Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the production manager's salary is an example of: Multiple Choice a variable cost. a mixed cost. a fixed cost. None of these

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the production manager's salary is an example of: Multiple Choice a variable cost. a mixed cost. a fixed cost. None of these

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...

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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.
Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.
Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.
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?
Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs. Wood used to produce desks ($125,00 per desk) Production labor used to produce desks ($15 per hour) Production supervisor salary ($45,000 per year) Depreciation on factory equipment ($60,000 per year) Selling and administrative expenses ($45,000 per year) Rent on corporate office ($44,000 per year) Nails, glue, and other materials required to produce desks (varies per desk) Utilities expenses for production facility Sales staff commission (5% of gross sales)
Regal Executive, Inc., produces executive motor coaches and currently manufactures the cent awnings that accompany them at these costs: The company received an offer from Saied Tents to produce the awnings for $3,200 per unit and supply 1,000 awnings for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the awning production can be used by a different production group that will lease it for $60,000 per year. Should the company make or buy the awnings?
Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
Kimball Company has developed the following cost formulas: Materialusage:Ym=80X;r=0.95Laborusage(direct):Yl=20X;r=0.96Overheadactivity:Yo=350,000+100X;r=0.75Sellingactivity:Ys=50,000+10X;r=0.93 where X=Directlaborhours The company has a policy of producing on demand and keeps very little, if any, finished goods inventory (thus, units produced equals units sold). Each unit uses one direct labor hour for production. The president of Kimball Company has recently implemented a policy that any special orders will be accepted if they cover the costs that the orders cause. This policy was implemented because Kimballs industry is in a recession and the company is producing well below capacity (and expects to continue doing so for the coming year). The president is willing to accept orders that minimally cover their variable costs so that the company can keep its employees and avoid layoffs. Also, any orders above variable costs will increase overall profitability of the company. Required: 1. Compute the total unit variable cost. Suppose that Kimball has an opportunity to accept an order for 20,000 units at 220 per unit. Should Kimball accept the order? (The order would not displace any of Kimballs regular orders.) 2. Explain the significance of the coefficient of correlation measures for the cost formulas. Did these measures have a bearing on your answer in Requirement 1? Should they have a bearing? Why or why not? 3. Suppose that a multiple regression equation is developed for overhead costs: Y = 100,000 + 100X1 + 5,000X2 + 300X3, where X1 = direct labor hours, X2 = number of setups, and X3 = engineering hours. The coefficient of determination for the equation is 0.94. Assume that the order of 20,000 units requires 12 setups and 600 engineering hours. Given this new information, should the company accept the special order referred to in Requirement 1? Is there any other information about cost behavior that you would like to have? Explain.
A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90
Marlin Motors sells a single product with a selling price of $400 with variable costs per unit of $160. The companys monthly fixed expenses are $36,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of November when they will sell 130 units. How many units will Marlin need to sell in order to realize a target profit of $48,000? What dollar sales will Marlin need to generate in order to realize a target profit of $48.000? Construct a contribution margin income statement for the month of February that reflects $200,000 in sales revenue for Marlin Motors.
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?
Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month plus a charge for each mile driven. Able Transport drove the tour bus 4,000 miles and paid a total of $1,250 in March. In April, they paid $970 for 3.000 miles. What is the variable cost per mile if Able Transport uses the high-low method to analyze costs?