Exercise 3-13A (Algo) Conducting sensitivity analysis using the equation method LO 3-5 Stuart Company currently produces and sells 6,700 units annually of a product that has a variable cost of $15 per unit and annual fixed costs of $191,300. The company currently earns a $70,000 annual profit. Assume that Stuart has the opportunity to invest in new labor- saving production equipment that will enable the company to reduce variable costs to $13 per unit. The investment would cause fixed costs to increase by $9,500 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Stuart invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B X Answer is not complete. Prepare a contribution margin income statement, assuming that Stuart invests in the new production equipment. STUART COMPANY Contribution margin Income statement hs

Exercise 3-13A (Algo) Conducting sensitivity analysis using the equation method LO 3-5 Stuart Company currently produces and sells 6,700 units annually of a product that has a variable cost of $15 per unit and annual fixed costs of $191,300. The company currently earns a $70,000 annual profit. Assume that Stuart has the opportunity to invest in new labor- saving production equipment that will enable the company to reduce variable costs to $13 per unit. The investment would cause fixed costs to increase by $9,500 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Stuart invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B X Answer is not complete. Prepare a contribution margin income statement, assuming that Stuart invests in the new production equipment. STUART COMPANY Contribution margin Income statement hs

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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Exercise 1 CVP Relationships high electromagnetic radiation environments. Kelter Company manufactures and sells a specialized cordless telephone contribution format income statement for the most recent year is grven L Exurcises CVP Relationships The companys or helow Total Per Unit % of Sales Sales (20,000 units) Less: Variable expenses Contribution margin Less Fixed expenses P1,200,000 P60 100% 900,000 45 P 300,000 15 240,000 Net operating income P 60,000 Management is anxious to improve the company's profit performance and bas asked for an analysis of a number of items. Required 1 Compute the company's CM ratio and variable expenses ratio.
Question 4 Ali Limited produces and sells two products. Product A sells for £12 per unit and has a total variable cost of £7.90, while Product B sells for £17 per unit and has a total variable cost of £11.20. For every 4 units of Product A sold, three of product B are sold. Ali Limited fixed costs are £131,850. Budgeted sales revenue is £428,500. Required: a) b) b) Calculate the Break-Even points in Units. Calculate the Margin of Safety in Units. Evaluate the relevance of Break-Even Analysis in decision making process.
Question Four i) Jambo Lid manufactures and markets a single product. The following information is available: Materials Conversation costs (variable) i) Dealers Margin Selling prices Fixed Costs 1,250,000 Present sales 400,000 Units Capacity utilization: 60% Shs. Per Unit 40 30 10 100 There is an acute competition. Extra efforts are necessary to sell. Suggestions have been made for increasing sales. By reducing sales price by 5% ii) By increasing dealers margin by 25% over existing rate. Which of the two suggestion you would recommend if the company desires to maintain the present profit? Give reasons.
Question 5 ABC Ltd sells a product that has a price of GH¢8.00 per unit, variable manufacturing cost of GH 4.00 per unit. ABC Company has a fixed manufacturing cost of GH¢150,000 and fixed general, selling and administrative expenses of GH¢50,000. You are required to answer the following questions as the management accountant of ABC Ltd. a. How many units does ABC Company have to sell to breakeven? b. How many units does ABC Company have to sell to earn an operating income of GH$200,000? c. d. What sales revenue must ABC Company achieve to breakeven? e. What sales revenue must ABC Company achieve to earn an operating income of GH$200,000? Suppose ABC expects to sell 300,000 units, what is the margin of safety? How do you explain your result?
Unit VI question 6
QUESTION 10 Randall has received a special order for 4300 units of its product at a special price of $20. The product normally sells for $34 and has the following manufacturing costs: AZ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Per unit 2 3 3 2 Assume that Randall has sufficient capacity to fill the order. If Randall accepts the order, what effect will the order have on the company's short-term profit? *** If a decrease, place a sign before your answer. For example, a decrease of $1,000 would be answered -1,000.
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Exercise A-2 Absorption Costing Approach to Setting a Selling Price [LOA-2] Martin Company 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 15,500 Unit product cost $ 50 Projected annual selling and administrative expenses $ 66,000 Estimated investment required by the company $ 450,000 Desired return on investment (ROI) 18 % The company uses the absorption costing approach to cost-plus pricing. Required: 1. Compute the markup required to achieve the desired ROI. ((Round your final answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 2. Compute the selling price per unit. (Round your intermediate and final answers to 2 decimal places. )
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