per unit. e. Each year, approximately 450,000 units are rejected in final inspection. Of these units, 80 percent can be recovered through rework. The cost of rework is 0.75 per unit. f. A customer cancelled an order that would have increased profits by 150,000. The customers reason for cancellation was poor product performance. g. The company employs three full-time employees in its complaint department. Each earns 40,500 a year. h. The company gave sales allowances totaling 45,000 due to substandard products being sent to the customer. i. The company requires all new employees to take its three-hour quality training program. The estimated annual cost of the program is 30,000. Required: 1. Prepare a simple quality cost report classifying costs by category. 2. Compute the quality cost-to-sales ratio. Also, compare the total quality costs with total profits. Should Wayne be concerned with the level of quality costs? 3. Prepare a pie chart for the quality costs. Discuss the distribution of quality costs among the four categories. Are they properly distributed? Explain. 4. Discuss how the company can improve its overall quality and at the same time reduce total quality costs. 5. By how much will profits increase if quality costs are reduced to 2.5 percent of sales?Harvey Company produces two models of blenders: the Super Model (priced at 400) and the Special Model (priced at 200). Recently, Harvey has been losing market share with its Special Model because of competitors offering blenders with the same quality and features but at a lower price. A careful market study revealed that if Harvey could reduce the price of its Special Model to 180, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the same amount so that per-unit profitability is not affected. Earl Wise, company controller, has indicated that poor overhead costing assignments may be distorting managements view of each products cost and, therefore, the ability to know how to set selling prices. Earl has identified the following overhead activities: machining, inspection, and rework. The three activities, their costs, and practical capacities are as follows: The consumption patterns of the two products are as follows: Harvey assigns overhead costs to the two products using a plantwide rate based on machine hours. Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Now, repeat the calculation using ABC to assign overhead costs. Did improving the accuracy of cost assignments solve Harveys competitive problem? What did it reveal? 2. Now, assume that in addition to improving the accuracy of cost assignments, Earl observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Harvey has found a new supplier that provides higher-quality components such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the same. Comment on the difference between ABC and ABM.Carpetland salespersons average 8,000 per week in sales. Steve Contois, the firms vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial selling period will enable him to conclude that the compensation plan increases the average sales per salesperson. a. Develop the appropriate null and alternative hypotheses. b. What is the Type I error in this situation? What are the consequences of making this error? c. What is the Type II error in this situation? What are the consequences of making this error?
- Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less than expected. Mandy Confer, owner of Bannister, was convinced that her firm needed to adopt a revenue growth and cost reduction strategy to increase overall profits. After a careful review of her firms condition, Mandy realized that the main obstacle for increasing revenues and reducing costs was the high defect rate of her products (a 6 percent reject rate). She was certain that revenues would grow if the defect rate was reduced dramatically. Costs would also decline as there would be fewer rejects and less rework. By decreasing the defect rate, customer satisfaction would increase, causing, in turn, an increase in market share. Mandy also felt that the following actions were needed to help ensure the success of the revenue growth and cost reduction strategy: a. Improve the soldering capabilities by sending employees to an outside course. b. Redesign the insertion process to eliminate some of the common mistakes. c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards. Required: 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements. 2. Illustrate the strategy using a strategy map. 3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.Peterson Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, John Leung, is opposed to the idea of a new JIT system. He is concerned that the new system (a) will be too costly to manage; (b) will result in too many stock outs; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Susan Chow, is in favour of the new system, due to the likely result in cost savings. John wants Susan to revise her cost saving estimation because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…XYZ Company is facing changes in its cost structure so that fixed costs will decrease from $800,000 to $700,000, but variable costs will increase from $10 per unit to $12 per unit. If it were to implement these changes at its current production level of 50,000 units (with no change to selling price )profit would not change. What would happen to the company's profit if the changes were implemented and production increased to 55,000 units?
