DIANNE ANCHETA operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of P470,000 per month and variable costs of 40% of sales. Cafeteria sales are currently averaging P1,200,000 per month. The company has the opportunity to replace the cafeteria with vending machines. Gross customer spending at the vending machines is estimated to be 40% greater than the current sale because the vending machines are available at all hours. By replacing the cafeteria with vending machines, the company would receive 16% of the gross customer spending and avoid cafeteria costs. A decision to replace the cafeteria with vending machines will result in a monthly increase (decrease) in operating income of

DIANNE ANCHETA operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of P470,000 per month and variable costs of 40% of sales. Cafeteria sales are currently averaging P1,200,000 per month. The company has the opportunity to replace the cafeteria with vending machines. Gross customer spending at the vending machines is estimated to be 40% greater than the current sale because the vending machines are available at all hours. By replacing the cafeteria with vending machines, the company would receive 16% of the gross customer spending and avoid cafeteria costs. A decision to replace the cafeteria with vending machines will result in a monthly increase (decrease) in operating income of

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

Dover’s engineers have developed a method that would lower the printing department’s rate of defective products to 6% at the printing operation. Implementing the new method would cost $1,400,000 per month. Should Dover implement the change? Show your calculations.
Maple Incorporated manufactures a product that costs $33 per unit plus $45,000 in fixed costs each month. Maple currently sells 4,000 of these units per month for $63 each. If Maple leased a machine for $12,000 a month, it could add features to the product that would allow it to increase the selling price. It would cost an additional $8 per unit to add these features. How much would Maple have to charge for the product with additional features to make it worthwhile to lease the machine?
Finch Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,400 6,000 4,000 11,400 27,300 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Finch for $2.70 each. Required a. Calculate the total relevant cost. Should Finch continue to make the containers? b. Finch could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Finch continue to make the containers? a. Total relevant cost Should Finch continue to make the containers? b. Total avoidable cost Should Finch continue to make the containers?
The Mighty Music Company produces and sells a desktop speaker for $200. The company has the capacity to produce 60,000 speakers each period. At capacity, the costs assigned to each unit are as follows: Unit-level costs Product-level costs Facility-level costs The company has received a special order for 11,000 speakers. If this order is accepted, the company will have to spend $20,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? Multiple Choice O O $96.82 $146.82 $104.32 $95 $25 $15 $107.32
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Adams for $2.80 each.Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
Aydesurv CompanyAydesurv Company currently sells hot dogs. During a typical month, the stand reports a profit of ₱9,000 withsales of ₱50,000, fixed costs of ₱21,000, and variable costs of ₱0.64 per hot dog.Next year, the company plans to start selling nachos for ₱3 per unit. Nachos will have a variable cost of ₱0.72and new equipment and personnel to produce nachos will increase monthly fixed costs by ₱8,808. Initial sales ofnachos should total 5,000 units. Most of the nacho sales are anticipated to come from current hot dog purchasers,therefore, monthly sales of hot dogs are expected to decline to ₱20,000.After the first year of nacho sales, the company president believes that hot dog sales will increase to ₱33,750 amonth and nacho sales will increase to 7,500 units a month.32. Determine the monthly breakeven sales in dollars before adding nachos.33. Determine the monthly breakeven sales during the first year of nachos sales, assuming a constant salesmix of 1 hotdog and 2 units of…
Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $54,000 per year, to solve the problem. With this extra worker, the company could produce and sell 2,900 more units per year. Currently, the selling price per unit is $26.00 and the cost per unit is $7.65. Direct materials $3.40 Direct labor 1.00 Variable overhead 0.45 Fixed overhead (primarily depreciation of equipment) 2.80 Total $7.65 Using the information provided, calculate the annual financial impact of hiring the extra worker. Profit $ 765 X Increase
The Glass menagerie makes small pressed resin ducks and ducklings. For every duck sold, the company sells five ducklings. The following information is available about the company’s selling prices and cost: Ducks Duckling Selling price Rs. 24 Rs. 12 Variable cost 12 8 Annual fixed cost Rs. 288,000 Required: a. What is average contribution margin ratio? b. Calculate the monthly break-even point if fixed cost is incurred evenly throughout the year. At the BEP, indicate how many units of each product will be sold monthly. c. If the company wants to earn Rs. 96,000 pre-tax profit monthly, how many units of each products must it sell? d. Company management has specified Rs. 31,680 as monthly net income, and the company is in a 40 percent tax bracket. However, marketing information has indicated that the sales mix has changed to one duck to nine ducklings. How much total revenge and what number of products must be sold to achieve the company’s profit objective? e. Refer to the original…
Tommy’s Tile Service is planning on purchasing new tile cleaning equipment that will improve their ability to remove tough stains from ceramic tiles. The company’s contribution margin is 25% and its current break-even point is $409,200 in sales revenue. Purchasing the new equipment will increase fixed costs by $9,500. Required: 1. Determine the company’s current fixed costs. 2. Determine the company’s new break-even point in sales. 3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $120,000?
A small shop in Bulacan fabricates portable threshers for palay producers in the locality. The shop can produce each thresher at a labor cost of P1,800. The cost of materials for each unit is P2,500. The variable costs amount to P650 per unit, while fixed charges incurred per annum totals P69,000. If the portable threshers are sold at P7,800 per unit, how many units must be produced and sold per annum to break-even? Support your answer with computations and also by graphical solution.
A national newspaper publishing group is considering introducing a new morning newspaper in Denver. Its direct competitor charges $0.75 per copy at retail, with $0.15 going to the retailer. For the level of news coverage the company desires, the fixed cost of editors, reporters, rent, press-room expenses, and wire-service charges are determined to be $300,000 per month. The variable cost of ink and paper is $0.20 per copy, but advertising revenues of $0.10 per paper will be generated. To print the morning paper, the publisher has to purchase a new printing press, which will cost $600,000. TI1e press machine will be depreciated according to the method for the seven-year MACRS class. The press machine will be used for 10 years, at which time its salvage value will be about $100,000. Assume 25 weekdays of printing in a month, a 40% tax rate, and a 12% MARR.How many copies per day must be sold at a selling price of $0.50 per copy at retail in order for the publishing group to break even?
Oriole Horticulture provides and maintains live plants in office buildings. The company's 934 customers are charged $38 per month for this service, which includes weekly watering visits. The variable cost to service a customer's location is $19 per month. The company incurs $2,432 each month to maintain its fleet of four service vans and $3,330 each month in salaries. Oriole pays a bookkeeping service $2 per customer each month to handle all invoicing and accounting functions.