Exercise 4-23/Priscilla Systems manufactures tape decks and currently sells 18,500units annually to producers of sound reproduction systems. The president of thecompany anticipates a 15%o increase in the cost per unit of direct labor onJanuary 1, 2010. He expects all other costs and expenses to remain unchanged.The president has asked you to assist him in developing the information he needsto formulate a reasonable product strategy for next year.You are satisfied that volume is the primary factor affecting costs andexpenses and have separated the semi-variable costs into their fixed and variablesegments. Beginning and ending inventories remain at a level of 1,000 units.Below are the current year data assembled for your analysis:P100Sales price per unitVariable costs per unit:Direct materialsP15Direct labor25Factory overhead, selling & administrative70Р30expenses30Contribution margin per unit (30%)Fixed costsP390,000REQUIRED:1. What inerease in selling price is necessary to cover the 15% inerease in directlabor cost and still maintain the current contribution margin ratio of 30%?2. How many tape decks must be sold to maintain the current operating incomeof P350,000 if the sales price remains at P100 and the 15% wage increasegoes into effect? (Hint: first compute the unit contribution margin.)3. The president believes that an additional P700,000 of machinery (to bedepreciated at 20% annually) will increase present capacity (20,000 units) by25%. If all tape decks produced can be sold at the present price of P100 perunit and the wage increase goes into effect, how would the estimatedoperating income before capacity is inereased compare with the estimatedoperating income at full capacity before and after the expansion.

Contribution margin: Contribution margin is defined as the excess of the selling price over the…

REQUIRED: 1. What increase in selling price is necessary to cover the 15% increase in direct labor cost and still maintain the current contribution margin ratio of 30%? 2. How many tape decks must be sold to maintain the current operating income of P350,000 if the sales price remains at P100 and the 15% wage inerease goes into effect? (Hint: first compute the unit contribution margin.) 3. The president believes that an additional P700,000 of machinery (to be depreciated at 20% annually) will increase present capacity (20,000 units) by 25%. If all tape decks produced can be sold at the present price of P100 per unit and the wage increase goes into effect, how would the estimated operating income before capacity is inereased compare with the estimated operating income at full capacity before and after the expansion.

REQUIRED: 1. What increase in selling price is necessary to cover the 15% increase in direct labor cost and still maintain the current contribution margin ratio of 30%? 2. How many tape decks must be sold to maintain the current operating income of P350,000 if the sales price remains at P100 and the 15% wage inerease goes into effect? (Hint: first compute the unit contribution margin.) 3. The president believes that an additional P700,000 of machinery (to be depreciated at 20% annually) will increase present capacity (20,000 units) by 25%. If all tape decks produced can be sold at the present price of P100 per unit and the wage increase goes into effect, how would the estimated operating income before capacity is inereased compare with the estimated operating income at full capacity before and after the expansion.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.4C: Variable costs and activity bases in decision making The owner of Dawg Prints, a printing company,...

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(Appendix 11A) Cycle Time and Velocity, Manufacturing Cycle Efficiency A company like Kicker performs warranty repair work on speakers in a manufacturing cell. The typical warranty repair involves taking the defective speaker apart, testing the components, and replacing the defective components. The maximum capacity of the cell is 1,000 repairs per month. There are 500 production hours available per month. Required: 1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit repaired). 2. Speaker repair uses 4 minutes of move time, 10 minutes of wait time, and 6 minutes of inspection time. Calculate the MCE. 3. Using the information from Requirement 2, calculate the actual cycle time and the actual velocity for speaker repair.
Refer to Cornerstone Exercise 8.1, through Requirement 1. FlashKick requires ending inventory of product to equal 20 percent of the next months unit sales. Beginning inventory in January was 3,100 practice soccer balls and 400 match soccer balls. Required: 1. Construct a production budget for each of the two product lines for FlashKick Company for the first three months of the coming year. 2. What if FlashKick wanted a production budget for the two product lines for the month of April? What additional information would you need to prepare this budget? FlashKick Company manufactures and sells soccer balls for teams of children in elementary and high school. FlashKicks best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, FlashKick expects to sell the following: Required: 1. Construct a sales budget for FlashKick for the first three months of the coming year. Show total sales for each product line by month and in total for the first quarter. 2. What if FlashKick added a third linetournament quality soccer balls that were expected to take 40 percent of the units sold of the match balls and would have a selling price of 45 each in January and February, and 48 each in March? Prepare a sales budget for Flash- Kick for the first three months of the coming year. Show total sales for each product line by month and in total for the first quarter.
Variable costs and activity bases in decision making The owner of Dawg Prints, a printing company, is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: Each color on the banner must be printed one at a time. Thus, for example, a four-color banner will need to be run through the printing operation four separate times. The total production volume last year was 600 banners, as shown below. The four-color banner is a new product offering for the upcoming year. The owner believes that the expected 600-unit increase in volume from last year means that direct labor expenses should increase by 100% (600 + 600). What do you think?
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.
(Appendix 11A) Cycle Time and Velocity Prakesh Company has the following data for one of its manufacturing cells: Maximum units produced in a month: 50,000 units Actual units produced in a month: 40,000 units Hours of production labor in 1 month: 10,000 hours Required: Compute the (1) theoretical cycle time (in minutes), (2) actual cycle time (in minutes), (3) theoretical velocity (in units per hour), and (4) actual velocity (in units per hour).
See Cornerstone Exercise 20.4. Fisher Company has three sequential processes: cutting, welding, and assembly. Assume that the optimal mix is Component A = 0 units per week; and Component B = 30 units per week. Demand is uniformly spread out over the five-day work week. Fisher requires a 2.5-day buffer. Required: 1. Identify the drummer, the rate of production, the time buffer, and the rope. 2. Illustrate the DBR structure of Fisher Company. 3. What if the Welding Department was allowed or encouraged to produce at capacity? What effect will this have on work-in-process inventories?
(Appendix 11A) Manufacturing Cycle Efficiency Kurena Company provided the following information on one of its factories: Maximum units produced in a quarter: 180,000 units Actual units produced in a quarter: 112,500 units Hours of cell production labor in a quarter: 30,000 hours Theoretical cycle time: 10 minutes per unit Actual cycle time: 16 minutes per unit Required: 1. Calculate the amount of processing time per unit and the amount of nonprocessing time per unit. 2. Calculate the MCE (rounded to three significant digits).
Variable costs and activity bases in decision making The owner of Warwick Printing, a printing company, is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: One Color Two Color Three Color Four Color Total Number of banners 212 274 616 698 1,800 Each color on the banner must be printed one at a time. Thus, for example, a four color banner will need to be run through the printing operation four separate times. The total production volume last year was 800 banners, as follows: One Color Two Color Three Color Total Number of banners 180 240 380 800 As you can see, the four-color banner is a new product offering for the upcoming year. The owner believes that the expected 1,000-unit increase in volume from last year means that direct labor expenses should increase by 125% (1,000 800). What do you think?
Use the following information for Brief Exercises 11-17and 11-18: Indy Company has the following data for one of its manufacturing plants: Maximum units produced in a quarter (3-month period): 250,000 units Actual units produced in a quarter (3-month period): 200,000 units Productive hours in one quarter: 25,000 hours 11-18 (Appendix 11A) Calculating Manufacturing Cycle Efficiency Refer to the information of Indy Company above. The actual cycle time for Indy Company is 7.5 minutes, and the theoretical cycle time is 6 minutes. Required: 1. Calculate the amount of processing time and the amount of nonprocessing time. 2. Calculate the MCE. (Round to one decimal place.)