Lush Lawn, Incorporated produces and sells electric lawn trimmers for $150 each. The variable costs of each mower total $110 whiletotal monthly fixed costs are $6,240. Current monthly sales are $51,000. The company is considering a proposal that will decrease theselling price by 10%, increase monthly fixed costs by 50%, and increase unit sales to 500 units per month.Required:a. Compute the company's current break-even point in units and dollars.b. What is the company's current margin of safety in units, dollars, and percentage?a. Break-even pointa. Break-even salesb. Margin of safetyb. Margin of safety in dollarsb. Margin of safety in ratiounitsunit%

Break-even point is the sales level at which a company covers its total costs, with no profit or…

Answered: Lush Lawn, Incorporated produces and…

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

Radar Company sells bikes for $490 each. The company currently sells 3.700 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $275 each to make: $160 in variable costs per bike and $115 of fixed costs per bike. Radar received an offer from a potential customer who wants to buy 800 bikes for $440 each. Incremental fixed costs to make this order are $47,000. No other costs will change if this order is accepted. Compute Radar's additional income (ignore taxes) if it accepts this order. Contribution margin Incremental Amount per Unit Incremental Fixed Costs Incremental income (loss) from new business The company should Incremental Income from New Business
A Mobile shop sells 5000 mobiles in a year and the sales is relatively constant throughout the year. These mobiles are purchased for SR 150.00 each, and the lead time is two days. The holding cost per mobile per year is 6% of the unit cost and the ordering cost per order is SR 37.50. There are 250 working days per year. Calculate the following: (i) What is the annual holding cost? (ii) In minimizing the cost, how many orders would be made each year? (iii) Given the EOQ, what is the total annual inventory cost (including purchase cost)? (iv) What is the time between orders? (v) What is the ROP?
Outback Outfitters sells a small camp stove for $150 per unit. Variable expenses are $105 per unit, and fixed expenses total $184,500 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced a 10% reduction in the selling price would result in a 25% increase in unit sales. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $79,000 per month? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Break-even…
Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are S600,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.) Required: 1. Calculate Disk City's break-even point for the current year in number of video disks.
Hello Company sells logs for an average of P18 per log. The company’s president, Jon, estimates the variable manufacturing and selling cost total P6 per log. Logging operations require substantial investments in equipment, so fixed cost are quite high and total P108,000 per month. Jon is considering making an investment in a new piece of logging equipment that will increase monthly fixed costs by P12,000Required: Calculate the number of additional logs, that must be sold to break-even after investing in the new equipment. Justify your answer.
Steven and Son Inc. sells its car wash package for $180 per unit, its total variable costs per unit is $80 per unit, whereas the total fixed costs are $150,000. The company is considering the increase this year targeted profit to $250,000. What is the company's break even point in units? Select one: O a. To breakeven the company needs to produce 1,500 units O b. To breakeven the company needs to produce 1,875 units c. To breakeven the company needs to produce 2,500 units d. To breakeven the company needs to produce 833 units
Sonora, Inc. is launching a new product that it estimates will sell for $95 per unit. Annual demand is estimated to be 98,000 units. Sonora estimates that using its current manufacturing technology, it can manufacture the units for $37 per unit, but if it purchases a new machine, the units can be manufactured for $36 per unit. Sonora has a target profit of 20% return on sales. Under target costing, what is the target cost for the new product?
Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30 and desk lamps sell for $20. The projected income statement for the upcoming year follows: Sales $600,000 Less: Variable costs 400,000 Contribution margin 200,000 Less: Fixed costs 150,000 Operating income $50,000 The owner of Carlyle’s estimates that 60 percent of the sales revenues will be produced by floor lamps and the remaining 40 percent by desk lamps. Floor lamps are also responsible for 60 percent of the variable expenses. Of the fixed expenses, one-third are common to both products, and one-half are directly traceable to the floor lamp product line. Required: By what percentage will profits increase with this change in sales volume? What is the theory behind the operating leverage concept?
Supersonic Tire Company makes a special kind of racing tire. Variable costs are $210 per unit, and fixed costs are $42,000 per month. Supersonic sells 400 units per month at a sales price of $320. If the quality of the tire is upgraded, the company believes it can increase the price to $350. If so, the variable cost will increase to $220 per unit, and the fixed costs will rise by 20%. If Supersonic decides to upgrade, how will operating income be affected? A. Operating income will increase by $20. B. Operating income will decrease by $400. C. Operating income will decrease by $12,000. D. Operating income will increase by $12,000.
ABC is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. Units sold 1,400 Sales proce per unit 225 variable cost per unit 145 fixed costs 52,000 break even (in units) 650 contribution margin ratio 0.36 break even in dollars 146,250 sales 315,000 variable cost 203,000 fixed costs 52,000 net income loss 60,000 What will be the impact on the break-even point if ABC purchases the new computer? A. What will be the impact on net operating income if ABC purchases the new computer? B. What would be your recommendation to ABC regarding this purchase? Current New Computer Units sold Sales price per unit…
Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable expenses are 40% of sales, and fixed expenses total $198,000 annually.Required:Answer the following independent questions:1. What is the product’s CM per unit?2. Use the CM per unit to determine the break-even point in units.3. The company estimates that sales will increase by $45,000 during the coming year due to increased demand. By how much should net operating income increase?
You want to establish your own business and are thinking about releasing a new Customers will pay P150 for it, according to market research, and your sales team believes they can sell at least 1,000 units every month. The equipment you'll need to make the product will require a monthly fixed cost of P400,000 and lease of facility at P500,000.Costs of producing the product are direct labor P20, direct mate1ials Pl5, shipping P5 and sales commission PlO. What is the breakeven point? Will this be a profitable venture? Justify you answer

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS