Stuart Company
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Stuart Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 20,000 units of product, computations for the sales price per clock follow.
| Unit-level costs | $ | 420,000 | |
| Fixed costs | 60,000 | ||
| Total cost (a) | 480,000 | ||
| Markup (a × 0.25) | 120,000 | ||
| Total sales (b) | $ | 600,000 | |
| Sales price per unit (b ÷ 20,000) | $ | 30 | |
Required
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Stuart has excess capacity and receives a special order for 7,000 clocks for $24 each. Calculate the contribution margin per unit. Based on this, should Stuart accept the special order?
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Prepare a contribution margin income statement for the special order.
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- 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.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.Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of $30. The companys monthly fixed expenses are $22,500. What is the companys break-even point in units? What is the companys break-even point in dollars? Construct a contribution margin income statement for the month of September when they will sell 900 units. How many units will Maple need to sell in order to reach a target profit of $45,000? What dollar sales will Maple need in order to reach a target profit of $45,000? Construct a contribution margin income statement for Maple that reflects $150,000 in sales volume.
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?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.Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of 5,000,000, fixed manufacturing costs of 2,000,000, variable marketing costs of 1,000,000, and fixed marketing costs of 3,000,000. Under the variable costing concept, the inventory value of the new product would be: a. 5,000,000. b. 6,000,000. c. 8,000,000. d. 11,000,000.
- Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?A company has prepared the following statistics regarding its production and sales at different capacity levels. Total costs: 1. At what point is break-even reached in sales dollars? In units? (Hint: Use the capacity level to determine the number of units.) 2. If the company is operating at 60% capacity, should it accept an offer from a customer to buy 10,000 units at 3 per unit?
- Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
