Luxe Pens is considering two methods for producing a new premium pen: Capital IntensiveLabor IntensiveDirect materials per unit$8.00$9.00Direct labor per unit$6.00$15.00 Variable manufacturing overhead per unit$4.00$3.00Fixed manufacturing overhead per year$3,200,000$900,000 The recommended selling price is $42 per unit. Incremental selling costs are expected to be $600,000 per year plus $3 per unit sold. Calculate the operating leverage for the capital-intensive method at a volume of 280,000 units. Round answer to two decimal places.

Luxe Pens is considering two methods for producing a new premium pen: Capital IntensiveLabor IntensiveDirect materials per unit$8.00$9.00Direct labor per unit$6.00$15.00 Variable manufacturing overhead per unit$4.00$3.00Fixed manufacturing overhead per year$3,200,000$900,000 The recommended selling price is $42 per unit. Incremental selling costs are expected to be $600,000 per year plus $3 per unit sold. Calculate the operating leverage for the capital-intensive method at a volume of 280,000 units. Round answer to two decimal places.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

See similar textbooks

Similar questions

Compute the net incremental cost
Alpesh
Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. State your assumptions.
Marigold Corp. is using the target cost approach on a new product. Information gathered so far is as follows: Expected annual sales Desired profit per unit Target cost What is the unit selling price? O $0.30 O $0.64 O $0.62 O $0.32 500000 units $0.32 $150000
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.45 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 108,900 $ 145,000 Variable cost per switch 0.46 0.20 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 150,000 switches per year and what is the total cost of that alternative?
Please help me with calculation
How many units would have to be sold to yield a target operating income of $22,000, assuming variable costs are $15 per unit, total fixed costs are $2,000, and the unit selling price is $20.00? ___________units
Pinkin Incorporated needs to determine a price for a new phone model. Pinkin desires a 25% markup on the total cost of the phone. Pinkin expects to sell 30,000 phones. Additional information is as follows: Variable Costs per Unit Fixed Costs (total) Direct materials $ 21 Overhead $ 85,000 Direct labor 46 General and administrative 65,000 Overhead 26 General and administrative 56 Using the total cost method what price should Pinkin charge?
Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs $41,000 $41,670 $41,890 $40,100 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law. Determine what the project’s net present value (NPV) would be under the new tax law. $80,438 $67,032 $77,087 $60,329 Now…
Compute the contribution margin
Cabin Creek Company is considering adding a new line of kitchen cabinets. The company's accountant provided the following estimated data for these cabinets: Annual sales Selling price per unit Variable manufacturing costs per unit Variable selling costs per unit Incremental fixed costs per year: Manufacturing Selling Allocated common costs per year: Manufacturing Selling and administrative 800 units Required 1 $ 3,510 $ 1,510 $360 If the kitchen cabinets are added as a new product line, the company expects that the contribution margin earned from selling its other products will decrease by $202,000 per year. Required 2 $ 476,400 $ 56,000 Required: 1. What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets? 2. What is the lowest selling price per unit that could be charged for the cabinets and still make it economically desirable for the company to add the new product line? $ 81,000 $ 113,000 Complete this question by entering your answers in the…
Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Unit sales Sales price Year 1 3,500 $38.50 Year 2 4,000 $39.88 Year 3 4,200 Year 4 4,250 $40.15 $41.55 $22.34 $22.85 $23.67 $23.87 Variable cost per unit Fixed operating costs $37,000 $37,500 $38,120 $39,560 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. Which of the following most closely approximates what the project's net present value (NPV) would be under the new tax law? (Hint: Round your final answer to two decimal places and choose…