Gwazda Men's Clothing's revenues and cost data for 2017 are as follows:E (Click the icon to view the data.)Mr. Gwazda, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $20,000 variable costs, which vary with sales volume, and $10,000 (fixed) costs.Read the requirements.Requirement 1. Compute the total contribution margin of Gwazda Men's Clothing. (Not the contribution margin per unit.)The contribution margin isRequirement 2. Compute the contribution margin percentage. (Enter the result as a whole percentage, XX%.)The contribution percentage isRequirement 3. Mr. Gwazda estimates that he can increase units sold, and hence revenues by 15% by incurring additional advertising costs of $14,000. Calculate the impact of the additional advertising costs on operating incoOperating income willby $Requirement 4. What other actions can Mr. Gwazda take to improve operating income?To improve operating income, Mr. Gwazda must find ways toChoose from any list or enter any number in the input fields and then continue to the next question. s and cost data for 2017 are as follows:a.)e, is unhappy with the operating results. An analysis of other operating costs reveals that it includData TableRequirementsRevenues2$400,000200,000Cost of goods sold (all variable costs)1. Compute the contribution margin of Gwazda Men's Clothing.2. Compute the contribution margin percentage.3. Mr. Gwazda estimates that he can increase units sold, and hence revenues by15% by incurring additional advertising costs of $14,000. Calculate the impactof the additional advertising costs on operating income.4. What other actions can Mr. Gwazda take to improve operating income?Gross margin200,000Operating costs:Salaries fixed$ 160,000Sales commissions (10% of sales)40,000ertDepreciation on equipment and fixtures18,000Store rent ($4,000 per month)48,000PrintDone30,000296,000Other operating costs(96,000)Operating income (loss)Ir. Gwazda must find ways toPrintDoneany number in the input fields and then continue to the next question.hp

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s and cost data for 2017 are as follows: .) e, is unhappy with the operating results. An analysis of other operating costs reveals that it includ Data Table Requirements Revenues $ 400,000 200,000 Cost of goods sold (all variable costs) 1. Compute the contribution margin of Gwazda Men's Clothing. 2. Compute the contribution margin percentage. 3. Mr. Gwazda estimates that he can increase units sold, and hence revenues by 15% by incurring additional advertising costs of $14,000. Calculate the impact of the additional advertising costs on operating income. 4. What other actions can Mr. Gwazda take to improve operating income? Gross margin 200,000 Operating costs: Salaries fixed $ 160,000 Sales commissions (10% of sales) 40,000 erti Depreciation on equipment and fixtures 18,000 Store rent ($4,000 per month) 48,000 Print Done 30,000 296,000 Other operating costs (96,000) Operating income (loss) 1. Gwazda must find ways to Print Done any number in the input fields and then continue to the next question.

s and cost data for 2017 are as follows: .) e, is unhappy with the operating results. An analysis of other operating costs reveals that it includ Data Table Requirements Revenues $ 400,000 200,000 Cost of goods sold (all variable costs) 1. Compute the contribution margin of Gwazda Men's Clothing. 2. Compute the contribution margin percentage. 3. Mr. Gwazda estimates that he can increase units sold, and hence revenues by 15% by incurring additional advertising costs of $14,000. Calculate the impact of the additional advertising costs on operating income. 4. What other actions can Mr. Gwazda take to improve operating income? Gross margin 200,000 Operating costs: Salaries fixed $ 160,000 Sales commissions (10% of sales) 40,000 erti Depreciation on equipment and fixtures 18,000 Store rent ($4,000 per month) 48,000 Print Done 30,000 296,000 Other operating costs (96,000) Operating income (loss) 1. Gwazda must find ways to Print Done any number in the input fields and then continue to the next question.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 34P: Kimball Company has developed the following cost formulas:...

