Riverside Inc. makes one model of wooden canoe. Partial information for it follows: Number of Canoes Produced and Sold 510 660 810 Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 72,420 148,800 $221,220 ? ? Required: 1. Complete the table. 3. Suppose Riverside sells its canoes for $516 each. Calculate the contribution margin per canoe and the contribution margin ratio. 4. Next year Riverside expects to sell 860 canoes. Complete the contribution margin income statement for the company.

Riverside Inc. makes one model of wooden canoe. Partial information for it follows: Number of Canoes Produced and Sold 510 660 810 Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 72,420 148,800 $221,220 ? ? Required: 1. Complete the table. 3. Suppose Riverside sells its canoes for $516 each. Calculate the contribution margin per canoe and the contribution margin ratio. 4. Next year Riverside expects to sell 860 canoes. Complete the contribution margin income statement for the company.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7PA: Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model...

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Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model 301. The sales price and variable costs for these three models are as follows: The current product mix is 4:3:2. The three models share total fixed costs of $430,000. Calculate the sales price per composite unit. What is the contribution margin per composite unit? Calculate Manatoahs break-even point in both dollars and units. Using an income statement format, prove that this is the break-even point.
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Eagle Brand Inc. produces two products as follows: Eagle Brand has 1,000 lbs. of raw materials that can be used to produce Products X and Y. Which of the following alternatives should Eagle Brand accept to maximize the contribution margin? a. 100 units of Product Y. b. 250 units of Product X. c. 200 units of Product X and 20 units of Product Y. d. 200 units of Product X and 50 units of Product Y.
Salvador Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows: Their sales mix is reflected in the ratio 7:3:2. If annual fixed costs shared by the three products are $196,200, how many units of each product will need to be sold in order for Salvador to break even?
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
Tim-Buck-Il rents jet skis at a beach resort. There are three models available to rent: Junior, Adult, and Expert. The rental price and variable costs for these three models are as follows: The current product mix is 5:4:1. The three models share total fixed costs of $1 14,750 A. Calculate the sales price per composite unit. B. What is the contribution margin per composite unit? C. Calculate Tim-Buck-IIs break-even point in both dollars and units. D. Using an income statement format, prove that this is the break-even point.
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
Manufacturing builds and sells switch harnesses for glove boxes. The sales price and variable cost for each follows: Their sales mix is reflected in the ratio 4:4:1. If annual fixed costs shared by the three products are $1 8840 how many units of each product will need to be sold in order forJj to break even?
The Calvary Company manufactures Part No. XXX for use in its production cycle. The cost per unit for 20,000 units of part No. XXX are as follows: Direct materials P 6 Direct labor 30 Variable overhead 12 Fixed overhead applied 16 P64 The Cross Company has offered to sell 20,000 units of part No. XXX to Calvary for P60 per unit. Calvary will make the decision to buy the part from Cross if there is a savings of P25,000 for Calvary. If Calvary accepts Cross’s offer, P9 per unit of the fixed overhead applied would be totally eliminated. Furthermore, Calvary has determined that the released facilities could be used to save relevant costs in the manufacture of part No. YYY. In order to have a savings of P25,000, the amount of the relevant costs that would be saved by using the released facilities in the manufacture…
Sandy Bank, Inc., makes one model of wooden canoe. and, the information for it follows: Number of canoes produced and sold 400 600 750 Total costs Variable costs $ 50,000 $ 75,000 $ 93,750 Fixed costs $ 90,000 $ 90,000 $ 90,000 Total costs $ 140,000 $ 165,000 $ 183,750 Cost per unit Variable cost per unit $ 125.00 $ 125.00 $ 125.00 Fixed cost per unit 225.00 150.00 120.00 Total cost per unit $ 350.00 $ 275.00 $ 245.00 Sandy Bank sells its canoes for $375 each. Required: 1. Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars. 2. If Sandy Bank sells 670 canoes, compute its margin of safety in dollars and as a percentage of sales. (Use the new sales price of $500.) 3. Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $100,000 profit.