Discontinuing a product line (Learning Objective 4)
Suppose Smithers Company is considering discontinuing its organic dried fruit product line. Assume that during the past year, the organic dried fruit’s product line income statement showed the following:
8.1-24 Full Alternative Text
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EBK MANAGERIAL ACCOUNTING
- Use ABC to allocate manufacturing overhead (Learning Objective 2)Several years after reengineering its production process, King Corporation hired a new controller, Christine Erickson . She developed an ABC system very similar to the one used by King's chief rival. Part of the reason Erickson developed the ABC system was because King's profits had been declining, even though the company had shifted its product mix toward the product that had appeared most profitable under the old system . Before adopting the new ABC system, the company had used a plantwide overhead rate, based on direct labor hours developed years ago .For the upcoming year, King's budgeted ABC manufacturing overhead allocation rates are as follows :ActivityMaterials handling .......................... Machine setup ................................ Insertion of parts ............................ Finishing .........................................Allocation BaseNumber of partsNumber of setupsNumber of partsFinishing…arrow_forwardc03 Use target costing to analyze data (Learning Objective 2) See the Winter Sports Inc. data from S8-2. Assume that Winter Sports' reputation has diminished and other resorts in the vicinity are charging only $65 per lift ticket. Winter Sports has become a price-taker and won't be able to charge more than its competitors. At the market price, Winter Sports' managers believe they will still serve 750,000 skiers and snowboarders each season. 1. If Winter Sports can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Show your analysis. 2. Assume that Winter Sports has found ways to cut its fixed costs to $30 million. What is its new target variable cost per skier/snowboarder? Assume investors want to earn a 15% return on assets. Compare this to the current variable cost per skier/ snowboarder. Comment on your results.arrow_forwardFunTime Cruiseline offers nightly dinner cruises departing from several cities on the east- ern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $50 per passenger. FunTime Cruiseline's variable cost of providing the dinner is $30 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $210,000 per month. The company's rel- evant range extends to 20,000 monthly passengers.arrow_forward
- S20-6 Calculating breakeven point in units, contribution margin given Learning Objective 3 Mackler, Inc. sells a product with a contribution margin of $50 per unit. Fixed costs are $8,000 per month. How many units must Mackler sell to break even?arrow_forwardEA1. 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 $15 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 opportunity costs for Garrison?arrow_forward7-23A Compute breakeven and project income (Learning Objectives 1 & 2)Grover’s Steel Parts produces parts for the automobile industry. The company hasmonthly fixed expenses of $630,000 and a contribution margin of 70% of revenues.Requirements1. Compute Grover’s Steel Parts’ monthly breakeven sales in dollars.2. Use the contribution margin ratio to project operating income (or loss) if revenues are$520,000 and if they are $1,010,000.3. Do the results in Requirement 2 make sense given the breakeven sales you computedin Requirement 1? Explain.arrow_forward
- Word Problem Question 4: (You have to submit an image of your FULL solution to the question in eConestoga -> Course Tools -> Assignments [Final Exam Submission]) The information below shows the net income based on December sales for Comicon Entertainment Inc. Assume the selling price per unit is $1. Sales $180,000 Fixed Costs $80,600 Total Variable Costs $63,000 Total Costs $143,600 Net Income $36,400 (Show all $ answers in this question rounded (if necessary) to the nearest dollar, no decimal places. Only show decimal places on the Revenue and Cost Functions.) 1. What are the revenue and cost functions? (write them both in the box in any format, I'll mark manually) 2. Using an algebraic method, calculate the break-even point in sales dollars. decimal places. Only show decimal places on the Revenue and Cost Functions.) 1. What are the revenue and cost functions? (write them both in the box in any format, l'll mark manually) 2. Using an algebraic method, calculate the break-even point…arrow_forwardw sion o 1om bles 56-3 Compute fixed costs per unit (Learning Objective 2) Scott Equipment produces high-quality soccer balls. If the fixed cost per ball is $3 when the company produces 15,000 balls, what is the fixed cost per ball when it produces 22,500 balls? Assume that both volumes are in the same relevant range.arrow_forward58-5 Special order decision (Learning Objective 3) Shilling Manufacturing produces and sells oil filters for $3.25 each. A retailer has offered to purchase 20,000 oil filters for $1.55 per filter. Of the total manufacturing cost per filter of $2.10, $1.30 is the variable manufacturing cost per filter. For this special order, Shilling would have to buy a special stamping machine that costs $8,000 to mark the customer's logo on the special order oil filters. The machine would be scrapped when the special order is complete. This special order would use manufacturing capacity that would other- wise be idle. No variable nonmanufacturing costs would be incurred by the special order. Regular sales would not be affected by the special order. Would you recommend that Shilling accept the special order under these conditions?arrow_forward
- Breok-Even and Target Profit Analysis The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $8 each with a minimum order of 75 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 75. Since Hooper’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $13.50 each. Hooper would pay the students a commission of $1.50 for each shirt sold. Required: 1. What level of unit sales and dollar sales is needed to…arrow_forwardEBI Solar uses a high-tech process to turn silicon wafers into tinysolar panels. These efficient and inexpensive panels are used topower low-energy, hand-held electronic devices. Last year, EBISolar turned their inventory 4.5 times and had a cost of goodssold of $2.5 million. Assuming 52 business weeks per year: a. Express last year’s average inventory in weeks of supply.b. After several supply chain improvement initiatives, in-ventory investment has dropped across all inventorycategories. While EBI’s cost of goods sold is not expected to change from last year’s level, the value of raw materialshas dropped to $100,500; work-in-process to $25,800; andfinished goods to $16,200. Assuming 52 business weeksper year, express EBI’s current total inventory level inweeks of supply and inventory turns.arrow_forwardStudent question MBI is a manufacturer of personal computers. All its personal computers use a 3.5-inch high-density floppy disk drive which it purchases from Ynos. MBI operates its factory 52 weeks per year, which requires assembling 100 of these floppy disk drives into computers per week. MBI’s annual holding cost rate is 20 percent of the value (based on purchase cost) of the inventory. Regardless of order size, the administrative cost of placing an order with Ynos has been estimated to be $50. A quantity discount is offered by Ynos for large orders as shown below, where the price for each category applies to every disk drive purchased. Determine the optimal order quantity according to the EOQ model with quantity discounts. What is the resulting total cost per year? What is the resulting total cost per year?arrow_forward
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