According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketingmanager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton'sstandard variable cost is $44 per hour, and its standard fixed cost is $1,320,000.RequiredDevelop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours.Flexible Budget44,000 HoursFlexible Budget Flexible Budget49,000 Hours54,000 Hours According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketingmanager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton'sstandard variable cost is $44 per hour, and its standard fixed cost is $1,320,000.RequiredDevelop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours.Fixed costsSalesVariable costsFlexible Budget44,000 HoursFlexible Budget49,000 HoursFlexible Budget54,000 Hours

Variable cost is the cost that changes with change in the activity of cost driver used. The variable…

Answered: According to its original plan,…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
When making the determination of whether or not a selling price should be increased there are many different aspects to take into consideration. Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month. Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. In a response of 400-600 words answer the following: What cost-volume relationships should Paulsen take into consideration for the original price and the proposed new selling price? Discuss the non-monetary factors that should be taken into consideration before raising a selling price.
The Chimes Clock Company sells a particular clock for $40. The variable costs are $23 per clock and the breakeven point is 230 clocks. The company expects to sell 280 clocks this year. If the company actually sells 430 clocks, what effect would the sale of additional 150 clocks have on operating income? Explain your answer. The sale of an additional 150 clocks would operating income by the amount of The total effect would amount to
efences According to its original plan, Franklin Consulting Services Company plans to charge its customers for service at $125 per hour in Year 2. The company president expects consulting services provided to customers to reach 45,000 hours at that rate. The marketing manager, however, argues that actual results may range from 40,000 hours to 50,000 hours because of market uncertainty. Franklin's standard variable cost is $47 per hour, and its standard fixed cost is $1,470,000. Required Develop flexible budgets based on the assumptions of service levels at 40,000 hours, 45,000 hours, and 50,000 hours. 45,000 Hours Flexible Budget Flexible Budget 40,000 Hours Flexible Budget 50,000 Hours
Spruce Enterprises anticipates fixed costs of $25,000. Variable costs and expenses are expected to be 60% of sales. The president has asked you to develop a worksheet to calculate sales needed to break even and sales needed to achieve any desired net income (file name DESNI). Your worksheet should include a Data Section that contains fixed costs, desired net income, and variable costs as a percentage of sales. Assume as initial input for your model that the company wishes to achieve a net income of $10,000.
When making the determination of whether or not a selling price should be increased there are many different aspects to take into consideration. Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month. Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. What cost-volume relationships should Paulsen take into consideration for the original price and the proposed new selling price? Discuss the non-monetary factors that should be taken into consideration before raising a selling price.
Lusk Corporation produces and sells 14,300 units of Product X each month. The selling price of Product X is $25 per unit, and variable expenses are $19 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company
Lusk Corporation produces and sells 15,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: O A. $70,000 O B. ($70,000) O C.($30,000) O D. $30,000
Leonard Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: O ($30,000) O $30,000 O $40,000 O ($40,000)

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