Cypress Inc. manufactures wooden canoes. Cypress normally sells the canoes for $2,700 per unit. Amajor distributor has offered to buy 1,000 units at a reduced price. At its budgeted annualproduction level of 18,000 units, Cypress' per-unit manufacturing costs are as follows:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overhead$950$200$330$450Cypress would have to produce the special order on an overtime shift, which would increase thedirect labor costs to $300 per unit. The special order would not impact Cypress' fixed costs.However, if Cypress accepts the special order, it will also incur $60,000 in additional, one-time costsin connection with the order. What is the minimum per-unit selling price that Cypress must chargeto break even on the special order? Round to the nearest whole dollar and do not enter a dollar signor a decimal point (e.g., enter 89, not $89.00).

Introduction:- Break-even point point means, where no profit or loss At Break-even point point,…

Answered: Cypress would have to produce the…

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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The president of Midnight Rambler wants to know if he should allow Jack Flash to have the scooters for $120,000. Determine the effect on profits from accepting Jack Flash’s offer. Briefly explain why certain costs should be omitted from the analysis in requirement (a.) Assume Midnight Rambler is operating at capacity and could sell the 300 scooters at its regular markup: Determine the Opportunity Cost of accepting Jack Flash’s offer. Determine the effect on profits of accepting Jack Flash’s offer What other factors should Midnight Rambler consider before deciding to accept the special order?
"We ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $20 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Because we use 80,000 drums a year, that equals an annual cost savings of $436,000." Antilles Refining's current cost to manufacture one drum is given below (based on 80,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($2.90 general company overhead, $1.80 depreciation, and $0.75 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: $ 12.00 6.50 1.50 Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $180,000 per year. Alternative 2: Purchase…
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How do I calculate the profit that would result form dropping Conway
The Comfy Company manufactures slippers and sells them at $11 a pair. Variable manufacturing cost is a $5 pair, and allocated fixed manufacturing cost is a $3 pair. It has enough idle capacity available to accept a one-time-only special order of 5000 pairs of slippers at $8 a pair. Comfy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $15000 increase, (c) $25000 increase, or (d) $40000 increase? Show your calculations. The HoustonCompany manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 38 Variable manufacturing overhead 15 Fixed manufacturing overhead allocated 18 Total manufacturing cost per unit $75 The Cushion Company has offered to sell…
Ivanhoe Industries incurs unit costs of $7 ($4 variable and $3 fixed) in making an assembly part for its finished product. A supplier offers to make 17,800 of the assembly part at $5 per unit. If the offer is accepted, Ivanhoe will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, that Ivanhoe will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs Fixed manufacturing costs Purchase price Total annual cost The decision should be to $ $ make Make the part. 43600 32700 i 76300 $ $ Buy i 32700 54500 87200 $ Net Income Increase (Decrease) 43600 i -54500 -10900 V A C Ac Q Ac
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"We ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $21 per drum, we would be paying $7.05 less than it costs us to manufacture the drums in our own plant. Because we use 65,000 drums a year, that equals an annual cost savings of $458,250." Antilles Refining's current cost to manufacture one drum is given below (based on 65,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($3.50 general company overhead, $1.95 depreciation, and $0.90 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $175,500 per year. Alternative 2: Purchase the drums from an…
Kitts Company buys and sells a product that has a variable cost per unit of $22. Kitts' fixed costs amount to $56,000. The product sells for $26 each. The Company is currently making and selling 20,000 units of product. If Kitts is able to increase sales by 4,000 units, the break-even point will Multiple Choice increase by $16,000. decrease by $16,000. not change. The answer cannot be determined with the information provided.
Yorkville sells a haircutter at $65 and each unit has variable cost of $25. Yorkville's fixed manufacturing costs are $80,000 when produces at its full capacity of 10,000 units and its its fixed cost per unit is $8 per unit. The company has an offer of 2,000 units at $30 each in an international market, which would not affect its current production but would increase the fixed cost by $5,000. How much is the incremental net income if it accepts the special order? Select one: a. $10,000 profit b. $6,000 loss c. $5,000 profit O d. $70,000 loss

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