KExercise 3-13A (Algo) Conducting sensitivity analysis using the equation method LO 3-5Campbell Company currently produces and sells 7,200 units annually of a product that has a variable cost of $6 per unit and annualfixed costs of $309,600. The company currently earns a $72,000 annual profit. Assume that Campbell has the opportunity to invest innew labor-saving production equipment that will enable the company to reduce variable costs to $4 per unit. The investment wouldcause fixed costs to increase by $9,500 because of additional depreciation cost.Requireda. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).b. Prepare a contribution margin income statement, assuming that Campbell invests in the new production equipment.Complete this question by entering your answers in the tabs below.Required A Required BUse the equation method to determine the sales price per unit under existing conditions (current equipment is used).Sales priceper unitRequired B > KExercise 3-13A (Algo) Conducting sensitivity analysis using the equation method LO 3-5Campbell Company currently produces and sells 7,200 units annually of a product that has a variable cost of $6 per unit and annualfixed costs of $309,600. The company currently earns a $72,000 annual profit. Assume that Campbell has the opportunity to invest innew labor-saving production equipment that will enable the company to reduce variable costs to $4 per unit. The investment wouldcause fixed costs to increase by $9,500 because of additional depreciation cost.Requireda. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).b. Prepare a contribution margin income statement, assuming that Campbell invests in the new production equipment.Complete this question by entering your answers in the tabs below.Required A Required BUse the equation method to determine the sales price per unit under existing conditions (current equipment is used).Sales priceper unitRequired B >

There are two types of costs that are incurred by a business. These are fixed costs and variable…

Answered: Campbell Company currently produces and…

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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MM currently carries out process B the output from which can be sold for $20 per unit and has variable costs of $7.50 per unit. Process B has directly attributable fixed operating costs of $ 40000 per annum. MM also carries out process C by using equipment that has running costs of $ 25000 per annum. The equipment could be sold now for $50000 (but this would incur dismantling costs of $7500) or in one year’s time for $45000 with dismantling costs of $8750.Process B could be adapted so that it incorporated process C.The existing process B machinery would have to be removed, either now at a dismantling cost of $12500 and with the sale of the machinery for $100000 or in one year’s time for $75000 with dismantling costs of $13750.Alternative process B machinery would have to be leased. This would cost $10000 per annum and have annual fixed costs of $30000.The existing process B machinery originally costs $250000 which bought five years ago. It is being depreciated at 10% per…
McPupper Steel has products that cost $10,500 to manufacture. The products can be sold as is for $13,000 or could be processed further for a cost of $2,100 and sold for $14,000. What would be the incremental profit or (loss) of processing the products further and selling them instead of selling them as is?
Plymouth corporation sells units for $108 each Variable costs are $39 per unit, and fixed costs are $212,000. If Plymouth leases a bed cast wail increase by $85,000 a year, but production will be more efficient, saving $5 per unit. At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?
Personal Engineering has purchased a machine that will see output increase from 2 million units to 5 million units. The variable cost per unit will decrease from $5.00 to $3.00. The sales price per unit is $12. Fixed costs will increase from $1,400,000 per annum to $2,500,000 per annum. Head office costs of $250,000 will be allocated to the new machine but the overall head office costs have not changed with the addition of the new machine. The new machine will require a 3 year, 5% interest only loan of $1m. Depreciation on the machine will be $200,000 per annum. The old Machine that was replaced and still had a useful life of 3 years had annual depreciation of $45,000. The tax rate is 20%. Calculate the FCF in Year 2. Show all workings.
Dexter Co. mines three products. Gold ore sells for P1,000,000 per ton, variable costs are P600,000 per ton, and fixed mining costs are P6,000,000. The segment margin for 2021 was P1,200,000. The management of the company was considering dropping the mining of Gold ore. Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. If Gold ore were dropped, net income for Dexter would?
2 Campbell Company currently produces and sells 7,600 units annually of a product that has a variable cost of $12 per unit and annual fixed costs of $373,000. The company currently earns a $83,000 annual profit. Assume that Campbell has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $10 per unit. The investment would cause fixed costs to increase by $9,300 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used), b. Prepare a contribution margin income statement, assuming that Campbell invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a contribution margin income statement, assuming that Campbell invests in the new production equipment. CAMPBELL COMPANY Contribution margin Income statement Sales Variable costs…
Chile’s, Inc. currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has considering investing in new technology that would decrease the variable cost per unit to $8 per unit and increase fixed costs to $33,000. The company expects the new technology to increase production and sales to 9,000 units of product. What sales price would have to be charged to earn a $75,000 target profit? a-$18 b-$22 $c-20 d-$16 e-$8
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What is the reduction in Variable manufacturing cost
Chile's, Inc. currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has considering investing in new technology that would decrease the variable cost per unit to $8 per unit and increase fixed costs to $33,000. The company expects the new technology to increase production and sales to 9,000 units of product. ?What sales price would have to be charged to earn a $75,000 target profit S18 $22 () $20 () $16 ()

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