oducing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- mand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell ch rack so that it can have a product profit margin of 28%? KED COSTS tesearch and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 ТOTALS P 200,000 P 30,000 P P 230,000 50,000 20,000 50,000 50,000 50,000 50,000 50,000 250,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 30,000 30,000 20,000 210,000 Other incremental operating costs FOTALS 25,000 P 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 25,000 25,000 25,000 125,000 ARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 600 OTALS 650 P 600 P 600 P 600 P NITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3.250
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: Calculate the total cost of racks over 5 year (Variable + Fixed) in order to determine the selling…
Q: Pathways Appliance Company is planning to introduce a built-in blender to its line of small home…
A: Schedule showing the estimated annual net income from the proposal to manufacture…
Q: Tim's Corp. is considering whether to overhaul an older machine or buy a newer more efficient…
A: Net Present Value is the sum of the discounted value of the future expected cash flows. In this…
Q: DETERMINING DAILY COST OF HOLDING A shipment of new connectors for semiconductors needs to go from…
A: Holding costs: These include the expenses related to the storage of inventory that is not sold or…
Q: You manage the shipping of item #A452 from your supplier. The shipments for this item are delivered…
A: Answer - Given Data, Annual Demand D = 5000 Units Order Cost = S = $92 Holding Charge =H = 0.14…
Q: Old Southwest Canning Co. has determined that any one of four machines can be used in a certain…
A: a.
Q: A recently retired professor, Melinda Marketing, plans to establish the Hot-Air Fan Company and…
A: Hey, since there are multiple questions posted, we will answer the first question. If you want any…
Q: Dell has decided to improve its products' cooling system to achieve better performance and enhance…
A: Expected monetary value (EMV) analysis is a popular method used in project management analysis. The…
Q: Cobe Company nas manufactured 200 partially finished cabinets at a cost of $50,000, These can be…
A: Lets understand the basics. When there is option to choose between sell it as it is or process…
Q: Nivea Company is planning to introduce a new product. Market research information suggests that the…
A: Introduction: A product is a tangible thing that is placed on the market for acquisition,…
Q: For the past few months, Sunshine Painting Sdn Bhd has been evaluating two alternatives; the…
A:
Q: Borges Machine Shop, Inc., has a 1-year contractfor the production of 200,000 gear housings for a…
A: Calculation of total cost of the machines: Excel spreadsheet:
Q: You need to select a machine for the robotized welding process at your factory. There are two…
A: NPV can be calculated using NPV function in excel =NPV(rate,value1,[value2],…) + Initial…
Q: Use the following information for Brief Exercises 16-26, 16-27, and 16-28. C. W. McCall sells a…
A: Sales volume variance: The sales volume variance is an important management tool. It simply…
Q: After conducting a market research study, Magnificent Manufacturing decided to produce a new…
A: After conducting a market research study, Magnificent Manufacturing decided to produce a new…
Q: Make or Buy Decision Han Products manufactures 30,000 units of part S–6 each year for use on its…
A: Particulars Making cost Purchase cost Direct material (30,000 x $3.6) $108,000 Direct…
Q: Polish Company is a leading local maker of Christmas decors. This coming Christmas season, the…
A: Solution: Let nos of units sold = x Now profit = Sales - Total costs Total costs = Fixed costs +…
Q: Yara manufactures state-of-the-art chairs. Manufacturing costs are expected to be £120 per chair,…
A: Introduction: Fixed cost: The cost remains fixed irrespective of units change it won't change.
Q: Maple Inc. manufactures a product that costs $25 per unit plus $43,000 in fixed costs each month.…
A: Relevant costs are the costs which are relevant to the decision making process. In this question,…
Q: A thermoplastic film manufacturer is trying to decide between 5 types of thermoforming molding…
A: IRR is a capital budgeting techniques which help in decision making on the basis of future cash…
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: Budget means the expected value of future. Budget is not affected by the actual value as it is…
Q: Samsung Electronics is trying to reduce supply chain risk by making more responsible make/buy…
A: Breakeven Sales Units It means the quantity of finished goods which are required to be sold for…
Q: Sinbo Electronics is trying to reduce supply chain risk by making more responsible make-buy…
A: Break-even quantity is that level of sales at which the company earns zero profit and incurs zero…
Q: Kevin Millers Ltd is examining a 750 -ton hydraulic press and 600-tonne molding press for purchase.…
A: In the given problem, two alternatives of Investment are given i.e. Investment in 750 ton Hydraulic…
Q: Jack's Back Porch manufactures rustic furniture. The cost accounting system estimates manufacturing…
A: Markup refers to the difference between the selling price and cost. It is the percentage of profit…
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A:
Q: Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the…
A: The break even sales are the sales where business earns no profit no loss during the period. Break…
Q: Choose the correct letter of answer Polish Company is a leading local maker of Christmas decors.…
A: Total cost includes fixed cost and variable cost used for the production of units. The variable cost…
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: The computation is shown below:
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: SOLUTION SELLING PRICE PER UNIT = REVENUE / NO OF UNITS .
