Hello tutor please provide correct answer general Accounting A firm thinks its consumer promotion expendituresare too high and wants to cut $500,000 from thebudget. Management estimates it will lose 10,000units in sales if it does.If the gross margin is $40 per unit, does cutting thepromotion budget make sense?

Step 1: Define Gross MarginNet sales less the cost of goods sold represents a company's gross…

Answered: A firm thinks its consumer promotion…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter7: Budgeting

Section: Chapter Questions

Problem 6TP: The management of Hess, Inc., is developing a flexible budget for the upcoming year. It was not...

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Bubbles Inc. has observed that their primary product, Apex Wrap is losing market share. Due to this phenomenon, Bubble's operating income was $120,000 in 2017, $100,000 in 2018 and 80,000 in $2019. The management brainstorms on a solution to the company's declining profits and decide to add a softer layer to the product in 2019, change product casing in 2020 and remove the edge lining in 2021. The management is incorporating O Rolling budget O Kaizen budget O Responsibility accounting budget O Flexible budget
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Lux Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be
Eagle Sales has developed the following budgeted income statement. The company is experimenting with new engineering techniques and believes it can reduce variable cost to $4 per unit and significantly improve the product. The innovations would increase fixed cost to $10,000. The company expects to be able to maintain current sales (2,500 units). Assuming Eagle decides to pursue this strategy, by what amount would the budgeted profit ?change Sales Revenue (2.500 units x $10 sales price) Total Variable Expenses (2,500 x S6 per unit). Contribution Margin Fixed Expenses Net Income S25,000 (15,000) 10,000 (6,000) $4.000 decrease by $4,000 ) increase by S4,000 decrease by $1,000 O decrease by $2,000 increase by $1,000
Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Required: 1. What is Hammonds variable cost ratio? Its contribution margin ratio? 2. Suppose Hammonds actual revenues are 200,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.) 4. How much sales revenue must Hammond generate to earn a before-tax profit of 130,000? An after-tax profit of 90,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.
Danna Martin, president of Mays Electronics, was concerned about the end-of-the year marketing report that she had just received. According to Larry Savage, marketing manager, a price decrease for the coming year was again needed to maintain the companys annual sales volume of integrated circuit boards (CBs). This would make a bad situation worse. The current selling price of 18 per unit was producing a 2-per-unit profithalf the customary 4-per-unit profit. Foreign competitors kept reducing their prices. To match the latest reduction would reduce the price from 18 to 14. This would put the price below the cost to produce and sell it. How could these firms sell for such a low price? Determined to find out if there were problems with the companys operations, Danna decided to hire a consultant to evaluate the way in which the CBs were produced and sold. After two weeks, the consultant had identified the following activities and costs: The consultant indicated that some preliminary activity analysis shows that per-unit costs can be reduced by at least 7. Since the marketing manager had indicated that the market share (sales volume) for the boards could be increased by 50% if the price could be reduced to 12, Danna became quite excited. Required: 1. CONCEPTUAL CONNECTION What is activity-based management? What phases of activity analysis did the consultant provide? What else remains to be done? 2. CONCEPTUAL CONNECTION Identify as many nonvalue-added costs as possible. Compute the cost savings per unit that would be realized if these costs were eliminated. Was the consultant correct in the preliminary cost reduction assessment? Discuss actions that the company can take to reduce or eliminate the nonvalue-added activities. 3. Compute the unit cost required to maintain current market share, while earning a profit of 4 per unit. Now compute the unit cost required to expand sales by 50%, assuming a per-unit profit of 4. How much cost reduction would be required to achieve each unit cost? 4. Assume that further activity analysis revealed the following: switching to automated insertion would save 60,000 of engineering support and 90,000 of direct labor. Now, what is the total potential cost reduction per unit available from activity analysis? With these additional reductions, can Mays achieve the unit cost to maintain current sales? To increase it by 50%? What form of activity analysis is this: reduction, sharing, elimination, or selection? 5. CONCEPTUAL CONNECTION Calculate income based on current sales, prices, and costs. Then calculate the income by using a 14 price and a 12 price, assuming that the maximum cost reduction possible is achieved (including Requirement 4s reduction). What price should be selected?
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2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10% next year, but the firm’s cost structure will remain the same. T-1 T-2 Sales $ 245,000 $ 296,000 Variable costs: Cost of goods sold 79,000 148,000 Selling & administrative 19,000 59,000 Contribution margin $ 147,000 $ 89,000 Fixed expenses: Fixed corporate costs 69,000 84,000 Fixed selling and administrative 21,000 30,000 Total fixed expenses $ 90,000 $ 114,000 Operating income $ 57,000 $ (25,000 ) Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. 2. By what percentage…
Kindly, answer the following: a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these changes, what will be the company’s increase or decrease in profit? b. The president is convinced that a 10% reduction in the selling price, combined with an increase of P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes, how much is the company’s expected profit? c. A new package for the product is being considered to induce sales. This package costs P0.60 per unit. Considering the new package cost, how many units would have to be sold each month to earn a profit ofP90,000?
D. What are the total expected cash disbursements for raw materials for the year under this revised budget? e. After seeing this revised budget the production manager cautioned that due to the current production constraint a complex milling machine the plant can produce no more than 90000 units in any one quarter. Is this a potential problem ?
The CEO of XYZ company has $1 million to spend to improve the company's operations. Although the money could be used to create another division, a new budget system is needed to track expenses and create responsibility budget reports. Even when the company earns profit, there are no reports to explain the reasons. Make a recommendation for the way the funds should be used. Defend your position.
Capital budgeting GAP, a retail chain, is considering buying a registered software from Microsoft so that it can more effectively deal with its retail sales. The software costs $750,000 and will be depreciated down to zero using the straight-line method over its five-year economic life. The marketing department predicts the sales will be $600,000 per year for the next three years, after which the market will cease to exist. The cost of one unit sold and operating expenses are predicted to be 25% of sales. After three years the software can be sold for $400,000. The GAP also needs to add net working capital of $25,000 immediately and maintain it for the next two years. The corporate tax rate is 35%. a) Compute the unlevered net income (EBIT minus taxes), and the free cash flows. Remember to consider the recovery value for the software program, and the tax benefit or cost. (Assume that GAP has other profitable businesses such that tax benefits become effective.) [25%] 3 Continued…

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A firm thinks its consumer promotion expenditures are too high and wants to cut $500,000 from the budget. Management estimates it will lose 10,000 units in sales if it does. If the gross margin is $40 per unit, does cutting the promotion budget make sense?