Gabriela Blazquez
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Finance
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Feb 20, 2024
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Gabriela Blazquez
1.
Executives of Studio Recordings, Inc., produced the latest compact disk, the Starshine Sisters Band, titled Starshine/Moonshine. The following cost information pertains to the new CD: CD package and disc (direct material and labor) $1.25/CD Songwriters’ royalties $0.35/CD Recording artists’ royalties $1.00/CD Advertising and promotion $275,000 Studio Recordings, Inc., overhead $215,000 Selling price to CD distributor $9.00 Calculate the following:
a. Contribution per CD unit
Paticulars
Amount ($)
Selling Price
9.00
Less: Variable Cost:
CD package and disc (direct material and labor)
1.25
Songwriters’ royalties
0.35
Recording artists’ royalties
1.00
Contribution per CD unit
6.40
b. Break-even volume in CD units and dollars
Total Fixed cost= 275,000+215,000= $490,000
Contribution margin= 6.40/9.00*100=
71.11%
Break-even volume= 490,000/71.11%=
$689,073.27
Break-even volume in units= 689,073.27/9.00= $76,564
c. Net profit if 1 million CDs are sold.
Particulars Amount ($)
Total Contribution
6.40 x 1,000,000
6,400,000
Less: Fixed Cost
490,000
Total profit if 1 million CD are sold
5,910,000
d. Necessary CD unit volume to achieve a $200,00 profit.
Desired Sales in units = [(490,000 + 20,000) / 0.7111] / 9.00
Desired sales in units = 79,689 units
2.
Video Concepts, Inc. (VCI) markets video equipment and film through a variety of retail outlets. Presently, VCI is faced with a decision as to whether it should obtain the distribution rights to an unreleased film titled
Touch of Orange
. If this film is distributed by VCI directly to large retailers, VCI’s investment in the project would be $150,000 and the total market for the film is estimated at 100,000 units. Other data are as follows:
Cost of distribution rights for film $125,000
Label design 5,000
Package design 10,000
Advertising 35,000
Reproduction of copies (per 1,000) 4,000
Manufacture of labels and packaging (per 1,000) 500
Royalties (per 1,000) 500
VCI’s suggested retail price for the film is $20 per unit. The retailer’s margin is 40 percent.
a.
What is VCI’s unit contribution and contribution margin?
b.
What is the break-even point in units? In dollars?
c.
What share of the market would the film have to achieve in the first year to earn a 20 percent return on BCI’s investment?
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Related Questions
The following cost information pertains to the new CD:
CD package and disc (direct material and labor): $2.50/CD
Songwriters’ royalties: $0.70/CD
Recording Artists’ royalties: $2.00/CD
Advertising & promotion: $380,000
Sony Records Inc.’s Overhead: $300,000
Selling price of CD: $10.00
Question 2: If they sold 100,000 CDs and decided they wanted to invest in a $75,000 advertising campaign in the hopes of generating more sales, how many more CDs would they have to sell to maintain their current contribution to the organization?
Group of answer choices
a 75,000
b None of these
c 15,625
d 92,500
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Campbell Publications established the following standard price and costs for a hardcover picture book that the company produces.
Standard price and variable costs
Sales price
$4
36.90
Materials cost
8.20
Labor cost
4.00
Overhead cost
6.10
Selling, general, and administrative costs
Planned fixed costs
7.10
Manufacturing overhead
Selling, general, and administrative
$131,000
45,000
Campbell planned to make and sell 31,000 copies of the book.
Required:
a. - d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements,
assuming production volumes of 30,000 and 32,000 units. Determine the sales and variable cost volume variances, assuming volume
is actually 32,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e.,
zero variance).)
Master Budget
Flexible Budgets
Volume Variances
Number of units
31,000
30,000
32,000
Variable manufacturing costs
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Executives at Studio Recordings, Inc. produced the latest compact disc the Starshine Sisters Band,
titled Sunshine/Moonshine. The following cost information pertains to the new CD.
CD package and disc (direct materials and labor)
Songwriters' royalties
Recording artists' royalties
Advertising and promotion
Studio Recordings, Inc.'s overhead
Selling price to CD distributor
Calculate the following if the selling price is cut by 5%:
f) Break-even volume in CD units
g) Break-even volume in dollars
h) Necessary CD volume to achieve $200,000 profit,
$1.25/CD
$0.35/CD
$1.00/CD
$275,000
$250,000
$9.00
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cost to produce 19,000 monitors:
19,000 monitors
$ 2,185,000
1,292,000
684,000
551,000
798,000
$ 5,510,000
$290
You are asked to look over the intern's estimate before the information is shared with members of management who will decide to continue to make the monitors or buy them. The company's controller believes that the estimate may be incorrect because it includes costs that are
not relevant. If Zee-Drive buys the monitors, the direct labor force currently employed in producing the monitors will be terminated and there would be no termination costs incurred. There are no materials on hand and no commitments to suppliers to purchase materials, so all
materials would need to be purchased…
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decide which of the two bracelets to manufacture. Cost data pertaining to the two choices follow.
