PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LOS-1, LO5-2, LO5-4, LO5-5The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles ofshoes that are all sold at the same price. Sales personnel in the shops are paid a sales commissionon each pair of shoes sold plus a small base salary.The following data pertains to Shop 48 and is typical of the company's many outlets:1.2.4.5.Selling price..Variable expenses:Invoice costSales commissionTotal variable expenses.6.Fixed expenses:AdvertisingRent..SalariesTotal fixed expenses.Per Pair ofShoes$30.00Required:What is Shop 48's annual break-even point in unit sales and dollar sales?Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000pairs of shoes sold each year. Clearly indicate the break-even point on the graph.3.If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income(loss)?The company is considering paying the Shop 48 store manager an incentive commission of75 cents per pair of shoes (in addition to the salesperson's commission). If this change ismade, what will be the new break-even point in unit sales and dollar sales?Refer to the original data. As an alternative to (4) above, the company is considering payingthe Shop 48 store manager 50 cents commission on each pair of shoes sold in excess of thebreak-even point. If this change is made, what will be Shop 48's net operating income (loss) if15,000 pairs of shoes are sold?Refer to the original data. The company is considering eliminating sales commissions entirelyin its shops and increasing fixed salaries by $31,500 annually. If this change is made, whatwill be Shop 48's new break-even point in unit sales and dollar sales? Would you recommendthat the change be made? Explain.$13.504.50$18.00Annual$ 30,00020,000100,000$150,000

Break Even Point (BEP) :— That is the point at which total cost and total revenue are equal. The…

PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LO5-1, LO5-2, LO5-4, LO5-5 The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price. Variable expenses: Invoice cost.. Sales commission Total variable expenses. 1. 2. Fixed expenses: Advertising.. Rent...... Salaries.... Total fixed expenses... **** Per Pair of Shoes $30.00 $13.50 4.50 $18.00 Annual $ 30,000 20,000 100,000 $150,000 Required: What is Shop 48's annual break-even point in unit sales and dollar sales? Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph. 3. If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income (loss)?

PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LO5-1, LO5-2, LO5-4, LO5-5 The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price. Variable expenses: Invoice cost.. Sales commission Total variable expenses. 1. 2. Fixed expenses: Advertising.. Rent...... Salaries.... Total fixed expenses... **** Per Pair of Shoes $30.00 $13.50 4.50 $18.00 Annual $ 30,000 20,000 100,000 $150,000 Required: What is Shop 48's annual break-even point in unit sales and dollar sales? Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph. 3. If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income (loss)?

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter19: Cost-Volume-Profit Analysis

