Cedar Company reports the following operating results for the month of June: Sales(5,000 units at $60 per unit), $300,000; variable costs ($36 per unit) $180,000; andtotal fixed costs $100,000. To increase net income, management is consideringreducing the selling price by 10%, with no changes to unit variable costs or fixedcosts. Management is confident that this change will increase unit sales by 25%.Management shouldA)implement the reduction in selling price because total sales increase to$337,500B)not implement the reduction in selling price because total contributionmargin decreases to $112,500C)not implement the reduction in selling price because operating incomedecreases to $12,500OD) both B and CE) none of the above Consider the break-even number of students for a noncredit course in pottery. Thecourse tuition is $500. The variable costs per student are pottery supplies of $300and enrollment costs of $20. The fixed costs for the course are instructor's salary of$3,000 and rental cost of the classroom of $1,500. The break-even point isstudents.A) 15B) 25C) 35D) 45E) none of the above

MARGINAL COSTING INCOME STATEMENTMarginal Costing Income Statement is One of the Important Cost…

Answered: Cedar Company reports the following…

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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Last month when Holiday Creations, Incorporated, sold 43,000 units, total sales were $172,000, total variable expenses were $137,600, and fixed expenses were $36,300. Required: 1. What is the company's contribution margin (CM) ratio? 2. What is the estimated change in the company's net operating income if it can increase sales volume by 325 units and total sales by $1,300? (Do not round intermediate calculations.) 1. Contribution margin ratio 2. Estimated change in net operating income %
Flying Cloud Co. has the following operating data for its manufacturing operations: Unit selling price $211 Unit variable cost $115 Total fixed costs $755,000 The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be Oa. increased by 1,142 units Ob. decreased by 1,428 units Oc. increased by 1,428 units Od. increased by 1,713 units
Drake Company produces a single product. Last year's income statement is as follows:Sales (23,000 units) $1,384,600Less: Variable costs 938,400 Contribution margin $ 446,200Less: Fixed costs 258,500 Operating income $ 187,700 3. Suppose that Drake Company is considering an investment in new technology that willincrease fixed costs by $227,800 per year, but will lower variable costs to 48 percent of sales.Units sold will remain unchanged. a) Prepare a budgeted income statement assuming Drakemakes this investment. (Round all amounts to the nearest dollar.) b) What is the new breakeven point in units, assuming the investment is made? (In your computations, round the unitcontribution margin to the nearest cent. Round your final answer to the nearest whole unit.)
Booth Company had sales in 2020 of $1,875,000 on 75,000 units. Variable costs totaled $1,125,000 and fixed costs totaled $500,000.A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $125,000. Management feels that two-thirds of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 4% increase in the number of units sold. Before Booth Company had the chance to implement usage of the new raw material, new industry specifications were announced and result in the following changes for the Booth Company. Variable costs will increase by 15% per unit and fixed costs will increase by $50,000. Management feels that a $3 per unit price increase is needed to accommodate the cost increases. However, this will result in a 10%…
International Data Systems' information on revenue and costs is relevant only up to a sales volume of 123,000 units. After 123,000 units, the market becomes saturated and the price per unit falls from $14.00 to $8.80. Also, there are cost overruns at a production volume of over 123,000 units, and variable cost per unit goes up from $7.00 to $7.50. Fixed costs remain the same at $73,000. a. Compute operating income at 123,000 units. Operating income b. Compute operating income at 223,000 units. Operating income
International Data Systems' information on revenue and costs is relevant only up to a sales volume of 121,000 units. After 121,000 units, the market becomes saturated and the price per unit falls from $10.00 to $6.80. Also, there are cost overruns at a production volume of over 121,000 units, and variable cost per unit goes up from $5.00 to $5.25. Fixed costs remain the same at $71,000. a. Compute operating income at 121,000 units. b. Compute operating income at 221,000 units.
Mike’s Motorcycles has enjoyed several years of business success, but recently the company has seen some indications of a slowdown in sales. The company’s owner has decided to increase the advertising budget by 10% and reduce sales prices by 4%. The following partial income statement shows the company’s results for the most recent quarter: Mike's Motorcycles Partial Income statement Sales $800,000 Less: Variable costs 560,000 Contribution margin 240,000 Less: Fixed costs 175,000 Net operating income $65,000 Required: Assuming that the advertising budget was $30,000 for the quarter and was included in fixed costs, calculate Mike’s Motorcycles’ new net income or loss if the changes are made. You should assume that the variable costs will not change if Mike implements the preceding changes.
Flying Cloud Co. has the following operating data for its manufacturing operations: Unit selling price $239 Unit variable cost $108 Total fixed costs $842,000 The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be Oa. increased by 858 units Ob, decreased by 858 units Oc. increased by 686 units Od. increased by 1,029 units
Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units. (a) Calculate the operating income for July. (b) Calculate the break-even point in units sold and total revenues. (c) Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month. (1.) Calculate operating income at a volume of 12,000 units per month with the new cost structure. (2.) Calculate the break-even point in units with the new cost structure.
Sue Bee Honey is one of the largest processors of its product for the retail market. Assume that one of its plants has annual fixed costs totaling $16,317,500, of which $5,250,500 is for administrative and selling efforts. Sales are anticipated to be 950,000 cases a year. Variable costs for processing are $35 per case, and variable selling expenses are 10% of selling price. There are no variable administrative expenses If the company desires a pretax profit of $9,000,000, what is the selling price per case?
Compute total and average costs Fizzy Cola spends $1.00 on direct materials, direct labor and variable manufacturing overhead for every unit (a 12 pack of soda) that it produces. Fixed manufacturing overhead costs $5 million per year. The plant, which is currently operating at only 75% of capacity, produced 20 million units this year. Management plans to operate closer to full capacity next year, producing 25 million units. Management doesn’t anticipate any changes in the prices it pays for materials, labor, and manufacturing overhead. What is current total product cost for the 20 million units including fixed and variable costs? What is the current average product cost per unit? What is the current fixed cost per unit? What is the forecasted total product cost next year (for the 25 million units?) Why does the average product cost decrease as production increases? What is the forecasted average product cost next year? What is the forecasted fixed cost per unit?
Booth Company had sales in 2020 of $2,030,000 on 81,200 units. Variable costs totaled $1,218,000 and fixed costs totaled $485,000.A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $125,000. Management feels that two-thirds of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 4% increase in the number of units sold. Before Booth Company had the chance to implement usage of the new raw material, new industry specifications were announced and result in the following changes for the Booth Company. Variable costs will increase by 15% per unit and fixed costs will increase by $46,000. Management feels that a $3 per unit price increase is needed to accommodate the cost increases. However, this will result in a 10%…

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