Bracelet ABracelet B
Cost of materials per unit
$
28
$ 34
Cost of labor per unit
44
44
Advertising cost per year
9,400
7,900
Annual depreciation on
5,700
5,400
existing equipment
Required
a. Identify the fixed costs and determine the amount of fixed cost for each product.
b. Identify the variable costs and determine the amount of variable cost per unit for each product.
c. Identify the avoidable costs and determine the amount of avoidable cost for each product.
Complete this question by entering your answers in the tabs below.
Required Required Required
A
B
C
Identify the avoidable costs and determine the amount of avoidable cost for each product.
Avoidable Costs
Bracelet Bracelet
A
B
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You make widgets, which is a subassembly for you main product of whatsup. An outside vendor
has provided you with a quote to supply the widget part for
$ 72.00
per unit
Your cost records show the following:
Your projected production for the widget is
12,500
units
Item of Cost
Per Unit Cost
Direct Material
$18.75
Direct Labor
$38.00
Variable manufacturing overhead
$9.25
Lease on manufacturing facility
$36,000.00
per year
Depreciation of equipment
$2.50
Allocated Corporate Expenses
$1.25
If this offer is accepted, you can sublease the manufacturing facility for
$15,000
per year
All direct and variable costs can be avoided. The equipment has no salvage value
How much would net operating income be changed if the outside supplier offer was accepted?
Show all calculations for full credit
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Nuru Co. manufactures special car sensors, among other car parts. The per unit cost to
manufacture 20,000 car sensors is as follows:
Direct materials
Direct labour
Variable overhead
Fixed overhead - traceable
Allocated fixed overhead
Total
$50
$40
$6
$10
$20
$126
Nuru is approached by Gisa Co. which offers to make Sensors for $115 per unit. The allocated
fixed overhead consists of common costs which are allocated to segments on the basis of sales
dollars.
Required
Part A
1. What is the financial advantage/disadvantage of accepting Gisa's offer?
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Fabric for sofa coverings
Wood for framing the sofas
Legal fees paid to attorneys in defense of the company in a patent infringement suit, $25,000 plus $160 per hour
Salary of production supervisor
Cartons used to ship sofas
Rent on experimental equipment, $50 for every sofa produced
Straight-line depreciation on factory equipment
Rental costs of warehouse, $30,000 per month
Property taxes on property, plant, and equipment
Insurance premiums on property, plant, and equipment, $25,000 per year plus $25 per $25,000 of insured value over $16,000,000
Springs for seat cushions
Consulting fee of $120,000 paid to efficiency specialists
Electricity costs of $0.13 per kilowatt-hour
Salesperson’s salary, $80,000 plus 4% of the selling price of each sofa sold
Foam rubber for cushion fillings
Janitorial supplies, $2,500…
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Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,300 containers follows.
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
$5,900
6,200
3,500
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Adams for $2.60 each.
Required
X Answer is complete but not entirely correct.
$ 19,300
Yes
$ 24,180 X
No
11,100
26,900
a. Calculate the total relevant cost. Should Adams continue to make the containers?
b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,800 per month, calculate
the total avoidable costs. Should Adams continue to make the containers?
a. Total relevant cost
a. Should Adams continue to make the containers?
b. Total avoidable cost
b. Should Adams continue to make the containers?
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Stuart Publications established the following standard price and costs for a hardcover picture book that the company produces.
Standard price and variable costs
Sales price
$
36.10
Materials cost
8.90
Labor cost
4.20
Overhead cost
5.90
Selling, general, and administrative costs
6.30
Planned fixed costs
Manufacturing overhead
$
128,000
Selling, general, and administrative
49,000
Stuart planned to make and sell 30,000 copies of the book.
Required:
a. - d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 29,000 and 31,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 31,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)
arrow_forward
Stuart Publications established the following standard price and costs for a hardcover picture book that the company produces.
Standard price and variable costs
Sales price
$
36.10
Materials cost
8.90
Labor cost
4.20
Overhead cost
5.90
Selling, general, and administrative costs
6.30
Planned fixed costs
Manufacturing overhead
$
128,000
Selling, general, and administrative
49,000
Stuart planned to make and sell 30,000 copies of the book.
Required:
a. - d. Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 29,000 and 31,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 31,000 units. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)
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Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
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ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor 2 Variable overhead 1 Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Should ColorPro make or buy the part?
Buy the part because it will save $300,000 over making it.
Buy the part because it will save 1,100,000 over making it.
Make the part because it will save $100,000 over buying it.
Buy the part because it will save $100,000 over making it.
Make the part because it will save $1,100,000 over buying it.
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Make or Buy
Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for 20,000 filters, are as follows.
Direct materials
$6.00
Direct labor
7.00
Variable overhead
1.00
Fixed overhead
2.00
Total costs
$16.00
Irrigation Products has offered to sell 20,000 filters to Filtration for $16 per filter. If Filtration accepts Irrigation Products’ offer, the facilities used to manufacture filters could be used to produce refrigerator filtration units. Revenues from the sale of refrigerator filtration units are estimated at $54,000, with variable costs amounting to 50% of sales. In addition, $1 per unit of the fixed overhead associated with the manufacture of secondary water irrigation filters could be eliminated.
Compute the following:
Cost to make filters
Answer
Cost to buy filters
Answer
Should Filtration, Inc. accept Irrigation Product’s offer?
Yes, the cost to purchase the filters is less than the cost to…
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