Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Sales Revenue $960,000 Costs: Vehicle leases $400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other costs 60,000 Manager's Salary 120,000 Total Costs 1,020,000 Operating Loss $ (60,000) Required: Prepare a report of the differential costs and revenues if the delivery service is added.
Q: A Corporation is considering to open an office in a new market area that would allow it to increase…
A: Formulas:
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: sales Price 100 Variable Cost @ 40% of Sales Price 40 Contribution PU 60 Fixed Cost…
Q: ou work in a Finance department and are asked to analyze the economics of an existing jet, which…
A: The question is based on the concept of Financial Management.
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: Break-even point is computed by dividing the total fixed cost by the contribution per unit.
Q: Angelus Press is considering replacing all of its old cash registers with new ones. The old…
A: Note: Hi! Thank you for the question, As per the honor code, we are allowed to answer three…
Q: A supermarket is planning on piloting a self- checkout system in one of its stores. It estimates…
A: Payback period is time required to generate the cashflow equal to initial investment .
Q: Gateway Construction Company, run by Jack Gateway, employs 25 to 30 people as subcontractors for…
A: Given as,
Q: Baguio Coat Company estimates that 60,000 special zippers will be used in the manufacture of men's…
A: Opportunity cost - This is the cost which company can gain if the alternative option is selected.…
Q: Comfy Corporation manufactures furniture in several divisions, including the patio furniture…
A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…
Q: A supermarket is planning on piloting a self-checkout system in one of its stores. It estimates that…
A: Conventional Pay back period is the time the project takes to recover initial investment in nominal…
Q: Simmons Company is a merchandiser with multiple store locations. One of its store managers is…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: Janet Garcia is considering expanding her business. She plans to hire a salesperson to cover trade…
A:
Q: AA company that has a definite plan for expansion will need to hire and train 60 new engineers per…
A: Cost refers to the amount which is paid to purchase something, whether goods or service. Costs can…
Q: A highway department is considering building a temporary bridge to cut travel time during the three…
A:
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: Break even point is the point at which the company makes no profit and incurs no loss. Data given:…
Q: Gazapizm Corporation is a manufacturing company and has estimated that they need $2,400,000 to put a…
A: Firm requires funds for new projects or existing operations. Firm can arrange the funds through long…
Q: A drive in movie theater has been selling popcorn, and the small concession stand has normally…
A: Break-even point analysis is calculated to determine number of units produced to cover fixed and…
Q: Kamal Fatehl, production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in…
A: Step 1 Sales are directly correlated to the efficiency of the supply chain, so proper systematic…
Q: Jason Bartlett is the managing partner of a business that has just finished building a 60-room…
A: There are two types of costs that are being incurred in the business. One is variable costs which…
Q: ou are the plant accountant for a company that makes a popular brand of basketball shoes. Currently,…
A: Break even sales volume refers the sales volume that needs to be achieved to cover the fixed cost…
Q: McGilla Golf has decided to sell a new line of golf clubs. The company would like to know the…
A: The sensitivity analysis of NPV in which the project are mostly vulnerable with respect to the…
Q: McGilla Golf has decided to sell a new line of golf clubs and would like to know the sensitivity of…
A: Cost of Marketing Study is $154,000 Selling price os club is $840 per set Variable cost is $440 per…
Q: Wendell’s Donut Shoppe is investigating the purchase of a new $31,300 donut-making machine. The new…
A: Introduction: Internal rate of return is a method to calculate the returns on an investment. The…
Q: DYC Co is a medium sized manufacturing company that plans to increase capacity by purchasing new…
A: NPV is a capital budgeting techniques which help in decision making on the basis of future cash…
Q: Management is trying to decide whether or not to build a new factory. They believe sales are…
A: Here, Revenues for 1st year = $85,000 Revenues for 2nd year = $70,000 Annual expenses = $30,000…
Q: If the department is discontinued, what would be the annual change in the company's overall net…
A: Any organization can have departments that work as either profit centers and cost centers . It is…
Q: You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic…
A: a. Calculate the free cash flow as follows: Formulas:
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: Note: There is no clarity in question w.r.t Price of shoe. it is shown as $100 a piece. If 2 piece…
Q: Business at your design engineering firm has been brisk. To keep up with the increasing workload,…
A: 1. In year 0, the net cash outflow associated with the drawing activities if the CAD/CAM system is…
Q: A study has been conducted to determine if one of the departments in Your Company should be…
A: Discontinuing a department means that department is no longer operated, it is either shut down…
