Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: Sales revenues (37,500 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits $2,500,000 $ 400,000 545,000 216,000 267,000 285,000 67,800 270,300 25, 200 $2,076,300 $ 423,700 All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $29,100 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $42,000. Sales volume and prices are expected to increase by 8 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 6 percent and variable manufacturing costs will decrease by 5 percent. Fixed cash manufacturing costs are expected to decrease by 9 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: Sales revenues (37,500 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits $2,500,000 $ 400,000 545,000 216,000 267,000 285,000 67,800 270,300 25, 200 $2,076,300 $ 423,700 All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $29,100 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $42,000. Sales volume and prices are expected to increase by 8 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 6 percent and variable manufacturing costs will decrease by 5 percent. Fixed cash manufacturing costs are expected to decrease by 9 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

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

Define Indirect method
What is canonical cover in DBMS?
What are the problems caused by lack of integration? Expalin.
How can thepayback method be useful?
What are some limitations of using the direct write-off method?
Explain high-low method.
Types of gap and give example with interpretation.
Define call option