E6.15 (LO 4), AN Service Casas Modernas of Juarez, Mexico, is contemplating a major change in itscost structure. Currently, all of its drafting work is performed by skilled draftsmen. Rafael Jiminez, Casas'owner, is considering replacing the draftsmen with a computerized drafting system. However, beforemaking the change, Rafael would like to know the consequences of the change, since the volume of busi-ness varies significantly from year to year. Shown below are CVP income statements for each alternative.SalesVariable costsContribution marginFixed costsNet incomeManualSystem$1,500,0001,200,000300,000100,000$ 200,000CHAPTER 6 Cost-Volume-Profit Analysis: Additional IssuesComputerizedSystem$1,500,000600,000900,000700,000$ 200,000Compute degree of operating leverageand evaluate impact of alternativecost structures on net income andmargin of safety.Instructionsa. Determine the degree of operating leverage for each alternative.b. Which alternative would produce the higher net income if sales increased by $150,000?c. Using the margin of safety ratio, determine which alternative could sustain the greater decline insales before operating at a loss.

Variable costs are those costs which changes with change in activity level or sales. Contribution…

Answered: E6.15 (LO 4), AN Service Casas Modernas…

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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Is this an example of a opportunity cost? Why or why not? “To begin, I began selling prints of my pictures in the year 2019. It's now closed. USPS and UPS were the options I had during this period to ship out orders. Because UPS was more expensive at the moment, I chose to mail my prints via USPS rather than UPS. My orders were delivered on time and without damage by the United States Postal Service. The opportunity cost is the cost of UPS shipping.”
Moora Inc.Due to the increasing energy costs in the US, Jackie Moora is anxious. The old machine hercompany has been using to manufacture steel support beams for the construction industry servedthe company well over the past 5 years. And she expected the machine to do the same for thenext 7 years. At which point she was expecting to replace the machine with another one.However, Jackie is concerned that higher cost of energy may reduce the profitability of theiroperations.Currently, for the most recent fiscal year, sales have been 2M per year, and all costs pre-tax are1.5M per year. Of these costs, direct labor associated with the existing machine is $300,000,energy costs are 500,000, and depreciation is 300,000 (expected for another 5 years). The existingmachine was purchased for 3M and is expected to have no resale value at the end.While sales and salaries are expected to increase at the rate of inflation of 5% per year for theforeseeable future, energy costs outpace inflation and are…
The insufficient capacity of SHELLA Craft is due to the availability of manpower that the company is currently lacking. One of the supervisors in the production department, En Shauqi suggested another option to use the service of external agency to recruit and hire workers at a rate of RM30 per hour. The company also will have to pay for transportation allowance for external workers amounting RM15,000. Evaluate the above suggestion. Suggest THREE (3) qualitative factors that need to be considered if the company decided to use the service of external agency.
Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielle’s first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis and calculated a present value index of 0.75. The plant manager, Jerrod Moore, is very intent on purchasing the warehouse because be believes that more storage space is needed. Jerrod asks Danielle into his office and the following conversation takes place: Jerrod: Danielle, you’re new here, aren’t you? Danielle: Yes, I am. Jerrod: Well, Danielle, I’m not at all pleased with capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I don’t get it, where am I going to place out output? Danielle: Well, we need to get product into our customer’s hands. Jerrod: I agree, and we need a warehouse to do that. Danielle: My analysis does not support constructing a new warehouse. The numbers don’t lie; the warehouse does not…
Denger
Rahul
Talladega Company manufactures an electric clock radio. The company expects production of 5,000 units this year. Currently, Talladega produces the clock used in the product. Talladega has received an offer from Daytona, Incoporated to supply the clock. If Talladega discontinues production of the clock, the company will be able to eliminate its product-level costs because no other products along the same line are produced by the company. However, due to its concern for quality, the company will have to inspect each clock. Various costs and items are described below: Required: Select the appropriate classification of the cost item from the drop-down that best describes the item in the context of the described outsourcing decision. A cost varies if the amount of the cost or the incurrence of the cost differs between the two alternatives: continuing to make the clocks or purchasing the clocks from Daytona. Purchase cost of clocks from Daytona Item Income that can be earned from renting the…
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely.
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs. Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…

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