A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major rawmaterials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locatingnear the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers.Revenue per unit will be $160 in either case.Annual fixed costs ($ millions)Variable cost per unitExpected annual demand (units)Near raw materialsNear customers1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minussign.)642. Which location would produce greater profit?O Near raw materialsO Near customersNear RawMaterials$0.90$ 408,600NearCustomers$1.00$ 4513,300

Cost of revenue is the total cost incurred to produce and sell a product or service. It includes all…

Answered: A newly formed company must decide on a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 3TP: As a manager, you have to choose between two options for new production equipment. Machine A will...

See similar textbooks

Similar questions

As a manager, you have to choose between two options for new production equipment. Machine A will increase fixed costs by a substantial margin but will produce greater sales volume at the current price. Machine B will only slightly increase fixed costs but will produce considerable savings on variable cost per unit. No additional sales are anticipated if Machine B is selected. What are the relative merits of both machines, and how could you go about analyzing which machine is the better investment for the company in terms of both net operating income and break-even?
Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set sells externally for $150. What would you recommend as the internal transfer price from the Wheel Division to the Assembly Division if a competitive external market exists for wheel set #102? Would your answer change if there were no external market this component? Why? What would the transfer price be if upper management required cost plus 25 percent as the transfer price?
Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000. (Enter your response as an integer.)
Great Corporations's decision to produce a new line of recreational products resulted in the need to construct either a small plant or large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium and high. Under low long-run demand, small plant size has payoff of P150 and large plant size has P50 payoff. Small plant size has payoffs of P200 in medium long-run demand. While large plant size has equal payoff with small size plant in case of medium long-run demand. In case of high long -run demand, large plant size projects a payoff of P500, which is P300 higher than that of the small plant size. 1. Construct the payoff table. 2. What is the decision to be made? 3. What is the chance event for the corporation's problem? 4. Construct a decision tree. 5. Recommend a decision based on the use of the optimistic, conservative and minimax…
The Shine Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model: Variable manufacturing costs Applied fixed manufacturing overhead Variable selling and administrative costs Applied fixed selling and administrative costs What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 235%? Multiple Choice $1,565.25. $1,700.25. $1,835.25. $2,060.25. None of these answer choices is correct. $ 440 220 175 190
Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $350 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location Jackson Dayton The annual profit from Jackson is $ Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit 45 $95 Forecasted Demand per Year 35,000 units 39,000 units (Enter your response as an integer.) ..
Solve 2, the first answer is the wrong. Find the lowest acceptable transfer price.
What is the answer to question number 33, 34 and 35? Provide a solution.
Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative Alternative A В Materials costs $41,000 $37,900 $13,300 $15,300 $57,100 $37,900 $13,300 $22,500 Processing costs Equipment rental Occupancy costs What is the financial advantage (disadvantage) of Alternative B over Alternative A?
Required:1. Is Davis’s general approach to calculating the opportunity cost in terms of the physical units involved, correct? Explain.2. Assuming productive capacity cannot be increased for either machine in December, how many PVRs would WCD have to forgo selling to existing customers to fill the special order from Scottie Barnes Limited ?3. Calculate the opportunity cost of accepting the special order.4. Calculate the net effect on profits of accepting the special order.5. Now assume that WCD is operating at 75% of capacity in December. What is the minimum price WCD should be willing to accept on the special order?
Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit $3,200,000 Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: $2,028,500 Capital-Intensive Labor-Intensive
Can you help me do this quickly, thanks a. The constraint at Shanghai Company is an expensive milling machine. The three products listed below use this constrained resource.Required (show your calculations):i. Rank the products in order of their current profitability from the most profitable to the least profitable. ii. Assume that sufficient constraint time is available to satisfy the demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource. Explain your answer.

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Essentials of Business Analytics (MindTap Course …

Statistics

ISBN:

9781305627734

Author:

Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS