HeExercise 7-25 Manufacturing; Using CVP Analysis (LO 7-1, 7-4)Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm's fixedcosts are 3,300,000 p per year. The variable cost of each component is 1,300 p, and the components are sold for 3,200 p each. Thecompany sold 5,000 components during the prior year. (p denotes the peso, Argentina's national currency. Several countries use thepeso as their monetary unit. On the day this exercise was written, Argentina's peso was worth 0.104 U.S. dollar. In the followingrequirements, ignore income taxes.)Required:1. Compute the break-even point in units. (Round your answer to the nearest whole number.)2. What will the new break-even point be if fixed costs increase by 15 percent? (Round your answer to the nearest whole number.)3. What was the company's net income for the prior year?4. The sales manager believes that a reduction in the sales price to 2,700 p will result in orders for 800 more components each year.What will the break-even point be if the price is changed? (Round your answer to the nearest whole number.)5. Should the price change discussed in requirement 4 be made?1. Break-even pointcomponents2. New break-even pointcomponents3. Net incomeр4. New break-even pointcomponents5. Should the price change discussed in requirement 4 be made?< Prev1 of 4Next >МacВook Pro#3%244.78.RT.YDGK< CÓ

Contribution margin per component = Sales – Variable expenses = 3,200 – 1,300 = 1,900 Fixed expenses…

Answered: Exercise 7-25 Manufacturing; Using CVP…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Q7 a.A manufacturer produces a car component. The cost sheet of the component is as follows: (5) Direct Material 4.00 Direct Labour 2.00 Variable Overheads 1.50 Fixed Overheads 2.50 A foreign manufacturer who uses this car component offers to purchase 20,000 units at Rs. 13 per component against the usual price of Rs. 15 per unit. If this offer is accepted the fixed expenses will go up by Rs. 40,000 annually. Would you accept this offer? Are there any other considerations, which may affect your decision? Q7 b.Calculate the effect on profit of a proposed change in ‘Sales Mix’ from the following data and also suggest that whether company should change the sales mix or continue with the existing: (5) M N O P Total Sales (in Rs) Existing Sales mix(Rs.)…
6. Plumbing Company makes 4,000 units per year of a part called an axial tap for use in one of its products. Data concerning the unit production costs of the axial tap follow: Direct materials Direct labor £35 10 8 20 Variable manufacturing overhead ... Fixed manufacturing overhead Total manufacturing cost per unit... £73 An outside supplier has offered to sell Plumbing Company all of the axial taps it requires. If Plumbing Company decided to discontinue making the axial taps, 40% of the above fixed manufacturing overhead costs could be avoided. Assume that direct labor is a variable cost. Required: a. Assume Plumbing Company has no alternative use for the facilities presently devoted to production of the axial taps. If the outside supplier offers to sell the axial taps for £65 each, should Plumbing Company accept the offer? Fully support your answer with appropriate calculations. b. Assume that Plumbing Company could use the facilities presently devoted to production of the axial taps…
A4
Knox Corporation manufactures an item. The cost structure is: Manufacturing $100 $800,000 Variable cost per unit Total fixed cost Selling & Administrative $30 $203,000 In its first year of operations, Knox Corporation produced 70,000 items and sold 64,000 at $200 each. Part 1: What is the contribution margin at the end of the first year of operations under the variable costing method? Part 2: Which costing method (variable or absorption) will generate a higher net operating income in Knox Corporation's first year of operations and by how much? Hint: See page 6-21 Illustration 6A- for Variable Costing model and page 6-20 Illustration 6A guidance on Absorption Costing model.
Question 1: Estimation of WC The management of ABC Company Limited has called for a statement showing the WC needed to finance a level of activity of 3,00,000 units of output per year. The cost statement of the company's product, for the above-mentioned activity level, is given below: Cost per unit TK 20 Direct material Direct labor Overhead Total cost Target profit Target selling price 5 TK 15 40 10 TK 50 1. Past records show that raw materials are held in stock, on an average, for two (2) months; 2. Work in process (WIP) will approximate to 15 days production; 3. Finished goods remain in warehouse on average for 1 month; 4. Suppliers for materials extend one month's credit; 5. Two months credit is normally allowed to customers (assume all sales are on credit) 6. A minimum cash balance of TK 5,00,000 is expected to be maintained; 7. The production pattern is assumed to be even during the year. Prepare a Statement of Working Capital Requirements
Exercise 20.3 (Algo) Computing Required Sales Volume (LO20-4, LO20-5) The following is information concerning a product manufactured by Ames Brothers. Sales price per unit Variable cost per unit Total fixed manufacturing and operating costs (per month) 78 43 430,000 ces a. Determine the unit contribution margin. b. Determine the number of units that must be sold each month to break even. (Round your answer to the nearest whole number.) c. Determine the number of units that must be sold to earn an operating income of $234,000 per month. (Round your answer to the nearest whole number.) a. Unit contribution margin b. Break-even units C. Target sales in units 23 NOV 11 itv li 1 W %24 ...
6-16 A process plant making 5000 kg/day of a product selling for $1.75/kg has annual variable pro- duction costs of $2 million at 100 percent capacity and fixed costs of $700,000. What is the fixed cost per kilogram at the breakeven point? If the selling price of the product is increased by 10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is 35 percent of gross earnings?
The company manufactures product X which has a selling price of ₱48 per unit. Unit costs associated with the manufacture and sale of product X based on 30,000 units manufactured and sold each year are: Direct materials→₱10.00; Direct labor→₱6.00; Variable manufacturing overhead→₱5.00; Fixed manufacturing overhead→₱6.00; Variable selling, general and administrative expenses→₱3.00; Fixed selling, general and administrative expenses→₱8.00. The company uses the absorption costing approach to cost-plus pricing . The percentage markup being used to determine the selling price for product X is: a. 100.0% b. 37.5% c. 60.0% d. 40.0%
A-2
Question 6 Amundsen Company makes 60,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling Fixed Selling Total $ 10.10 $17.40 $ 2.70 $15.00 $ 2.75 $ 3.25 $51.20 An outside supplier has offered to sell the company all of these parts it needs. If the company accepts this offer, the facilities now being used to make the part would be idle and fixed manufacturing overhead would be reduced by 80% of current cost. The variable selling costs would be reduced to 40% of current cost. Required: What is the maximum amount the company should be willing to pay an outside supplier per unit for the part?
7
EX25-15

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