Xia-Ming is considering the expansion of her picture-framing camera business to include the printing of oversize pictures from She would need to lease equipment, at a cost of $66 per month. To process the pictures, she estimates that she would have se expenses of $4 per picture. Xia-Ming estimates that she can sell 60 pictures per month. (a) What price should she charge to break even? (b) Compute the break-even point in sales dollars. The picture frames should be sold for $ to break even. (Round to the nearest cent as needed Round all intermediate values to six decimal places as needed)

Xia-Ming is considering the expansion of her picture-framing camera business to include the printing of oversize pictures from She would need to lease equipment, at a cost of $66 per month. To process the pictures, she estimates that she would have se expenses of $4 per picture. Xia-Ming estimates that she can sell 60 pictures per month. (a) What price should she charge to break even? (b) Compute the break-even point in sales dollars. The picture frames should be sold for $ to break even. (Round to the nearest cent as needed Round all intermediate values to six decimal places as needed)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11E

See similar textbooks

Similar questions

Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
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?
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?
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.
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?
Markson and Sons leases a copy machine with terms that include a fixed fee each month of $500 plus a charge for each copy made. The company uses the high-low method to analyze costs. If Markson paid $360 for 5,000 copies and $280 for 3,000 copies, how much would Markson pay if it made 7,500 copies?
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.
KNS estimates that if he purchases the new equipment and lowers his price to P44.55 per item, his volume will increase to about 4,700 units per month. Based on the local market, that is the largest volume he can realistically expect. WHAT SHOULD KNS DO?
Kath is considering investing 500,000.00 to open a Milk Tea Station near a mall. Based on her feasibility study, she can sell 12 large size of milk tea per hour at a price of 25.00 per bottle. She is planning to hire 2 crews, with an hourly rate of 25.00, to manage the store which will operate 8hours per day, 6 days per week, and 50 weeks per year. However, additional out-of-pocket miscellaneous cost is 8,500.00 per month. More so, she wanted to have her crews a 2-week vacation every year with pay. If the capital now is earning 15% annually and she must write off her investment within 5 years with desire rate of return of at least 20% on his investment, would you recommend the investment? Use the rate of return method and annual worth method in making your decision.
Jamie is considering leaving her current job, which pays $75,000 per year, to start a newcompany that develops applications for smartphones. Based on market research, she can sellabout 50,000 units during the first year at a price of $4 per unit. With annual overhead costsand operating expenses amounting to $145,000. Jamie expects a profit margin of 20 percent.This margin is 5 percent larger than that of her largest competitor, Apps, Inc.● If Jamie decides to embark on her new venture, what will her accounting costs be duringthe first year of operation?○ Her company’s implicit costs?○ Her company’s opportunity costs?● Suppose that Jamie’s estimated selling price is lower than originally projected during thefirst year. How much revenue would she need in order to earn:o Positive accounting profits?o Positive economic profits
Having recently graduated with a visual arts degree, Zane is considering starting a new business in this field, selling exotic artwork. He believes he can sell each piece of artwork for an average price of $600. The suppliers of the artwork will be paid a commission of 25% of the price. Artwork will be packed and delivered to the customer. Zane estimates that packing and delivery costs should be about $30 per product. There will be additional expenses associated with running the store. Rent will be $5,400 per month. Utilities (which it is assumed will not vary from month to month) will be $990 per month. Insurance and other expenses will be $750 per month. He plans to pay himself and one sales assistant salaries of $10,500 per month ($7,500 for himself and $3,000 for his assistant). The tax rate is assumed by Zane to be 30%. Required: a. Based on the information how many pieces of artwork per month would Zane need to sell to break even? Show all workings. b. If Zane wanted to earn a…