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1. Calculate the operating income of Titan for Year 4 and Year 5;

1. Calculate the operating income of Titan for Year 4 and Year 5;

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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As a direct result of your work, quality significantly improved during the latest year leading to an increase in sales. Sales of AllPad have increased in tandem with an increase in unit price. Information about the current period (Year 5) and prior period (Year 4) follow. Type of Data Units of AllPad produced and sold Selling price Pounds of direct material used Direct material cost per pound Manufacturing capacity in units Total conversion costs Conversion cost per unit of capacity Selling and customer service capacity Total selling and customer service costs Cost per customer of selling and customer service capacity Assuming Titan had 70 customers in Year 4 and 80 customers Year 5, 1. Calculate the operating income of Titan for Year 4 and Year 5; 2. Calculate the net increase in operating income attributable to revenue growth. 3. Calculate the cost effect of growth for direct materials. 4. Calculate the revenue effect of price recovery. 5. Calculate the cost effect of price recovery for direct materials cost. 6. Calculate the cost effects of price recovery for conversion costs. 7. Calculate the cost effect of productivity for direct materials. Year 4 8,000 $480 32,000 $35 12,000 $1,800,000 $150 98 $490,000 $5,000 8. Please comment on Titan Computer Company's performance from Year 4 to Year 5. 9. If Titan Computer Company elects not to eliminate any unused capacity, why might the company choose not to downsize? 10. As a business owner, how would you manage unused capacity? Please explain. Year 5 9,000 $490 34,200 $36 12,000 $1,848,000 $154 96 $518,400 $5,400
Transcribed Image Text:As a direct result of your work, quality significantly improved during the latest year leading to an increase in sales. Sales of AllPad have increased in tandem with an increase in unit price. Information about the current period (Year 5) and prior period (Year 4) follow. Type of Data Units of AllPad produced and sold Selling price Pounds of direct material used Direct material cost per pound Manufacturing capacity in units Total conversion costs Conversion cost per unit of capacity Selling and customer service capacity Total selling and customer service costs Cost per customer of selling and customer service capacity Assuming Titan had 70 customers in Year 4 and 80 customers Year 5, 1. Calculate the operating income of Titan for Year 4 and Year 5; 2. Calculate the net increase in operating income attributable to revenue growth. 3. Calculate the cost effect of growth for direct materials. 4. Calculate the revenue effect of price recovery. 5. Calculate the cost effect of price recovery for direct materials cost. 6. Calculate the cost effects of price recovery for conversion costs. 7. Calculate the cost effect of productivity for direct materials. Year 4 8,000 $480 32,000 $35 12,000 $1,800,000 $150 98 $490,000 $5,000 8. Please comment on Titan Computer Company's performance from Year 4 to Year 5. 9. If Titan Computer Company elects not to eliminate any unused capacity, why might the company choose not to downsize? 10. As a business owner, how would you manage unused capacity? Please explain. Year 5 9,000 $490 34,200 $36 12,000 $1,848,000 $154 96 $518,400 $5,400
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