Section: Chapter Questions

Problem 19.24EX

See similar textbooks

Similar questions

PROBLEM 7-20 Evaluating the Profitability of Services LO7-2, LO7-3, L07-4, L07-5 Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear in the pictures below: Job support consists of receiving calls from potential customers at the home office, schedulingjobs, billing, resolving issues, and so on.Required:1.Using Exhibit 7-6 as a…
Problem 10-59 (Algo) Customer Profitability (LO 10-4) Carmel Company has a frequent buyer program for its customers, where the customers can attain an “elite” level based on the number of orders and the total revenue of the orders. There are two elite levels: Platinum and Titanium. The benefits of elite membership include discounts and access to special customer service representatives who can resolve problems. The company has one full-time customer representative per 200 Titanium customers and one full-time customer representative per 2,000 Platinum customers. Customer representatives receive salaries plus bonuses of 1 percent of customer gross margin. Carmel spends 90 percent of its promotion costs on Titanium customers to encourage their loyalty. Customer Costs Total Titanium Platinum Number of customers 34,000 8,000 26,000 Average customer representative salary $ 71,000 $ 71,000 Promotion costs $ 3,150,000 Average gross margin per…
Problem 3-54 (Algo) CVP Analysis and Price Changes (LO 3-1) Littlefield Partners produce a part sold to agricultural equipment suppliers. For the last year (Year 1), the price, costs, and volume of the part were as follows: Unit price $ 80 Unit variable cost $ 60 Annual fixed cost $ 3,220,000 Sales volume 232,200 units Managers at Littlefield believe that next year (Year 2), conditions in the industry will result in lower prices, both for the part they sell and the materials they purchase. Their best estimates at this time are that the selling price will decline by 10 percent while the unit variable cost will decline by 5 percent, taking into account the changes in both materials and labor. They believe that fixed costs will remain the same.
Please answer questions 4 andd 5 in it's entirety. Please make it easy to define the answer and refer to the images attached. Problem 11-25 (Algo) Volume Trade-Off Decisions [LO11-5, LO11-6] The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 61,000 $ 20.00 $ 5.40 $ 3.60 Trish 53,000 $ 6.50 $ 2.20 $ 1.44 Sarah 46,000 $ 33.50 $ 8.09 $ 6.30 Mike 44,400 $ 14.00 $ 3.10 $ 4.50 Sewing kit 336,000 $ 9.10 $ 4.30 $ 0.99 The following additional information is available: The company’s plant has a capacity of 113,140 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products. The…
Exercise 4-44 (Algo) Dropping Product Lines (LO 4-4) Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch 44 Inch 54 Inch Revenues $ 374,100 $ 576,500 $ 354,300 Variable costs 232,600 286,680 164,500 Fixed costs allocated to products 148,230 226,464 139,806 Operating profit (loss) $ (6,730) $ 63,356 $ 49,994 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company’s total fixed costs would be reduced by 25 percent.…
3-37 Uncertainty and expected costs. Kindmart is an international retail store. Kindmart’s managers areconsidering implementing a new business-to-business (B2B) information system for processing merchandiseorders. The current system costs Kindmart $2,000,000 per month and $55 per order. Kindmart has twooptions, a partially automated B2B and a fully automated B2B system. The partially automated B2B systemwill have a fixed cost of $6,000,000 per month and a variable cost of $45 per order. The fully automated B2Bsystem has a fixed cost of $14,000,000 per month and a variable cost of $25 per order.Based on data from the past two years, Kindmart has determined the following distribution onmonthly orders:Monthly Number of Orders - Probability300,000 - 0.25500,000 - 0.45700,000 - 0.301. Prepare a table showing the cost of each plan for each quantity of monthly orders.2. What is the expected cost of each plan?3. In addition to the information system’s costs, what other factors should Kindmart…
Refer to Exercise 8.29. Suppose Gene determines that next years Sales Division activities include the following: Researchresearching current and future conditions in the industry Shippingarranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobberscoordinating the efforts of the independent jobbers who sell the mattresses Basic adsplacing print and television ads for the Sleepeze and Plushette lines Ultima adschoosing and working with the advertising agency on the Ultima account Office managementoperating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Additional information is as follows: a. Depreciation on the office equipment belongs to the office management activity. b. Of the 21,000 for office supplies and other expenses, 5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers activities. An additional 2,400 per year is attributable to Internet connections and fees, and the bulk of these costs (80 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. Required: 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at 65,000, a marketing research assistant at 40,000, and an administrative assistant at 25,000) are budgeted for 130,000 next year. b. Depreciation on the offices and equipment is 20,000 per year. c. Office supplies and other expenses total 21,000 per year. d. Advertising has been steady at 20,000 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should spend 15 percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 5 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged 50 per unit sold. Gene expects the Ultima line to ship for 75 per unit sold since this model features a larger mattress. Required: 1. Suppose that Gene is considering three sales scenarios as follows: Prepare a revenue budget for the Sales Division for the coming year for each scenario. 2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.
Analyze and compare Costco, Wal-Mart, and Nordstrom The general merchandise retail industry has a number of segments represented by the following companies: Company Name Merchandise Concept Costco Wholesale Corporation (COST) Membership warehouse Wal-Mart Stores, Inc. (WMT) Discount general merchandise Nordstrom, Inc. (JWN) Fashion department store For a recent war, the following cost of goods sold and beginning and ending inventories are provided from corporate annual reports (in millions) for these three companies: a. Determine the inventory turnover ratio for all three companies. Round all calculations to one decimal place. b. Determine the number of days sales in inventory for all three companies. Use 365 days and round all calculations to one decimal place. c. Interpret these results based on each companys merchandising concept.
PROBLEM 2-25 Schedule of Cost of Goods Manufactured; Income Statement [LO1, LO2, LO3, LO4]Skyler Company was organized on November 1 of the previous year. After seven months of start-uplosses, management had expected to earn a profi t during June, the most recent month. Managementwas disappointed, however, when the income statement for June also showed a loss. June’s incomestatement follows:Variable or FixedDirect or Direct or with RespectIndirect Cost of Indirect Cost of to the Numberthe Immunization Particular of ImmunizationsCenter Patients AdministeredItem Description Direct Indirect Direct Indirect Variable FixedExample: The cost of polioimmunizationtablets . . . . . . . . . . . . . . . . X X XSkyler CompanyIncome StatementFor the Month Ended June 30Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000Less operating expenses:Selling and administrative salaries . . . . . . . $ 35,000Rent on facilities . . . . . . . . . . . . . . . . . . . . . .…
Question 8.1 T2 Manufacturing Ltd. manufactures electrical parts. Data for two of the company's customers is as follows: Customer 1 Customer 2 Revenues at list price $592,500 $102,000 Units sold 75,000 10,000 Unit list price $7.90 $10.20 Cost of goods per unit $5.10 $6.25 Sales discounts $11,850 $1,020 Customer-specific costs Order-taking $13,600 $1,500 Product-handling $14,100 $1,350 Delivery $9,400 $1,290 Required: Prepare a comparative income statement in gross margin format with one column for each customer; present customer-specific costs as period expenses.
Exercise 5-18 (Algo) Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio [LO5-1, LO5-3, LO5-5, LO5-6, LO5-7] Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 616,000 $ 40 Variable expenses 431,200 28 Contribution margin 184,800 $ 12 Fixed expenses 154,800 Net operating income $ 30,000 Required: 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company’s CM ratio? If the company can sell more units thereby increasing sales by $83,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Assignment 5.1: Session 5 Comprehensive Problem Problem 5-1 Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. Required: a. Compute the breakeven point in units. b. Compute the number of units and sales revenue needed to achieve a $20 profit. (Ignore income taxes.) c. Assume that the income tax rate for Redlands is 40%. Compute the number of units and sales revenue needed to achieve an $18 net profit. d. Compute the number of units and sales revenue needed to achieve an 8% profit margin. (Ignore income taxes.) e. Compute the number of units and sales revenue needed to achieve a 12% net profit margin. (Assume a 40% income tax rate.) f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by 10%. Determine if Redlands should increase its selling price. (Ignore income taxes.) g. Assume that Redlands currently sells 30 units and has a 40%…