Each year, a company produces and sells 80,000 units of its only product for $40 per unit. The company's average unit costs at this level of activity are given below:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadVariable selling expensesFixed selling expensesTotal cost per unit$ 9.5010.002.805.001.704.50$ 33.50The company's relevant range of production is 70,000 100,000 units. It believes that spending an additional $155,000 on advertising would increase unit sales by25%. What is the financial advantage (disadvantage) of spending the additional money on advertising?

Answered: Image /qna-images/answer/1e0b2318-a0cd-4263-8bd2-7800b1d72f35.jpg

Answered: Each year, a company produces and sells…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

See similar textbooks

Similar questions

A process requires a 20 second setup for each batch. When producing, the process can produce one unit every 12 seconds. Demand for the product is 7 units per minute. With a batch size of 20 units, what is the process utilization? Note: Do not round your intermediate calculations. Round your answer to 2 decimal places
A Company Is Considering Buying One Of The Following Two Machines. Show the complete solution for each question.
An apartment complex has a vacancy rate of 5%. If the apartment's PG is $450,000, what is the apartment's vacancy cost? $32,000 $22.500 S2.050 $47,500
A machine that costs $8,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $1,554 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 35 percent. What is the internal rate of return on this investment?
A company has the following demand data for the last three years of sales for their popular product B. There are currently 5 workers assigned to the production line, each capable of producing approximately 8 units per month. It is assumed that each month has the same number of production days. They can hire more workers at a hiring and training cost of $800 per worker. If they layoff any workers, the unemployment cost is $2,000 per worker. The product has a standard production cost (labor, material, and overhead) of $300 per unit. The extra cost to produce one unit on overtime is $50 and the maximum overtime is two units per month per worker. They can use inventory but it will cost them $25 per unit per month for any unit in inventory at the end of the month. Failure to meet market demand typically will imply the customer will buy from another supplier, and therefore cost the company $100 in profit. They currently have 0 units in inventory. a. Use the demand data to develop a forecast…
A building has an NOI of $130,000 and is being valued with a cap rate of 4%. Using the income approach, what is the value of the building? $4,130,000 $1,300,000 $3,250,000 $2,450,000
Please show all work and explain answer. OneRing Company sells memorabilia to residents of Middle-Earth. They are about to invest $6 million in a new ring making plant. Fixed costs of operating the plant are $1 million a year. The ring costs $60/unit to manufacture (variable cost) and will be sold for $200/unit. The plant will last for 5 years, and will be depreciated over 5 years to zero using the straight-line method. The plant will have no salvage value after five years. Net working capital requirements are negligible for this project. Assume there are no taxes in Middle-Earth, and that the appropriate discount rate for the project is ten percent. How many rings per year must OneRing sell in order to break even?
Dana’s Ribbon World makes award rosettes. Following is information about the company: Variable cost per rosette $ 2.00 Sales price per rosette $ 6.00 Total fixed costs per month $ 6000.00 Required: 1. Suppose Dana’s would like to generate a profit of $1,120. Determine how many rosettes it must sell to achieve this target profit. 2. If Dana’s sells 2,140 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales. 3. Calculate Dana’s degree of operating leverage if it sells 2,140 rosettes. 4a. Using the degree of operating leverage, calculate the change in Dana’s profit if unit sales drop to 1,819 units. 4b. Prepare a new contribution margin income statement to verify change in dana's profit.
Cost Per Thousand CPM An advertising campaign features two print ads. One ad generates 15,007 exposures and cost $5,329. The second ad generates 19,223 impressions and cost $8,583. Calculate Cost Per Thousand for the campaign as a whole. (Rounding: penny.)
a Tax Revenue ($) Refer to the above Laffer Curve diagram. Going into the sluggish U.S. economy of the early 1980s, economist Arthur Laffer and President Ronald Reagan maintained that that the economy was located at O tax rate d. O some level above tax rate b. O some level below tax rate b. O tax rate b. of Tax Rate (%)
Cox Electric makes electronic components and has estimated the following for a new design of one of its products. Fixed cost = $23,750 Material cost per unit = $0.17 • Labor cost per unit = $0.12 • Revenue per unit = $0.67 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue. Construct an appropriate spreadsheet model to find the profit based on a given production level and use the spreadsheet model to answer these questions. (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = the total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000.…
Each day a small business owner sells 200 pizza slices at $1.50 per slice and 85 sandwiches at $4.00 each. Business expenses come to $110 per day. What is the owner's profit for a ten-day period?

SEE MORE QUESTIONS

Recommended textbooks for you

Understanding Business

Management

ISBN:

9781259929434

Author:

William Nickels

Publisher:

McGraw-Hill Education

Management (14th Edition)

Management

ISBN:

9780134527604

Author:

Stephen P. Robbins, Mary A. Coulter

Publisher:

PEARSON

Spreadsheet Modeling & Decision Analysis: A Pract…

Management

ISBN:

9781305947412

Author:

Cliff Ragsdale

Publisher:

Cengage Learning

Understanding Business

Management

ISBN:

9781259929434

Author:

William Nickels

Publisher:

McGraw-Hill Education

Management (14th Edition)

Management

ISBN:

9780134527604

Author:

Stephen P. Robbins, Mary A. Coulter

Publisher:

PEARSON

Spreadsheet Modeling & Decision Analysis: A Pract…

Management

ISBN:

9781305947412

Author:

Cliff Ragsdale

Publisher:

Cengage Learning

Management Information Systems: Managing The Digi…

Management

ISBN:

9780135191798

Author:

Kenneth C. Laudon, Jane P. Laudon

Publisher:

PEARSON

Business Essentials (12th Edition) (What's New in…

Management

ISBN:

9780134728391

Author:

Ronald J. Ebert, Ricky W. Griffin

Publisher:

PEARSON

Fundamentals of Management (10th Edition)

Management

ISBN:

9780134237473

Author:

Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo

Publisher:

PEARSON

SEE MORE TEXTBOOKS