Mini-Exercise 16-1 (Static) Sell or process further? LO 2, 3 Lakeside Inc. produces a product that currently sells for $36 per unit. Current production costs per unit include direct materials, $10; direct labor, $12; variable overhead, $5; and fixed overhead, $5. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product for $40 per unit? (Round your final answer to 2 decimal places. Loss amounts should be indicated with a minus sign.) Incremental Profit (Loss)

Mini-Exercise 16-1 (Static) Sell or process further? LO 2, 3 Lakeside Inc. produces a product that currently sells for $36 per unit. Current production costs per unit include direct materials, $10; direct labor, $12; variable overhead, $5; and fixed overhead, $5. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product for $40 per unit? (Round your final answer to 2 decimal places. Loss amounts should be indicated with a minus sign.) Incremental Profit (Loss)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 2 Moon produces tow products the A and B. The direct costs of the two products are given below: Direct materials Direct Labour A £4.00 £3.00 Materials handling Production set up costs The budgeted production for 80,000 units of A and 30,000 units of B. The two main activities identified for the simple production process are material handling and production set ups. Product A requires large production runs and large transfers of materials from stores. However, product B is a more complex product with a number of different types of materials required and shorter and more frequent production runs. A Number Material Handling requisitions 100 Number of Production Set Ups 50 Required: B The budgeted fixed overheads of Caplan are £600,000 and they are made up as follows: £200,000 £400,000 £600,000 The use of these activities for each product is £4.20 £2.20 B 400 200 Total 500 250 Calculate the unit cost of each product using the costing method of Activity Based Costing.
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) (56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales revenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) d. Johnstone distributed $27,200 to Marcus in year 2. Accumulated adjustments account Dividend income
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Q.4 Standard cost systems provide companies with a number of advantages, argue the statement. Following are the details of Abbass Industries for the period ended June 30, 2020. Company establish standard on its normal capacity of 120,000 units/hours in a year: Direct Material 600,000 kgs at Rs. 9 per kg Direct Labor 4 hours per unit at Rs. 6 per hour Factory overhead: Fixed cost Rs. 240,000 per year or Rs. 20,000 per month. Variable Cost Rs. 4.50 per hour. During the one month of operation, company produced 11,000 units. Direct material used: 60,500 kgs at Rs. 9.10 per kg Direct labor used:…
QUESTION 4 An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeksMaximum delivery time: 3.5 weeksNormal usage: 52 000 units per yearPurchase price per unit: R8.50Cost of placing an order: R18.00Interest rate: 2% per yearStoring cost per unit: R2.50 Required: Calculate the re-order point if the organisation has a policy to keep safety stock. Calculate the safety stock that should be kept by the organisation.
Exercise 21.12 (Static) Pricing a Special Order (LO21-1, LO21-2, LO21-3) Mazeppa Corporation sells relays at a selling price of $28 per unit. The company's cost per unit, based on full capacity of 160,000 units, is as follows: Direct materials Direct labor Overhead (2/3 of which is variable) Mazeppa has been approached by a distributor in Montana offering to buy a special order consisting of 30,000 relays. Mazeppa has the capacity to fill the order. However, it will incur an additional shipping cost of $2 for each relay it sells to the distributor. a-1. Assume that Mazęppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit? a-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor? b-1. Assume that Mazeppa is currently operating at full capacity.…
PROBLEM S-20 CVP Applications: Break Even Analysis; Cost Structure: Target Safes LOS-1, LOS-3. LOS-4, LOS-S, LOS-6, LOS-8 Northwood Company manufactures basketballs. The company has a ball that sells for $25. Al present, the ball is manufactured in a small plant that relies heavily on direct labor workers. T, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last the company sold 30,000 of these balls, with the following results: year, $750,000 450,000 Sales (30,000 balls) Variable expenses. 300,000 210.000 Contribution margin Fixed expenses $ 90.000 Net operating income. Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of oper ating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains constant at $25, what will be next year's…
Question Four i) Jambo Lid manufactures and markets a single product. The following information is available: Materials Conversation costs (variable) i) Dealers Margin Selling prices Fixed Costs 1,250,000 Present sales 400,000 Units Capacity utilization: 60% Shs. Per Unit 40 30 10 100 There is an acute competition. Extra efforts are necessary to sell. Suggestions have been made for increasing sales. By reducing sales price by 5% ii) By increasing dealers margin by 25% over existing rate. Which of the two suggestion you would recommend if the company desires to maintain the present profit? Give reasons.
QUESTION 10 Randall has received a special order for 4300 units of its product at a special price of $20. The product normally sells for $34 and has the following manufacturing costs: AZ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Per unit 2 3 3 2 Assume that Randall has sufficient capacity to fill the order. If Randall accepts the order, what effect will the order have on the company's short-term profit? *** If a decrease, place a sign before your answer. For example, a decrease of $1,000 would be answered -1,000.
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Question 3 (12 marks) Grass & Go Ltd produce two models of petrol lawnmowers, Standard and Deluxe. Overhead was allocated based on direct labour hours. The following information was collected at the end of 2022. Annual sales Selling price Direct material cost per unit Direct labour cost per unit Overhead cost per unit Following an examination of the data above the marketing manager recommended that more emphasis should be placed on selling the Deluxe mower. The manufacturing manager disagreed and argued that there were problems in relation to the costing of the mowers. The management accountant agreed with the manufacturing manager and suggested that an activity-based costing system should be installed. Overhead activity Setups Standard 36,250 units $650 $90 $200 $90 The general manager asked the management accountant to recalculate the product costs using ABC techniques. The management accountant subsequently collected the following information. Cost driver Number of setups Machine…
Question 2 Pisang Berhad produces 500,000 switches per year with the following costs: (For the production of 500,000 switches) RM Direct materials 1,000,000 Direct labour 750,000 Variable manufacturing expenses 300,000 450,000 Fixed manufacturing expenses Total cost 2,500,000 RM5/unit Cost/per unit RM2,500,000/500,000 units + A supplier has approached the company, and offered the switches at RM4 per unit. Should the company decided to purchase from the supplier, the company need to employ an incoming quality controller with a salary of RM70,000 per annum. Other than this, all the other fixed manufacturing expenses will remain unchanged. Required: a) Should Pisang Berhad continue with the production of switches internally, or to purchase the switches from the external supplier? Support your answer with appropriate calculations. b) Will your answer change if the facilities freed up by the company can be used to do alternative works that will contribute an annual profit of RM50,000? Why?…