It's Your Turn. Show Us What YouKnowShannon's Brewery in Keller, Texas isconsidering using a sales team to help itpenetrate market areas not served by itscurrent distributors. However, Shannon Carter,the CEO, wants to know whether it would becheaper to hire an independent outside salesforce rather than hire and train his own salespersonnel. Estimates are that the costs ofhiring, training, and maintaining his own salesforce would entail fixed costs of salaries andadministrative overhead of $300,000 peryear. These sales people would also receive a2.9% commission on all sales. If going with theindependent sales force option, all costs wouldbe variable in that these reps would be paid acommission of 10.8% on all sales. At whatlevel of sales will the costs of each sales forcebe equal? Round your answer to the nearestdollar value. Round your answer to thenearest one dollar.

Let the level of sales be ‘$ X’. At $ X level, the cost of hiring outside sales force and cost of…

Answered: It's Your Turn. Show Us What You Know…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Mindspin Labs Inc. is a manufacturing firm that has experienced strong competition in its traditional business. Management is considering Joining the trend to the "service economy" by eliminating its manufacturing operations and concentrating on providing specialized maintenance services to other manufacturers. Management of Mindspin Labs has had a target ROI of 15% on an asset base that has averaged $8 million. To achieve this ROI, average total asset turnover of 2 was required. If the company shifts its operations from manufacturing to providing maintenance services, it is estimated that average total assets will decrease to $2 million. Required: a. Calculate net Income, margin, and sales required for Mindspin Labs to achieve its target ROI as a manufacturing firm. b. Assume that the average margin of maintenance service firms is 3.10%, and that the average ROI for such firms is also 17% Calculate the net Income, sales, and total asset turnover that Mindspin Labs will have if the…
The company president does not believe that the formula should be altered for fear it will tarnish the company’s brand. She prefers that the company become more efficient in manufacturing the product. If fixed manufacturing costs can be reduced by $250,000 and variable direct manufacturing labor costs are reduced by $1 per unit, will Westerly achieve its target cost?
Coast Corporation's research and development department has a a project to develop a new product which is expected to be very profitable. However, this very expensive product requires approval from the company's controller, J.Davis. Since the corporate profits have been decreasing lately, Davis hesitates to approve a project that will incur significant expenses that cannot be capitalized. To overcome this problem, he's thinking about hiring a firm to develop this product and purchasing the patent of the product from this firm. w wwn wwwww Required: a. Why doesn't Davis prefer producing the product internally, and what are the ethical issues in this situation. b. What would you do if you were in Davis's place? ww n ww www wwww
The insufficient capacity of SHELLA Craft is due to the availability of manpower that the company is currently lacking. One of the supervisors in the production department, En Shauqi suggested another option to use the service of external agency to recruit and hire workers at a rate of RM30 per hour. The company also will have to pay for transportation allowance for external workers amounting RM15,000. Evaluate the above suggestion. Suggest THREE (3) qualitative factors that need to be considered if the company decided to use the service of external agency.
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,237,000 based on production of 290,000 handheld consoles and 100,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor $ 1,135,250 $ 411,000 $ 1,546,250 Materials 700,000 671,000 1,371,000…
Mindspin Labs Inc. is a manufacturing firm that has experienced strong competition in its traditional business. Management is considering joining the trend to the "service economy" by eliminating its manufacturing operations and concentrating on providing specialized maintenance services to other manufacturers. Management of Mindspin Labs has had a target ROI of 16% on an asset base that has averaged $8 million. To achieve this ROI, average total asset turnover of 2 was required. If the company shifts its operations from manufacturing to providing maintenance services, it is estimated that average total assets will decrease to $5 million.Required: Calculate net income, margin, and sales required for Mindspin Labs to achieve its target ROI as a manufacturing firm. Assume that the average margin of maintenance service firms is 2.50%, and that the average ROI for such firms is also 17%. Calculate the net income, sales, and total asset turnover that Mindspin Labs will have if the change…
Denger
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…
Ellie now had two offers to think about. Her initial reaction was to turn down the special request for 25,000 brochures at $10 per 100. Especially as she did not believe Tyco would realize any repeat or future business from the customer. She also needed to understand her costs versus the cost offered by the small shop to increase Tyco's printing capacity by outsourcing. Should she tell the small shop about the special order request and let them work it out themselves? They might both get what they needed.
Race Cars, Inc., produces model cars made from aluminum. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $250,000, $400,000 and $200,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs. The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance cost are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current…
CHS is a large multidivision firm. One division, Health Services, is well known Inside CHS for its efficient Information technology (IT). A smaller division, Optics, has approached Health Services with a proposal that it provide IT support in the form of machine time for some of Optics's billing and administrative work. After an analysis of the demands that Optics would place on the system, the IT manager of Health Services notes that Health Services would have to lease a new server because of the additional load. The lease rates for the current server are a fixed annual lease of $3,280 and it averages machine time of 2,900 hours annually. The new server leases for an annual rate of $5,040. Because the new server is a faster machine, Health Services can complete its current requirements In only 2,040 hours. The work for Optics is estimated to be 1,110 hours. In addition to leasing a new server, there are two other changes Health Services would have to make in IT. First, it will have to…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS