Sandra Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major pron include the installation of a new lighting system and increased display space that will add $39,000 in fıxed $423,000 currently spent. In addition, Sandra is proposing that a 5% price decrease ($60 to $57) will proe
Q: Statement 1: Cash received in lieu of stock dividends is accounted for as dividend income. Statement...
A: Stock dividend means method use by company to distribute dividend in form of shares rather then cash...
Q: Ivanhoe Company reported net income of $93,300. The partnership agreement provides for salaries of $...
A: Partnership Business: A partnership business is comprised of two or more individuals who pool their ...
Q: Trial Balance for Lowe's Repair Services june 1. A. lowe invested 7000 cash and 5000 worth of repai...
A: Trail balance for the june 2022
Q: Calculate the trade discount and net price (in $) to the nearest cent. List Price Trade Discount Rat...
A: There are two type of discounts that is given to customer at the time of sale of goods. One is trade...
Q: Stock Dividends and Stock Splits The balance sheet of Castle Corporation includes the following sto...
A: Stock Dividend and Stock Split are two methods by which corporations increases the count of outstand...
Q: Q2. A medium size profitable corporation is considering the purchase of a $5000 truck for use by the...
A: The question is related to Capital Budgeting. The before tax rate of return is calculated with the h...
Q: Carla Vista Company is considering three long-term capital investment proposals. Each investment has...
A: The Payback Period seems to be the time it takes to return the cost of an invested capital by the ca...
Q: Slow Running Shoes uses the Aging of receivables method to account for uncollectible accounts. o The...
A: If you use accounting software or outsource your accounting, your journal entries may not be visible...
Q: Purchased tools worth $3,500 by paying $2,000 in cash and the remaining on account. Transaction Anal...
A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in...
Q: Angela Lopez owns and manages a consulting firm called Metrix, which began operations on December 1....
A: Financial Statement - Financial Statements of the company includes - 1. Income Statement 2. Statemen...
Q: 8. C. Walton sold inventory on 1 August to M. Jones for $990 (including $90 GST). On 20 August, Jone...
A: Let's understand the basics Journal entry is used to record the transaction of business there are 3...
Q: he Suremiss Miniature Golf and Driving Range was opened on May1, 2018 by Jacinto Claveria. he follow...
A: Suremisss Miniature Gold and Drivinge Range Opened on May 1 ,2018 Proprietor Jacinto Claveria
Q: Lower-of-Cost-or-Market Method On the basis of the following data, determine the value of the invent...
A: Using LCM method, the inventory is valued at lower of the value between market value and cost value....
Q: Surreal Company accounted for non-current assets using the revaluation model. On October 1, 2021, th...
A: Generally the fixed assets are valued at cost plus cost of...
Q: 12. During the current year, Hyatt Company issued for P110 per share, 15,000 convertible preference ...
A: company generally issue shares and debentures in order to raise capital. share issued may be either ...
Q: 1. Determine the ending cash balance for the year a. P 3,430,000 b. P 3,280,000 c. P 3,000,000 d. ...
A: 1. Ending Cash Balance can't be determined with the data given. 2. Calculation of Cash used in Fin...
Q: Christie and Jergens formed a partnership with capital contributions of $350,000 and $450,000, respe...
A: Introduction: Partnership: Its an agreement between two or more partners for forming a business and ...
Q: describe the objectives behind FASB ASC Topic 740, Income Taxes, and the income tax provision proces...
A: The FASB Accounting Standards Codification seems to be the definitive source of generally accepted a...
Q: On January 1, the first day of the fiscal year, a company issues a $700,000, 7%, 10-year bond that p...
A: A journal entry is a form of accounting entry that is used to report a business transaction in a com...
Q: 3. Suppose that the President and Congress were to pass a law stating that futur shortfalls in the S...
A: A conventional IRA allows an individual to divert free tax income into investments with the potentia...
Q: On September 15, YG Corporation splits up its share 2-for-5 when the market value was USD65 per shar...
A: Concept of stock split up: The concept of stock split up is to indicate the effective increase of th...
Q: What is the difference between Direct and Indirect Financing?
A: Difference between direct financing and indirect financing are as follows
Q: Total Per Unit Sales (7,200 units) Variable expenses $ 230,400 136, 800 $ 32.00 19.00 Contribution m...
A: Formula: Sales revenue = Sales units x sales price per unit
Q: Net income was $520.000 in 2020. S452.400 in 2021, and $524,784 in 2022. What is the percentage of c...
A:
Q: Whirly Corporation's contribution format income statement for the most recent month is shown below: ...
A: Formula: Sales revenue = Sales units x Each unit sales price
Q: Martinez Company’s relevant range of production is 7,500 units to 12,500 units. When it produces and...
A: Prime cost means the addition of direct material and direct labor and other direct expenses. Manufac...
Q: ds for the next 3 months. She badly needed P30,000,000 in cash because of an emergency. Pielago look...
A: Money Market Fund Money market fund is also called short term financial fund which can be generate t...
Q: The following trial balance was extracted from the books of Movies To The Max Ltd at July 31, the en...
A: A journal entry is a form of accounting entry that is used to report a business transaction in a com...
Q: Prepare the Shareholders' Equity section of the Statement of Financial Position of New Era Corporati...
A: Shareholder's equity is the difference between the assets and liabilities of the company. In other w...
Q: Question Content Area The Jack Company began its operations on January 1, 2016, and used the LIFO me...
A: The retained earnings comprises of the accumulated profits of the business for different years.
Q: 80. Oblation Bank loaned P9,000,000 to a borrower on January 1, 2017. The terms of the loan were pay...
A: Calculation of impairment loss, interest income , carrying amount are as follows.
Q: Determining Cash Flows from Investing Activities Burns Company’s 2019 and 2018 balance sheets prese...
A: Cash flow from investing activities includes the purchase of long-term assets and the sale of long-t...
Q: Which of the following qualifications is NOT a prerequisite for becoming a licensed agent? a. being ...
A: A town clerk, government agency or corporate executive, government entity, firm, or organization tha...
Q: Effect of Omitting Adjustments For the year ending April 30, Beckinworth Medical Services Co. mista...
A: Adjusting entries are prepared by management to ensure the accrual basis accounting system. It is pr...
Q: Liam, a shareholder in Lager, Inc., (a C corporation), would like to sell 800 of his shares of stock...
A: Present market value of 800 shares = $200,000 Value of shares when Liam purchased=800×$95=$7,200 Pro...
Q: following terms of the partnership, determine the total profit share of Kaye assuming the auditing f...
A: ln partnership accounting , partners agreement states profit and losses them. THE partnership deed...
Q: Milan Company issued bonds with a face value of $275,000 on January 1, Year 1. The bonds had a 7 per...
A: Bonds payable is a form of liability for rhe business, on which regular interest payments needs to b...
Q: Information asymmetry vs Information Symmetry: What is addressed in Financial Markets? IV. Savers an...
A: Financial market is the market which does not now onwards any more physical existence just because o...
Q: The following information is from the annual financial statements of Raheem Company. Year 3 Year 2 Y...
A: Account receivable turnover measures the number of times the company collects its account receivable...
Q: 4. What is the meaning of: a. 2/10, n/30:
A: It is difficult to maintain a consistent credit turnover in a company. Salespeople and individual ve...
Q: Farmer Company issues P 20,000,000 of 10-year, 9% bonds on March 1, 2020 at 97 plus accrued interest...
A: Issue price of bond= 200000*97 Accrued interest= P 20000000*9%*2/12 = 300000
Q: Total $ 230,400 136,800 Per Unit Sales (7,200 units) Variable expenses $ 32.00 19.e0 $ 13.00 Contrib...
A: Under marginal costing, costs are divided into variable and fixed costs. Variable costs are costs th...
Q: Noel and Emily agreed to divide partnership income as follows: a. Noel and Emily will be paid USD60,...
A: Noel Opening capital balance 300000 Add :additional 50000 Less: drawings (10000) Add: neol s...
Q: The cash collection pattern of Twice Co. Inc shows that 60% of sales are collected on the month of s...
A:
Q: The cost of goods sold computations for Novak Company and Flounder Company are shown below. Compute ...
A: The question is based on the cost accounting.
Q: 1. Disposal of an asset. From pages 7-7 and 7-8 of the VLN, the company sold the mower after using i...
A: Depreciation means the amount fixed assets written off due to normal wear and tear , normal usage , ...
Q: Statement 1: Equity investments at FVPL are assessed for impairment. Statement 2: Dividends are reco...
A: An impaired asset is one whose market value is less than the value shown on the company's balance sh...
Q: Statement 1: Financial assets held for trading shall be measured at fair value through profit or los...
A: The correct statement with explanation is given in the following steps for your reference.
Q: Fostoria Corporation began the current period with $21,975 of raw materials, purchased $97,950 of ra...
A: Raw materials are those materials which are used by the business for the purpose of production or ma...
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- 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.Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?
- Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The national sales manager believes that if they invest an additional $25,000 in advertising, they would increase sales volume by 10,000 units. Prepare a forecasted contribution margin income statement for Brahma if they incur the additional advertising costs, using this information:Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 200,000 units (for the two-year period). The proposed selling price was 130 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be 120 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of 15 per unit is needed for this new product. Also, as I look at the projected market share, 25 percent isnt acceptable. Total profits need to be increased. Cathy, what suggestions do you have? CATHY: Simple. Decrease the selling price to 125 and we expand our market share to 35 percent. To increase total profits, however, we need some cost reductions as well. BRIAN: Youre right. However, keep in mind that I do not want to earn a profit that is less than 15 per unit. MARK: Does that 15 per unit factor in preproduction costs? You know we have already spent 100,000 on developing this product. To lower costs will require more expenditure on development. BRIAN: Good point. No, the projected cost of 120 does not include the 100,000 we have already spent. I do want a design that will provide a 15-per-unit profit, including consideration of preproduction costs. CATHY: I might mention that post-purchase costs are important as well. The current design will impose about 10 per unit for using, maintaining, and disposing our product. Thats about the same as our competitors. If we can reduce that cost to about 5 per unit by designing a better product, we could probably capture about 50 percent of the market. I have just completed a marketing survey at Marks request and have found out that the current design has two features not valued by potential customers. These two features have a projected cost of 6 per unit. However, the price consumers are willing to pay for the product is the same with or without the features. Required: 1. Calculate the target cost associated with the initial 25 percent market share. Does the initial design meet this target? Now calculate the total life-cycle profit that the current (initial) design offers (including preproduction costs). 2. Assume that the two features that are apparently not valued by consumers will be eliminated. Also assume that the selling price is lowered to 125. a. Calculate the target cost for the 125 price and 35 percent market share. b. How much more cost reduction is needed? c. What are the total life-cycle profits now projected for the new product? d. Describe the three general approaches that Nico can take to reduce the projected cost to this new target. Of the three approaches, which is likely to produce the most reduction? 3. Suppose that the Engineering Department has two new designs: Design A and Design B. Both designs eliminate the two nonvalued features. Both designs also reduce production and logistics costs by an additional 8 per unit. Design A, however, leaves post-purchase costs at 10 per unit, while Design B reduces post-purchase costs to 4 per unit. Developing and testing Design A costs an additional 150,000, while Design B costs an additional 300,000. Assuming a price of 125, calculate the total life-cycle profits under each design. Which would you choose? Explain. What if the design you chose cost an additional 500,000 instead of 150,000 or 300,000? Would this have changed your decision? 4. Refer to Requirement 3. For every extra dollar spent on preproduction activities, how much benefit was generated? What does this say about the importance of knowing the linkages between preproduction activities and later activities?Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
- Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week, and would earn $1 S per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs for Garrison?Gaston Company manufactures furniture. One of its product lines is an economy-line kitchen table. During the last year, Gaston produced and sold 100,000 units for 100 per unit. Sales of the table are on a bid basis, but Gaston has always been able to win sufficient bids using the 100 price. This year, however, Gaston was losing more than its share of bids. Concerned, Larry Franklin, owner and president of the company, called a meeting of his executive committee (Megan Johnson, marketing manager; Fred Davis, quality manager; Kevin Jones, production manager; and Helen Jackson, controller). LARRY: I dont understand why were losing bids. Megan, do you have an explanation? MEGAN: Yes, as a matter of fact. Two competitors have lowered their price to 92 per unit. Thats too big a difference for most of our buyers to ignore. If we want to keep selling our 100,000 units per year, we will need to lower our price to 92. Otherwise, our sales will drop to about 20,000 to 25,000 per year. HELEN: The unit contribution margin on the table is 10. Lowering the price to 92 will cost us 8 per unit. Based on a sales volume of 100,000, wed make 200,000 in contribution margin. If we keep the price at 100, our contribution margin would be 200,000 to 250,000. If we have to lose, lets just take the lower market share. Its better than lowering our prices. MEGAN: Perhaps. But the same thing could happen to some of our other product lines. My sources tell me that these two companies are on the tail end of a major quality improvement programone that allows them significant savings. We need to rethink our whole competitive strategyat least if we want to stay in business. Ideally, we should match the price reduction and work to reduce the costs to recapture the lost contribution margin. FRED: I think I have something to offer. We are about to embark on a new quality improvement program of our own. I have brought the following estimates of the current quality costs for this economy line. As you can see, these costs run about 16 percent of current sales. Thats excessive, and we believe that they can be reduced to about 4 percent of sales over time. LARRY: This sounds good. Fred, how long will it take for you to achieve this reduction? FRED: All these costs vary with sales level, so Ill express their reduction rate in those terms. Our best guess is that we can reduce these costs by about 1 percent of sales per quarter. So it should take about 12 quarters, or three years, to achieve the full benefit. Keep in mind that this is with an improvement in quality. MEGAN: This offers us some hope. If we meet the price immediately, we can maintain our market share. Furthermore, if we can ever reach the point of reducing the price below the 92 level, then we can increase our market share. I estimate that we can increase sales by about 10,000 units for every 1 of price reduction beyond the 92 level. Kevin, how much extra capacity for this line do we have? KEVIN: We can handle an extra 30,000 or 40,000 tables per year. Required: 1. Assume that Gaston immediately reduces the bid price to 92. How long will it be before the unit contribution margin is restored to 10, assuming that quality costs are reduced as expected and that sales are maintained at 100,000 units per year (25,000 per quarter)? 2. Assume that Gaston holds the price at 92 until the 4 percent target is achieved. At this new level of quality costs, should the price be reduced? If so, by how much should the price be reduced, and what is the increase in contribution margin? Assume that price can be reduced only in 1 increments. 3. Assume that Gaston immediately reduces the price to 92 and begins the quality improvement program. Now, suppose that Gaston does not wait until the end of the three-year period before reducing prices. Instead, prices will be reduced when profitable to do so. Assume that prices can be reduced only by 1 increments. Identify when the first future price change should occur (if any). 4. Discuss the differences in viewpoints concerning the decision to decrease prices and the short-run contribution margin analysis done by Helen, the controller. Did quality cost information play an important role in the strategic decision making illustrated by the problem?
- Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)Ac Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using the extra worker, the company will be able to engrave 8,000 more units per year. The selling price per unit is $16. The cost per unit currently is $11.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?