Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell40,000 Rets per year. Costs associated with this level of production and sales are as follows:UnitTotalDirect materials$20.502$820,000540,000340,000580,000160,000240,000Direct labour13.50Variable manufacturing overheadFixed manufacturing overheadVariable selling expenseFixed selling expense8.5014.504. ০06.00Total cost$67.00$2,680,000The Rets normally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the range of 24,000through 40,000 Rets per year.Required:1. Assume that, due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels next year. A large retailchain has offered to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There would be no salescommissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have topurchase a special machine to engrave the retail chain's name on the 16,000 units. This machine would cost $32,000. PolaskiCompany has no assurance that the retail chain will purchase additional units any time in the future. Determine the maximum discountthat Polaski can offer to this large retail chain in order for it to be no worse off compared to its current profit. (Do not roundintermediate calculations. Round your percentage answer to nearest whole number.)Maximum discount

Total cost of 40000 units =2680000 For 16000 units additional cost required are $32000 Now Fixed…

ally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the Rets per year. due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels ed to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There n this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Compan cial machine to engrave the retail chain's name on the 16,000 units. This machine would cost $3. 1o assurance that the retail chain will purchase additional units any time in the future. Determine n offer to this large retail chain in order for it to be no worse off compared to its current profit. (Da alculations. Round your percentage answer to nearest whole number.) nt

ally sell for $72 each. Fixed manufacturing overhead is constant at $580,000 per year within the Rets per year. due to a recession, Polaski Company expects to sell only 24,000 Rets through regular channels ed to purchase 16,000 Rets if Polaski is willing to accept a price lower than the regular $72. There n this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Compan cial machine to engrave the retail chain's name on the 16,000 units. This machine would cost $3. 1o assurance that the retail chain will purchase additional units any time in the future. Determine n offer to this large retail chain in order for it to be no worse off compared to its current profit. (Da alculations. Round your percentage answer to nearest whole number.) nt

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The Warren Watch Company sells watches for $29, fixed costs are $180,000, and variable costs are $10 per watch. What is the firm's gain or loss at sales of 7,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.$ What is the firm's gain or loss at sales of 15,000 watches? Loss, if any, should be indicated by a minus sign. Round your answer to the nearest cent.$ What is the break-even point (unit sales)? Round your answer to the nearest whole number.units
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)
Outback Outfitters sells a small camp stove for $150 per unit. Variable expenses are $105 per unit, and fixed expenses total $184,500 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Break-even…
Moon produces and sells a single product and faces an inelastic demand curve meaning it can sell as many units as it wants without affecting the selling price. Moon has a cost structure consisting of fixed costs that are incurred each month and a variable cost of $12 per unit produced that is independent of (i.e. does not vary with) the number of units produced. Moon's ncome tax rate is 30 percent and its breakeven quantity is 24,000 units each month. If Moon produces 30,000 units during the month it has after tax net income of $33,600. Calculate Moon's selling price and monthly fied costs.
X Ltd. has annual sales of 10,000 units at $300 per unit. The annual fixed costs amount to $300,000. The variable cost is $200 per unit. The current credit period is 1 month. The company is considering a proposal to increase the credit period. Fixed cost will increase by $60,000 on account of increase in sales beyond 25% of present level. The company plans a pre-tax return of 15% on investment in receivables. Requirements: 1. Calculate the most paying credit policy for the company. 2. Analyze the results in detail.
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
Newton Cellular ltd. Manufactures and sells the TopLine Cell phone. For its 2021 business plan, Newton Cellular estimated the following: Selling price $750 Variable cost per cell phone $450 Annual fixed costs $180,000 Net (after-tax) income $360,000 Tax rate 25% The March financial statements reported that sales were not meeting expectations. For the first three months of the year, only 400 units had been sold at the established price. With variable costs and fixed costs staying as planned, it was clear that the 2021 after-tax profit projection would not be reached unless some action was taken. A management committee presented the following mutually exclusive alternatives to the president: Reduce the selling price by $80. The sales team forecasts that, with the significantly reduced selling price, 5,000 units can be sold during the remainder of the year. Total fixed…
Lucid Images Ltd manufactures premium high definition televisions. The firm’s fixed costs are$4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. Thecompany sold 5,000 TVs during the previous year. (In the following requirements, ignore income taxes)Required:Treat each of the requirements as independent situations:a) Calculate the break-even point in units.b) What will the new break-even point be if fixed costs increase by 10 per cent? c) What was the company’s net profit for the previous year? (4 marks)d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed?
Exon is selling a commercial heating unit at the price of $100.000 per unit. The variable cost of producing this unit is $75,000. Exon is considering offering credit tems to their customers which would allow payment to be delayed one month. Exon predicts that offering these terms will increase monthly sales from 50 units to 60 units. Exon does not expect the inreased production to change variable cost and Exon does not expect to charge a higher price. The appropiate discount rate is 1% a month The probability of payment that would make Exon indifferent between granting credit and the present policy is
Xeta Inc., sells a box for $15 each. The box have a variable cost of $4 per unit, and the products' fixed operating costs are at $220,000 per year. The company's capital structure includes 55% debt and 45% equity. Annual interest expense is $25,000, and the corporate tax rate is 35%. 1.Calculate the break-even point in units. 2.If it sells 25,000 units, calculate the firm's EBIT and net income.
According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year 2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketing manager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton's standard variable cost is $44 per hour, and its standard fixed cost is $1,320,000. Required Develop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours. Flexible Budget 44,000 Hours Flexible Budget Flexible Budget 49,000 Hours 54,000 Hours
Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $6.75 per bottle which is expected to decrease sales by 5%. If the price is raised profits are expected to (increase/decrease) by $ per year. (Enter the profit increase or decrease as a whole number.)