Manning Company produces a product that has a variable cost of $61 per unit and a sales price of $97 per unit. The company's annual fixed costs total $672,000. It had net income of $232,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $81 per unit. If Manning desires to increase net income by $50,000 even with a lower price of $81, how many units must the

Manning Company produces a product that has a variable cost of $61 per unit and a sales price of $97 per unit. The company's annual fixed costs total $672,000. It had net income of $232,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $81 per unit. If Manning desires to increase net income by $50,000 even with a lower price of $81, how many units must the

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7EB: Delta Co. sells a product for $150 per unit. The variable cost per unit is $90 and fixed costs are...

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Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
Delta Co. sells a product for $150 per unit. The variable cost per unit is $90 and fixed costs are $15,250. Delta Co.s tax rate is 36% and the company wants to earn $44,000 after taxes. What would be Deltas desired pre-tax income? What would be break-even point in units to reach the income goal of $44,000 after taxes? What would be break-even point in sales dollars to reach the income goal of $44000 after taxes? Create a contribution margin income statement to show that the break-even point calculated in B, generates the desired after-tax income.
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Baghdad Company produces a single product. They have recently received the result of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. If they enact the 10% price increase, what will be their new break-even point in units and dollars? Their most recent CVP analysis is:
Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
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Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 8% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is shown. If they enact the 8% price increase, what will be their new break-even point in units and dollars?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000