Q: Delta Sonic, a chain of full service automotive detailers, is considering introducing a new…
A: To Find: Projected incremental sales
Q: A national newspaper publishing group is considering introducing a new morning newspaper in Denver.…
A: Break-even point of sale is the point where the company earns no profit or loss by selling the…
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: Cost volume profit (CVP) analysis is an accounting practice which determines the relationship…
Q: Regency Rug Repair Company is trying to decide whether it should relax its credit standards. The…
A: 1)Profit contribution per unit = Sales per unit - variable cost per unit = $32 - $28 = $4per unit…
Q: Simmons Company is a merchandiser with multiple store locations. One of its store managers is…
A:
Q: Comfy Corporation manufactures furniture in several divisions, including the patio furniture…
A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…
Q: Comfy Corporation manufactures furniture in several divisions, including the patio furniture…
A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…
Q: You are the plant accountant for a company that makes a popular brand of basketball shoes.…
A: The question is related to the Marginal Costing. The details are given regarding the same. First we…
Q: Question 3, 5, and 6, please. Thank you
A: Cost-volume profit analysis is a tool that helps in decision making by establishing a relationship…
Q: Wendell’s Donut Shoppe is investigating the purchase of a new $40,000 donut-making machine. The new…
A: Answer : Internal rate of return = 16.99%
Q: The Sandhill Acres Inn is trying to determine its break-even point during its off-peak season. The…
A: Break even point is the point at which the total costs will be equal to the total sales. At this…
Q: Wendell’s Donut Shoppe is investigating the purchase of a new $31,300 donut-making machine. The new…
A: As posted multiple sub parts we are answering only first three sub parts kindly repost the…
Q: A company intends to install new management software for its warehouse. The software will cost…
A: The benefit in the first year is the total reduction through reduction in staff as well as general…
Q: You are considering a new product line for your business. The new product line will require…
A: Cash flows: These are the inflow & outflow of cash in & out of the company or a project. It…
Hello question is attached, thanks.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- 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:Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.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.
- 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?Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 17 million, and production and sales will require an initial 5 million investment in net operating working capital. The companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for 1.5 million after taxes and real estate commissions. How would this affect your answer?
- 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.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?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.
- Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Javier Company has sales of 8 million and quality costs of 1,600,000. The company is embarking on a major quality improvement program. During the next three years, Javier intends to attack failure costs by increasing its appraisal and prevention costs. The right prevention activities will be selected, and appraisal costs will be reduced according to the results achieved. For the coming year, management is considering six specific activities: quality training, process control, product inspection, supplier evaluation, prototype testing, and redesign of two major products. To encourage managers to focus on reducing non-value-added quality costs and select the right activities, a bonus pool is established relating to reduction of quality costs. The bonus pool is equal to 10 percent of the total reduction in quality costs. Current quality costs and the costs of these six activities are given in the following table. Each activity is added sequentially so that its effect on the cost categories can be assessed. For example, after quality training is added, the control costs increase to 320,000, and the failure costs drop to 1,040,000. Even though the activities are presented sequentially, they are totally independent of each other. Thus, only beneficial activities need be selected. Required: 1. Identify the control activities that should be implemented, and calculate the total quality costs associated with this selection. Assume that an activity is selected only if it increases the bonus pool. 2. Given the activities selected in Requirement 1, calculate the following: a. The reduction in total quality costs b. The percentage distribution for control and failure costs c. The amount for this years bonus pool 3. Suppose that a quality engineer complained about the gainsharing incentive system. Basically, he argued that the bonus should be based only on reductions of failure and appraisal costs. In this way, investment in prevention activities would be encouraged, and eventually, failure and appraisal costs would be eliminated. After eliminating the non-value-added costs, focus could then be placed on the level of prevention costs. If this approach were adopted, what activities would be selected? Do you agree or disagree with this approach? Explain.