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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.
Mr.Godfroy,the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $45,000 variable costs, which vary with sales volume, and $20,000 (fixed) costs. 1. Compute the contribution margin of Godfroy Men's Clothing. 2. Compute the contribution margin percentage. 3. Mr. Godfroy estimates that he can increase units sold and, hence, revenues by 20% by incurring additional advertising costs of $12,000. Calculate the impact of the additional advertising costs on operating income. 4. What other actions can Mr. Godfroy take to improve operating income?
The Robinson Lawn Chair Company produces and sells a single high-priced lawn chair and in fiscal 2016 the company produced and sold 30,000 units. The 2016 income statement of the company reported the following: Sales $1,800,000 Variable Costs $1,350,000 Fixed Costs $240,000 Income before Taxes $210,000 (a) Compute the contribution margin per unit. (b) How many units must be sold to break even? (c) Compute the new breakeven point if the price of unit is increased to $65 and additional $102,000 per year will be paid for advertising. (d) Assuming a tax rate of 25%, how many units must be sold to gain an after tax profit of $200,000
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable Expenses per unit :direct material $40 direct labour $32 variable manufacturing overhead $18 Fixed Expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Cost $115,000 Fixed Administrative Costs $135,000 Required:(a) Calculate the margin of safety in units and in sales dollars. (b) The management of Valencia Manufacturing Company is desirous of increasing operating incomeby 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018. Determine the number of units that must be sold to earn this target operating profit. Is this a realistic goal? (c) Assume that as a result of reorganizing the production…
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Required: (a) Calculate the margin of safety in units and in sales dollars. (b) The management of Valencia…
Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Samantha is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Required: (d) Calculate the margin of safety in units and in sales dollars. (e) The management of Samantha Manufacturing Company is desirous of increasing operating income by 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018. Determine the number of units that must be sold to…
Mr. Ador Estoria, the operations manager of Achos Merchandising Corp. Is worried about the result of its operation this year. Although the accounting dept. has not submitted the financial statements yet, the following data where already available pertaining to year 2020. Total number of units sold at P50 per unit price 120,000 units Total fixed costs and expenses P1,800,000 Variable cost rate 60% Because of other pressing problems, he hired you to give him information and computation that will help him plan for the next year operation. He specifically wants the following (with proofs, if possible): If management projects a profit of P1,200,000 after the 25% tax, how many units should be sold? If the total peso sales generated next year is short by P1million in order to break-even, what is the result of the operation? If the selling price…
Mr. Ador Estoria, the operations manager of Achos Merchandising Corp. Is worried about the result of its operation this year. Although the accounting dept. has not submitted the financial statements yet, the following data where already available pertaining to year 2020. Total number of units sold at P50 per unit price 120,000 units Total fixed costs and expenses P1,800,000 Variable cost rate 60% Because of other pressing problems, he hired you to give him information and computation that will help him plan for the next year operation. He specifically wants the following (with proofs, if possible): Break-even point in peso sales and in units The margin of safety in peso, in units and in percentage If the profit this year will be doubled next year, how much sales should be realized? If the number of units sold next year, exceeds the…
South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. Sales (5,500 microwave ovens) $5,500,000 Cost of goods sold 962,500 Store manager's salary per year 150,000 Operating costs per year 220,000 Advertising and promotion per year 18,960 Commissions (3.2% of sales) 176,000 What was the variable cost per unit sold for 2017?
Aranguez Corporation produces a molded plastic casing, LX20A, for desktop computers. Summary data from its 2013 income statement are as follows: Revenues $ 6,000,000 Variable costs (3,600,000) Fixed costs (2,000,000) Operating income $ 400,000 Jane Dall, Aranguez’s president, is very concerned about Aranguez Corporation’s poor profitability. She asks Giselle James, production manager, and Lester Saline, controller, to see if there are ways to reduce costs. After two weeks, James returns with a proposal to reduce variable costs to 50% of revenues by reducing the costs Aranguez currently incurs for safe disposal of waste plastic. Saline is concerned that this would expose the company to potential environmental liabilities. He tells James, “We would need to estimate some of these potential environmental costs and include them in our analysis.” “You cannot do that,” James replies. “We are not violating any laws. There is some possibility that we…
Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows:Revenues $5,000,000 Variable costs 3,250,000 Fixed costs 1,890,000 Operating income $ (140,000) Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitability. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to reduce costs. After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would expose the company to potential environmental liabilities. He tells Leroy, “We would need to estimate some of these potential environmental costs and include them in…
Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows:Revenues $5,000,000 Variable costs 3,250,000 Fixed costs 1,890,000 Operating income $ (140,000) Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitability. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to reduce costs. After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would expose the company to potential environmental liabilities. He tells Leroy, “We would need to estimate some of these potential environmental costs and include them in…