National Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be * O

National Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be * O

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 29BEB: Cassara, Inc., had the following quality costs for the years ended December 31, 20X1 and 20X2: At...

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The management of Hess, Inc., is developing a flexible budget for the upcoming year. It was not pleased with the small amount of net income the budget showed at all sales levels and Is contemplating using a less expensive material. This action reduces direct material cost by $1 per unit. What would be the effects on financial statements and a flexible budget if management takes this approach? Are there other factors that need to be considered?
Cassara, Inc., had the following quality costs for the years ended December 31, 20X1 and 20X2: At the end of 20X1, management decided to increase its investment in control costs by 40% for each categorys items, with the expectation that failure costs would decrease by 25% for each item of the failure categories. Sales were 12,000,000 for both 20X1 and 20X2. Required: 1. Calculate the budgeted costs for 20X2, and prepare an interim quality performance report. 2. Comment on the significance of the report. How much progress has Cassara made?
Andresen Company had the following quality costs for the years ended June 30, 20X1 and 20X2: At the end of 20X1, management decided to increase its investment in control costs by 50% for each categorys items, with the expectation that failure costs would decrease by 20% for each item of the failure categories. Sales were 6,000,000 for both 20X1 and 20X2. Required: 1. Calculate the budgeted costs for 20X2, and prepare an interim quality performance report. 2. Comment on the significance of the report. How much progress has Andresen made?
Lux Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be
According to its original plan, Munoz Consulting Services Company plans to charge its customers for service at $125 per hour. The company president expects consulting services provided to customers to reach 55,000 hours at that rate. The marketing manager, however, argues that actual results may range from 49,000 hours to 61,000 hours because of market uncertainty. Munoz's standard variable cost is $46 per hour, and its standard fixed cost is $1,410,000. Required Develop flexible budgets based on the assumptions of service levels at 49,000 hours, 55,000 hours, and 61,000 hours.
Qwax Limited had a poor March quarter after producing and selling only 95% of the budgeted number of units. A reconciliation of actual and budgeted profit for Qwax Limited shows an adverse sales price variance and a favourable direct material usage variance. What circumstances might have caused these variances?
Top managers of Cole Industries predicted 2018 sales of 14,600 units of its product at a unit price of $7.00. Actual sales for the year were 14,000 units at $10.50 each. Variable costs were budgeted at $2.60 per unit, and actual variable costs were $2.70 per unit. Actual fixed costs of $43,000 exceeded budgeted fixed costs by $4,500. Prepare Cole's flexible budget performance report. What variance contributed most to the year's favorable results? What caused this variance? Prepare a flexible budget performance report for the year. First, complete the flexible budget performance report through the contribution margin line, then complete the report through the operating income line. Finally, compute the total variances. (Enter a "0" for any zero balances. For any $0 variances, leave the Favorable (F)/Unfavorable (U) input blank.) Cole Industries Flexible Budget Performance Report For the Year Ended December 31, 2018 1 2 3 4 5…
Fairfield Company management has budgeted the following amounts for its next fiscal year: If Fairfield can reduce fixed expenses by $41,625, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units? a. $2.78 b. $0.53 c. $0.25 d. $0.75
Webster has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, P150,000; fixed overhead, P240,000. If Webster now revises its anticipated production slightly downward, it would expect: * A.total fixed overhead of P240,000 and a lower hourly rate for variable overhead. B.total fixed overhead of P240,000 and the same hourly rate for variable overhead. C. total fixed overhead of P240,000 and a higher hourly rate for variable overhead. D. total variable overhead of less than P150,000 and a lower hourly rate for variable overhead. E. total variable overhead of less than P150,000 and a higher hourly rate for variable overhead.
The company’s marketing team estimates that sales volume could be increased to 5,000 units per month if the sales price was lowered from $150 to $125 per unit. The production manager has confirmed that they have the capacity to increase production to this level. Assume that the cost pattern will not vary at the increased level of production. If management decreases the price, what would the impact on monthly sales, income and costs be? For each figure, indicate whether the change will result in an increase, decrease or no change in the sales, income and cost. Would you recommend the reduction in sales price? Why or Why not? (Show all supporting calculations). (NOTE: ignore taxes or other costs not specifically mentioned in the questions.)
QC Corp has the following budget amounts for the current year: $1,100,000 for prevention costs and $880,000 for appraisal costs. Internal failure equals $100 per failed item and external failure has a total budget of $660,000. The Product Testing department has proposed a new method of testing products. If management decides to implement the new method, $2.20 per unit of appraisal costs will be saved, up to a level of 150,000 tests. No additional savings are expected past the 150,000 level. The new method involves $104,500 in training costs and $71,500 in yearly testing supplies. If the new testing method is implemented what is the revised budget for appraisal costs, assuming 550,000 units are tested during the current year?
You have asked your sales manager to explain why budgeted revenues for your division are below expectations. The budget indicated $1,039,500 of revenues based on a sales volume of 1,485,000 units. Sales records indicate that 1,500,400 product units were actually sold, but revenues were only $1,020,272. Calculate the sales price variance, the sale volume variance, and the total revenue variance. Sales price variance $ Unfavorable Sales volume variance $ Favorable Total revenue variance $ Unfavorable