Q: Upper Hutt Bakery Warehouse uses specialized ovens to bake its bread. One oven costs $1,000,000 and…
A: Present Value: The present value is the value of cash flow stream or the fixed lump sum amount at…
Q: Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of…
A: To choose option we have to compare both ways expenses by calculating the total expenses of product…
Q: otiate the purchase price of its proposal in order to win the contract. What purchase price will…
A:
Q: An investor has agreed to produce 100 waffles/day for a restaurant, which is willing to pay 5₺ for…
A: 1) to break even we need to cover the initial cost + the unit cost to produce each wafflenow that…
Q: One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently…
A: In-house production: An activity or process that is carried out within a business rather than via…
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: We need to find a fixed selling price for all 5 years. We need a product profit margin of 28%. In…
Q: HASF Furniture Inc. manufactures a moderate-price set of lawn furniture (a table and four chairs)…
A: HASF Furniture Inc. manufactures a moderate-price set of lawn furniture (a table and four chairs)…
Q: Shurp Company manufactures a variety of air-conditioning units. The company is currently…
A: Following is the answer to the given question
Q: Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out…
A: Profit margin means where profit is divided with sales and percentage is found out. While…
Q: ABC has developed a new kitchen utensil. The firm has conducted significant market research and…
A: >Target cost is the cost of the product that has been determined by analysing the difference…
Q: Theta Metalwork Inc. entered into an exclusive contact with an entity involved in franchising out…
A: The answer is stated below:
Q: A firm plans to begin production of a new small appliance. The manager must decide whether to…
A: In order to choose between the alternatives we need to find indifference point. Here Indifference…
Q: Shurp Company manufactures a variety of air-conditioning units. The company is currently…
A: Differential analysis is done for comparing the cost of making and buying.
Q: How much should Theta sell each rack so it can have a product profit margin of 28%?
A: In order to calculate the selling price for each rack, we need to calculate total cost of racks over…
Q: One of the bulk raw beverages, which Blanchard buys, is gin. Assume that the cost of purchasing…
A: The question is related to Inventory Management. The Economic Order Quantity is that level of…
Q: PLEASE MAKE IT IN EXCEL AND SHOW THE FORMULAS Comercial El Suspiro, S.A., purchases 2'100,000 units…
A: The question is related to the Inventory Management. Reorder point is calculated with the help of…
Q: Mighty Safe Fire Alarm is currently buying 55,000 motherboards from MotherBoard, Inc., at a price of…
A:
Q: To make an item inhouse, equipment costing $250,000 must be purchased. It will have a life of 4…
A: Cost of equipments=$250000n=4 yearsAnnual cost=$80000Cost per unit to manufacture=$40Cost for buying…
Q: One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently…
A: Calculation of Net present value of supplier’s option: Answer: Net present value of supplier’s…
Step by step
Solved in 2 steps
- Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The national sales manager believes that if they invest an additional $25,000 in advertising, they would increase sales volume by 10,000 units. Prepare a forecasted contribution margin income statement for Brahma if they incur the additional advertising costs, using this information:Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 200,000 units (for the two-year period). The proposed selling price was 130 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be 120 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of 15 per unit is needed for this new product. Also, as I look at the projected market share, 25 percent isnt acceptable. Total profits need to be increased. Cathy, what suggestions do you have? CATHY: Simple. Decrease the selling price to 125 and we expand our market share to 35 percent. To increase total profits, however, we need some cost reductions as well. BRIAN: Youre right. However, keep in mind that I do not want to earn a profit that is less than 15 per unit. MARK: Does that 15 per unit factor in preproduction costs? You know we have already spent 100,000 on developing this product. To lower costs will require more expenditure on development. BRIAN: Good point. No, the projected cost of 120 does not include the 100,000 we have already spent. I do want a design that will provide a 15-per-unit profit, including consideration of preproduction costs. CATHY: I might mention that post-purchase costs are important as well. The current design will impose about 10 per unit for using, maintaining, and disposing our product. Thats about the same as our competitors. If we can reduce that cost to about 5 per unit by designing a better product, we could probably capture about 50 percent of the market. I have just completed a marketing survey at Marks request and have found out that the current design has two features not valued by potential customers. These two features have a projected cost of 6 per unit. However, the price consumers are willing to pay for the product is the same with or without the features. Required: 1. Calculate the target cost associated with the initial 25 percent market share. Does the initial design meet this target? Now calculate the total life-cycle profit that the current (initial) design offers (including preproduction costs). 