(a)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting variable cost from sales revenue.
To calculate:
Thecontribution margin earned on each backpack.
(b)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting variable cost from sales revenue.
To find out:
The contribution margin lost on each backpack donated to charity.
(c)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting variable cost from sales revenue.
To find out:
The contribution margin if one backpack is donated with each backpack.
(d)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting variable cost from sales revenue.
To find out:
The contribution margin if one backpack is donated with each backpack.
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Managerial Accounting - With Access
- Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the companys direct fixed costs can be avoided if a segment is dropped. This information is available for the segments. A. What will be the impact on net income if the embroidery segment is dropped? B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? C. Identify one cost that is not relevant in this analysis.arrow_forwardCost Behavior, High-Low Method, Pricing Decision Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firms founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide basic accounting services for small businesses located in the barrio. He wants to price the services at cost. Since the clinic is brand new, it has no experience to go on. Carlos decided to operate the clinic for 2 months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of 25, half the amount charged by Fonseca, Ruiz, and Dunn for professional services. The accounting services clinic opened on January 1. During January, the clinic had 120 hours of professional service. During February, the activity was 150 hours. Costs for these two levels of activity usage are as follows: Required: 1. Classify each cost as fixed, variable, or mixed, using hours of professional service as the activity driver. 2. Use the high-low method to separate the mixed costs into their fixed and variable components. (Note: Round variable rates to two decimal places and fixed amounts to the nearest dollar.) 3. Luz Mondragon, the chief paraprofessional of the clinic, has estimated that the clinic will average 140 professional hours per month. If the clinic is to be operated as a nonprofit organization, how much will it need to charge per professional hour ? How much of this charge is variable? How much is fixed? (Note: Round answers to two decimal places.) 4. CONCEPTUAL CONNECTION Suppose the accounting center averages 170 professional hours per month. How much would need to be charged per hour for the center to cover its costs ? Explain why the per-hour charge decreased as the activity output increased. (Note: Round answers to two decimal places.)arrow_forwardROI by revenue formula: profit/total investment x 100. Please calculate the ROI of social media campaign for a pair of Ray Ban sunglasses by presenting them with this case: You are a social media marketer responsible for creating a social media campaign for a pair of Ray Ban sunglasses. The goal of your social campaign is to drive sales for the sunglasses. With every single social post, you include a trackable call-to-action link to your website where users could purchase the sunglasses. You outsourced all of the professional photographs of the sunglasses, creation of the social media graphics and videos to a company for $5,000. You also spent $3,000 on social media ads directed at the target market. Your campaign ran for one month, and during that time you only worked on the campaign, making a salary of $5,000. The social media management tool that your company pays for costs $1,000 a month. By the end of the campaign, you were able to pull a report from your company website of all…arrow_forward
- Strategic Initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company’s gross profit is 21% of sales, and its target gross profit percentage is 26%. The company’s current monthly sales revenue is $540,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 50% direct labor, 25% direct materials, and 25% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit. Cost makeup of Procedure 1: Direct Labor $ Direct Materials Overhead…arrow_forwardStrategic Initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company’s gross profit is 25% of sales, and its target gross profit percentage is 30%. The company’s current monthly sales revenue is $480,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit. Cost makeup of Procedure 1: Direct Labor $fill in the blank 1 Direct…arrow_forwardsolve a,b and c please. Mcleavey Manufacturing has a demand for 1,000 pumps each year. The company outsources her production by ordering outside supplier, unit purchase price is 60$/ unit. Mc Leavey Manufacturing has to rent warehouse 10% of unit cost per year. And Mc Leavey Manufacturing pays for investment cost of 10% of unit cost per year. For ordering, the company must pay 50$/ order. a. What do you recommend if Mc Leavey Manufacturing get discount from his vendor with below schemes: Order quantity: discount price Less than 150 pumps: 5% discount rate More than 150 pumps: 10% discount rate b. If the company has plan to produce by themself then what is optimal production quantity? (given that they have production rate is 1500 units/year and setup cost is 100$). c. What is the optimal total annual inventory cost if they produce?arrow_forward
- Simple Rate of Return; Payback Period; Internal Rate of Return The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathered the following information to decide whether a cherry picker would be a profitable investment for the Elberta Fruit Farm: a. Currently, the farm is paying an average of $40,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $94,500, and it would have an estimated 12-year useful life. The farm uses straight-line depreciation on all assets and considers salvage value in computing depreciation expense. The estimated salvage value of the cherry picker is $4,500. c. Annual out-of-pocket costs…arrow_forwardAnalyzing profitability Father Furniture Company manufactures and sells oak tables and chairs. Price and cost data for the furniture follow: Father Furniture has three sales representatives: Adam, Ben, and Caleb. Adam sold 100 tables With 6 chairs each. Ben sold 110 tables With 4 chairs each. Caleb sold 80 tables with 8 chairs each. Requirements Calculate the total contribution margin and the contribution margin ratio for each sales representative (round to two decimal places). Which sales representative has the highest contribution margin ratio? Explain Whyarrow_forwardA furniture company manufactures desks and chairs. Each desk uses four units of wood, and each chair uses three units of wood. A desk contributes $250 to profit, and a chair contributes $145. Marketing restrictions require that the number of chairs produced be at least four times the number of desks produced. There are 2000 units of wood available. a. Use Solver to maximize the company’s profit. b. Confirm graphically that the solution in part a maximizes the company’s profit. c. Use SolverTable to see what happens to the decision variables and the total profit when the availability of wood varies from 1000 to 3000 in 100-unit increments. Based on your findings, how much would the company be willing to pay for each extra unit of wood over its current 2000 units? I got through part a and need help on the last 2 parts. Please use the attached template.arrow_forward
- A small company manufactures a certain item and sells it online. The company has a business model where the cost, C in dollars, to make x items is given by the equation C = 20/3 x + 50. The revenue R , in dollars , made by selling x items is given by the equation R = 10x. How many items must the company sell in order for the cost to equal their revenue?arrow_forwardUsing Excel for cost-volume-profit (CVP) analysis Download an Excel temp/ate for this problem online in MyAccountingLab or at http://www.pearsonhigheredcom/Horngren. The Oceanside Garden Nursery buys flowering plants in tour-inch pots for $1.00 each and sells them for $2.50 each. Management budgets monthly fixed costs of $2,100 for sales volumes between 0 and 5,000 plants. Requirements Use the contribution margin approach to compute the company’s monthly breakeven point in units. Use the contribution margin ratio approach to compute the breakeven point in sales dollars. Use the contribution margin approach to compute the monthly sales level (in units) required to earn a target operating income of $5,000. Prepare a graph of the company’s CVP relationships. Include the sales revenue line, the fixed cost line, and the total cost line. Create a chart title and label the axes.arrow_forwardComputing breakeven sales and sales needed to earn a target profit; graphing CVP relationships; performing sensitivity analysis National Investor Group is opening an office in Portland, Oregon. Fixed monthly costs are office rent ($8,100), depreciation on office furniture ($1,700), utilities ($2,000), special telephone lines ($1,500), a connection with an online brokerage service ($2,500), and the salary of a financial planner ($5,200). Variable costs include payments to the financial planner (9% of revenue), advertising (11% of revenue), supplies and postage (4% of revenue), and usage fees for the telephone lines and computerized brokerage service (6% of revenue). Requirements Use the contribution margin ratio approach to compute Nationals breakeven revenue in dollars. If the average trade leads to $1,000 in revenue for National, how many trades must be made to break even? Use the equation approach to compute the dollar revenues needed to earn a monthly target profit of $12,600.…arrow_forward
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