Hermione Ltd. produces magical wands. The budgeted production equals 500 magical wands and the budgeted fixed production overheads equals £282,000. The actual production level was 20% lower than estimated and the actual fixed production overheads equal £300,000. The selling, general and administrative expenses equal £18,250. Hermione Ltd. sells 200 magical wands for a price of £150 per unit. The variable production cost per unit is £56. Required: a) Generate the profit statement using the absorption costing technique. b) Considering your answer in a), which is your advice for Hermione Ltd.? Explain your answer in detail. c) Would your answers in a) and b) change if the amount of magical wands sold equals 400 units? Explain your answer in detail.

Hermione Ltd. produces magical wands. The budgeted production equals 500 magical wands and the budgeted fixed production overheads equals £282,000. The actual production level was 20% lower than estimated and the actual fixed production overheads equal £300,000. The selling, general and administrative expenses equal £18,250. Hermione Ltd. sells 200 magical wands for a price of £150 per unit. The variable production cost per unit is £56. Required: a) Generate the profit statement using the absorption costing technique. b) Considering your answer in a), which is your advice for Hermione Ltd.? Explain your answer in detail. c) Would your answers in a) and b) change if the amount of magical wands sold equals 400 units? Explain your answer in detail.

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

Dreams Ltd. has budgeted fixed production overheads of £120, 000 and the expected level of production is 4,000 units. After the production period, the actual production level was 10, 000 units and the actual fixed production overheads is £180, 000. Considering this information, which of the following statements is true? O a. The overheads recovery rate equals £20. O b. There is under-absorption of overheads of £300,000 which increases profit. O c. There is over-absorption of overheads of £120,000 which increases profit. O d. None of the answers is true.
Northwest Technology Inc. manufactures and sells two products, digital game players and computer tablets. The fixed costs are $936,000, and the sales mix is 70% game players and 30% computer tablets. The unit selling price and the unit variable cost for each product are as follows: Products Unit Selling Price Unit Variable Cost Game players $ 50 $30 Tablets 120 80 a. Compute the break-even sales (units) for the overall product, E.units b. How many units of each product, game players and tablets, would be sold at the break-even point? Digital game players units Computer tablets units
Chord Ltd manufactures different types of guitars. Its best seller is the Atlantica. Chord Ltd plans to produce 600 Altlanticas in the upcoming period. Material costs are £120 per guitar. Each guitar uses 4Kg of material. The labour rate is £18.50 per hour and each guitar takes 3.5 hours to manufacture. Variable overheads are £20 per unit. Fixed overheads attributed to the manufacturing of all Atlanticas are expected to be £60,000 and absorbed on a per unit basis. Each Atlantica will sell for £350. What is the expected margin of safety in units? A) 2,400 units B 414 units C) 172 units 186 units
Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 140 100% Variable expenses 42 30% Contribution margin $ 98 70% Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $58,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change?
The Montanah Corporation manufactures jerseys with Ronaldo's signature stamped. Each jersey sells for USD12 and has a variable cost of USD7.00. There are USD20,000 in the fixed cost involved in the production process. a) Calculate the break-even in units. b) Calculate the sales (in units) needed to earn a profit of USD15,000.
Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices? a. no transfer should take place b. a transfer should take place at £50 C. a transfer should take place at £48 d. a transfer should take place between £48 and £50
Bonita Industries produces tinted SPF 100 moisturizer that it sells for $120 each. Each bottle costs $6 of variable costs to make. During the most recent quarter, 1100 bottles of moisturizer were manufactured and sold. Fixed costs for the quarter were $20 per unit for a total of $22000. What is the company's contribution margin ratio?
A small company produces two products, x and y. Product x requires 1 hour of labour and 6 tons of raw materials, whereas each unit of product y requires2 hours of labour and 5 tons of raw material. The number of hours available each week is 40 and the available raw materials each week is 150 tons. If the contribution to profit is £2 per unit of product x and £3 per unit of y, determine the weekly production mix that will maximize profits.
Burns Industries currently manufactures and sells 30,000 power saws per month, although it has the capacity to produce 45,000 units per month. At the 30,000- unit-per-month level of production, the per-unit cost is $85, consisting of $50 in variable costs and $35 in fixed costs. Burns sells its saws to retail stores for $90 each. Allen Distributors has offered to purchase 6,000 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Burns decides to accept the special order for 6,000 units from Allen at a unit sales price that will add $120,000 per month to its operating income. The unit price Burns is charging Allen is: Multiple Choice $85. $50 $90. $70.
Harvest Inc. produces and sells a single product. The selling price of the product is $200.00 per unit and its variable cost is $80.00 per unit. The fixed expense is $300,000 per month. The break- even in monthly unit sales is closest to: Multiple Choice 2,583 3,750 1,500 2,500
Guadalupe Olayo produces grandfather clocks. Each grandfather clock normally sells for $1,500. The following manufacturing cost information per clock is available: Direct materials are $200, labor is $600, variable overhead is $50, and fixed overhead is $40 (based on planned production for the year of 1,200 clocks). Commissions are 10% of selling price, and fixed selling and administrative costs are $70,000. Guadalupe’s tax rate is 25%. A European company has asked Guadalupe to accept a special order for 400 clocks. Due to some minor design changes, the material and labor costs for the special order clocks would increase by 25%. Another production run would have to be scheduled for the special order, since the clocks are different from the regular clocks, at a cost of $2,200. In addition, Guadalupe would have to hire a temporary clerk to process the ISO and export paperwork for shipping to Europe, at a cost of $600. Commissions will be paid at the rate of 5% of the special order…
(a) A company manufactures a single product which has variable cost of £40 per unit. The contribution to sales ratio is 45%. Monthly fixed costs are £198,000. What is the breakeven point in pounds and in units? (b) John makes and sells a product which has a variable cost of £60 and sells for £80 per unit. Budgeted fixed costs are £140,000 and budgeted sales are 16000 units. Determine the sales required to achieve this profit What is the breakeven point and margin of safety? (c) TLF Ltd wishes to sell 28,000 units of its product, which has a variable cost of £30 to make and sell. Fixed costs are £94,000 and required profit is £26,000. Calculate the sales price per unit (d) Apple Ltd makes and sells a single product, for which variable costs are follows:Direct materials $20Direct labour $16Variable production overhead $12…