2. Assume that the two features that are apparently not valued by consumers will be eliminated. Also assume that the selling price is lowered to 125. a. Calculate the target cost for the 125 price and 35 percent market share. b. How much more cost reduction is needed? c. What are the total life-cycle profits now projected for the new product? d. Describe the three general approaches that Nico can take to reduce the projected cost to this new target. Of the three approaches, which is likely to produce the most reduction? 3. Suppose that the Engineering Department has two new designs: Design A and Design B. Both designs eliminate the two nonvalued features. Both designs also reduce production and logistics costs by an additional 8 per unit. Design A, however, leaves post-purchase costs at 10 per unit, while Design B reduces post-purchase costs to 4 per unit. Developing and testing Design A costs an additional 150,000, while Design B costs an additional 300,000. Assuming a price of 125, calculate the total life-cycle profits under each design. Which would you choose? Explain. What if the design you chose cost an additional 500,000 instead of 150,000 or 300,000? Would this have changed your decision? 4. Refer to Requirement 3. For every extra dollar spent on preproduction activities, how much benefit was generated? What does this say about the importance of knowing the linkages between preproduction activities and later activities?
- Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
- NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Based solely on financial factors, explain why NoFat should accept or reject PUs special sales offer.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that NoFat rejected PUs special sales offer because the 2.20 price suggested by PU was too low. In response to the rejection, PU asked NoFat to determine the price at which it would be willing to accept the special sales offer. For its regular sales, NoFat sets prices by marking up variable costs by 10%. If Allyson decides to use NoFats 10% markup pricing method to set the price for PUs special sales offer, a. Calculate the price that NoFat would charge PU for each pound of olestra. b. Calculate the relevant profit that NoFat would earn if it set the special sales price by using its markup pricing method. (Hint: Use the estimate of relevant costs that you calculated in response to Requirement 1b.) c. Explain why NoFat should accept or reject the special sales offer if it uses its markup pricing method to set the special sales price.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that Allysons relevant analysis reveals that NoFat would earn a positive relevant profit of 10,000 from the special sale (i.e., the special sales alternative). However, after conducting this traditional, short-term relevant analysis, Allyson wonders whether it might be more profitable over the long term to downsize the company by reducing its manufacturing capacity (i.e., its plant machinery and plant facility). She is aware that downsizing requires a multiyear time horizon because companies usually cannot increase or decrease fixed plant assets every year. Therefore, Allyson has decided to use a 5-year time horizon in her long-term decision analysis. She has identified the following information regarding capacity downsizing (i.e., the downsizing alternative): The plant facility consists of several buildings. If it chooses to downsize its capacity, NoFat can immediately sell one of the buildings to an adjacent business for 30,000. If it chooses to downsize its capacity, NoFats annual lease cost for plant machinery will decrease to 9,000. Therefore, Allyson must choose between these two alternatives: Accept the special sales offer each year and earn a 10,000 relevant profit for each of the next 5 years or reject the special sales offer and downsize as described above. Assume that NoFat pays for all costs with cash. Also, assume a 10% discount rate, a 5-year time horizon, and all cash flows occur at the end of the year. Using an NPV approach to discount future cash flows to present value, a. Calculate the NPV of accepting the special sale with the assumed positive relevant profit of 10,000 per year (i.e., the special sales alternative). b. Calculate the NPV of downsizing capacity as previously described (i.e., the downsizing alternative). c. Based on the NPV of Requirements 5a and 5b, identify and explain which of these two alternatives is best for NoFat to pursue in the long term.
- This year, Hassell Company will ship 4,000,000 pounds of chocolates to customers with total order-filling costs of 900,000. There are two types of customers: those who order 50,000 pound lots (small customers) and those who order 250,000 pound lots (large customers). Each customer category is responsible for buying 1,500,000 pounds. The selling price per pound is 2 per lb for the 50,000 pound lot and 3 per lb for the larger lots, due to differences in the type of chocolate. ABC would likely assign order-filling costs to the customer type as follows: a. 450,000, small; 450,000, large (using pounds as the driver) b. 360,000, small; 540,000, large (using revenue as the driver) c. 750,000, small; 150,000, large (using number of orders as the driver) d. 450,000, small; 450,000, large (using customer type as the driver)Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?