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,…

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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Whitewater Inc sells a product that has variable costs of $40 and a selling price of $95. Its current sales total $304,000 per month. Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month. The company is considering a proposal that will increase the selling price by 10%, increase the fixed manufacturing costs by 10%, and increase the fixed selling and administrative costs by $1,500. Part 1: Compute the company's current break-even point in units. Part 2: Compute the company's current income and the current margin of safety. Part 3: Compute the new contribution margin per unit assuming the proposal is accepted. Part 4: Compute the new break-even point in units assuming the proposal is accepted. Part 5: Compute the company's income assuming the proposal is accepted and sales total 3,300 units. Part 6: Should the proposal be accepted?
Braile Gear Works sells a single gear for a price of $55.00 per unit. The variable costs of the gear are $23.00 per gear and annual fixed costs are $448,000. The cost analyst tells you that, based on the price and cost information of the gear and the marketing department's sales projection for next year, the margin of safety percentage is 30 percent. How many units does marketing expect to sell next year? Note: Do not round intermediate calculations.
None
Klinken Corporation's contribution margin ratio on the sale of its most popular product is 42%. The product is priced at $100, annual fixed expenses are $900,000. Management is evaluating two options: (1) lowering variable costs by 15% and (2) reducing fixed expenses by 15%. Required: Calculate the current level of break-even sales in dollars, as well as the break-even sales for the two options. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Break-even sales in dollars Option 1: Break-even sales in dollars Option 2: Break-even sales in dollars
D) Nuevo Company manufactures a product which sells for P5. At present, the company produces and sells 50,000 units per year. Unit variable manufacturing and marketing expenses are P2.50 and P.50 respectively. Fixed expenses are P70,000 for tactonY overhead and P30,000 for marketing and administration. The sales manager hos proposed that the price be increased to P6. To maintain the present sales volume. advertising must be increased. The company's profit objective is 10% of sales. 2. Compute the additional expenditure the company can afford for advertising. E) The annuUal FC amounted to P798,000. At present, the contribution margin ratio is 42%. 3. Determine the amount of sales if the desired profit is P173,800 net of the ff. fax rates: For the first P100,000 25% In excess of P100,000 35% F) Bosh Company expects to incur the following costs to produce and sell 70,000 units of its product: Variable manufacturing cost Fixed manufacturing cost Variable marketing expense Fixed marketing…
Interchange Inc. had sales of $400,000, based on a unit selling price of $200. The variable cost per unit was $175, and fixed costs were $75,000. The maximum sales within Interchange Inc.’s relevant range are 2,750 units. Interchange Inc. is considering a proposal to spend an additional $32,750 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.a. Construct a cost-volume-profit chart indicating the break-even sales for last year. Verify your answer, using the break-even equation. b. Using the cost-volume-profit chart prepared in part (1), determine (A) the income from operations for last year and (B) the maximum income from operations that could have been realized during the year. Verify your answers using the mathematical approach to cost-volume-profit analysis. c. Construct a cost-volume-profit chart indicating the break-even sales for the current year, assuming that a noncancellable contract is signed for the additional…
Your Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows: Annual sales in units 3,000 Selling price per unit $309 Variable costs per unit: Production $130 Selling $50 Traceable annual fixed costs: Production $51,000 Selling $75,000 Allocated annual fixed cost $54,000 If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the existing product lines is expected to drop $78,000 per year. What is the increase in net income if the new product is added next year? This is a reverse drop the segment. New CM is positive and new FC and lost CM are negative.
A company sells its product at P30 per unit.Unit variable cost is P22 and total fixed costs total to P100,000 per month. The company currently pays salaries of P40,000 per month but with no commission. It is considering a compensation plan whereby the sales people would receive 5% commission based on sales, but their salaries would be decreased to P25,000 per month. At what sales level is the company indifferent between the two compensation plans?
this is only one question
A company wants to expand by offering a new product. Expected cost and revenue data for this product are: Annual sales 5,000 units Unit selling price ? Unit variable costs: Production $ 30.20 Selling 6. Incremental fixed costs per year: 32:16 Production $35,000 Selling $45,000 If the company adds this new product, sales of its other product lines will be impacted, causing the contribution margin of other product lines to drop by $18,500 per year. What is the lowest price the company could charge for its new product without affecting the company's total profits? Multiple Choice $39.90 $52.20
The fixed costs of Chun Company are $309,000 and the total variable costs for its only product are 45% of the sales price, which is $100. Chun currently sells 7,400 units per month and is looking to sell more. Consider each of the following independently: The marketing manager thinks sales are too low in St. Kitts and Nevis and suggests that sales there would be increased by 120 units per month if an additional $9,000 per month was spent advertising there. What should be the effect on monthly income if this additional advertising is done? (DECREASE BY 2400, DECREASE BY 4975, INCREASE BY 404,600, OR INCREASE BY 329400)
Brody Inc. is currently selling a product at P20 per piece. The income statement for the current month showed that Brody Inc. have sold 100,000 units, variable costs of P800,000 and fixed costs of P400,000. Management is thinking of reducing the current sales price by P2 and based on studies, this will increase unit sales by 20%. If you are the company’s management accountant, what will be the financial impact of this scenario that you will report to management? a. no change in profit b. an P80,000 drop in profitability. c. a P240,000 drop in profitability. d. a P400,000 drop in profitability.

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