1) Booth Inc. has the following information for its first year of operations: Revenues (250,000 units) Manufacturing costs: Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing & administrative costs: Marketing (variable) Marketing depreciation Administrative (fixed) Administrative depreciation Total costs Operating profits $ 3,730,000 $ 665,000 904,000 360,000 445,000 475,000 113,000 450,550 42,000 454,550 $ 275,450 All depreciation charges are fixed and are expected to remain the same for the second year. Sales volume is expected to increase by 13%, and sales prices are expected to increase by 4%. Material costs per unit are expected to increase by 8%. Other unit variable manufacturing costs are expected to increase by 10% per unit. Fixed manufacturing costs (other than depreciation) are expected to increase by 6%. Variable marketing costs per unit will remain constant. Administrative costs (other than depreciation) are expected to increase by 12%. Assume there are no inventories. Booth operates on a cash basis.
1) Booth Inc. has the following information for its first year of operations: Revenues (250,000 units) Manufacturing costs: Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing & administrative costs: Marketing (variable) Marketing depreciation Administrative (fixed) Administrative depreciation Total costs Operating profits $ 3,730,000 $ 665,000 904,000 360,000 445,000 475,000 113,000 450,550 42,000 454,550 $ 275,450 All depreciation charges are fixed and are expected to remain the same for the second year. Sales volume is expected to increase by 13%, and sales prices are expected to increase by 4%. Material costs per unit are expected to increase by 8%. Other unit variable manufacturing costs are expected to increase by 10% per unit. Fixed manufacturing costs (other than depreciation) are expected to increase by 6%. Variable marketing costs per unit will remain constant. Administrative costs (other than depreciation) are expected to increase by 12%. Assume there are no inventories. Booth operates on a cash basis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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