Scholastic Tours is trying to decide which one of two tours It will introduce. The costs and revenues associated with each alternative are listed below:Projected revenueVariable costsFixed costsProfitMultiple ChoiceWhat are the incremental (differential) costs of the Western Tour?$2,000.$3,000.Eastern Tour$16,0002,0003,000$11,000$6.000.Western Tour$18,0008,0003,000$7,000None of these choices are correct.

The incremental costs are the additional costs incurred compared to others. The net income is…

Answered: cholastic Tours is trying to decide…

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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Special order, opportunity cost. Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be $9 per unit, and the contribution margin of the next best alternative of the facility to be $5 per unit, then if Chade has: Full capacity, the company will be profitable at $4 per unit. Excess capacity, the company will be profitable at $6 per unit. Full capacity, the selling price must be greater than $5 per unit. Excess capacity, the selling price must be greater than $9 per unit.
Assume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) What is the markup percentage on absorption cost required to achieve the desired ROI? 15,000 30 $ $81,900 $780,000 12%
Do problem 4, a through h.
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Company XYZ has $2,500,000 in fixed costs. It sells products at an average selling price of $50. Average variable costs amount to 60% of selling price. The marketing department proposes spending $500,000 on an advertising campaign which will result in increased volume of between 10,000 and 30,000 units. Determine: Breakeven volume before the proposed ad campaign Breakeven volume if ad campaign undertaken Minimum and maximum incremental profit if ad campaign undertaken Would you support the proposal? Why or why not? Unit volume to achieve an operating profit of $800,000 assuming the ad campaign is undertaken Operating income at unit volume of 200,000 units assuming ad campaign is undertaken Margin of safety assuming volume of 200,000 units is achieved and ad campaign undertaken Incremental operating income if an additional 1,000 units are sold
Applying Differential Analysis to Alternative Profit Scenarios Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $1,881,000. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, $0.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 990,000 and annual capacity is 1,210,000 units. REQUIRED The company would like to increase profitability in the upcoming year. Estimate the effect of the following separate proposals on annual profits. a. A 15% increase in the unit selling price would likely decrease annual sales by 99,000 units. Note: enter all numbers as positive numbers, do NOT use a negative sign. x . Net estimated profits would increase ✔ by $ 0 b. A 10% decrease in the unit selling price would likely increase…
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Current Attempt in Progress Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 66% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 34,300 curtain rods per year. A supplier offers to make a pair of finials at a price of $13.05 per unit. If Pottery Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $45,700 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products. (a) Prepare the incremental analysis for the decision to make or buy the finials. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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.
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Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs $41,000 $41,670 $41,890 $40,100 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law. Determine what the project’s net present value (NPV) would be under the new tax law. $80,438 $67,032 $77,087 $60,329 Now…

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