Nitin Sweets believes its advertising expenditures are too high and wants to from the budget. cut $600,000 Management estimates that this decision will result in a loss of 12,000 units in sales. If the gross margin per unit is $50, does cutting the advertising budget make sense?
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- MM Co. uses corrugated cardboard to ship its product to customers. Management believes it has found a more efficient way to package its products and use less cardboard. This new approach will reduce shipping costs from $10.00 per shipment to $9.25 per shipment. (1) If the company forecasts 1,200 shipments this year, what amount of total direct materials costs would appear on the shipping department’s flexible budget? (2) How much is this sustainability improvement predicted to save in direct materials costs for this coming year?Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Required: 1. What is Hammonds variable cost ratio? Its contribution margin ratio? 2. Suppose Hammonds actual revenues are 200,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.) 4. How much sales revenue must Hammond generate to earn a before-tax profit of 130,000? An after-tax profit of 90,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.Carpetland salespersons average 8,000 per week in sales. Steve Contois, the firms vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial selling period will enable him to conclude that the compensation plan increases the average sales per salesperson. a. Develop the appropriate null and alternative hypotheses. b. What is the Type I error in this situation? What are the consequences of making this error? c. What is the Type II error in this situation? What are the consequences of making this error?
- Danna Martin, president of Mays Electronics, was concerned about the end-of-the year marketing report that she had just received. According to Larry Savage, marketing manager, a price decrease for the coming year was again needed to maintain the companys annual sales volume of integrated circuit boards (CBs). This would make a bad situation worse. The current selling price of 18 per unit was producing a 2-per-unit profithalf the customary 4-per-unit profit. Foreign competitors kept reducing their prices. To match the latest reduction would reduce the price from 18 to 14. This would put the price below the cost to produce and sell it. How could these firms sell for such a low price? Determined to find out if there were problems with the companys operations, Danna decided to hire a consultant to evaluate the way in which the CBs were produced and sold. After two weeks, the consultant had identified the following activities and costs: The consultant indicated that some preliminary activity analysis shows that per-unit costs can be reduced by at least 7. Since the marketing manager had indicated that the market share (sales volume) for the boards could be increased by 50% if the price could be reduced to 12, Danna became quite excited. Required: 1. CONCEPTUAL CONNECTION What is activity-based management? What phases of activity analysis did the consultant provide? What else remains to be done? 2. CONCEPTUAL CONNECTION Identify as many nonvalue-added costs as possible. Compute the cost savings per unit that would be realized if these costs were eliminated. Was the consultant correct in the preliminary cost reduction assessment? Discuss actions that the company can take to reduce or eliminate the nonvalue-added activities. 3. Compute the unit cost required to maintain current market share, while earning a profit of 4 per unit. Now compute the unit cost required to expand sales by 50%, assuming a per-unit profit of 4. How much cost reduction would be required to achieve each unit cost? 4. Assume that further activity analysis revealed the following: switching to automated insertion would save 60,000 of engineering support and 90,000 of direct labor. Now, what is the total potential cost reduction per unit available from activity analysis? With these additional reductions, can Mays achieve the unit cost to maintain current sales? To increase it by 50%? What form of activity analysis is this: reduction, sharing, elimination, or selection? 5. CONCEPTUAL CONNECTION Calculate income based on current sales, prices, and costs. Then calculate the income by using a 14 price and a 12 price, assuming that the maximum cost reduction possible is achieved (including Requirement 4s reduction). What price should be selected?Bubbles Inc. has observed that their primary product, Apex Wrap is losing market share. Due to this phenomenon, Bubble's operating income was $120,000 in 2017, $100,000 in 2018 and 80,000 in $2019. The management brainstorms on a solution to the company's declining profits and decide to add a softer layer to the product in 2019, change product casing in 2020 and remove the edge lining in 2021. The management is incorporating O Rolling budget O Kaizen budget O Responsibility accounting budget O Flexible budgetEarl Massey, director of marketing, wants to reduce the selling price of his company’s products by 15% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost margin.” Before this action is taken, what other factors does the company need to consider?
- Suppose that marketing executives for TouchéToiletries (see problem 7) reduced the price to$6.50 for a three-ounce bottle of Ode d’Toade andthe fixed costs were $1,100,000. Suppose furtherthat the unit variable cost remained at 45 cents fora three-ounce bottle. (a) How many bottles mustbe sold to break even? (b) What dollar profit levelwould Ode d’Toade achieve if 200,000 bottleswere sold?a) What is JJE's break-even point in units? b) What is JJE's Margin of Safety in dollars? c) The new VP marketing has suggested a special promotion be run where units are sold at a discount of 8%. The promotion is expected to increase the units sold by 20%, but variable costs would increase by $2 per unit due to special packaging. The advertising associated with this campaign would cost $10,000. Should this promotion be run? Use incremental analysis.Lux Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be
- Compute the break-even point and contribution marginratio (CM ratio) of Goats Head Soup Company? Sales department feels that if monthly advertising budget is increased by $16,000, the sales will be increased by 3,500 units. Show the effect of these changes assuming the selling price remains unchanged. If sales price is reduced by 20% and monthly advertising expenses are increased by $70,000, the unit sales are expected to increase by 100%. Show the effect of this change by preparing a new income statementof Goats Head Soup Company. The Goats Head Soup wants to make the packing of its product more attractive. The new packing would increase cost by $1.20 per unit. Assuming no other changes, compute the number of units to be sold to earn a net operating income of $9,000. The company is planning to purchase a new machine. The installation of new machine will increase fixed cost by $236,000 and decrease unit variable expenses by 50%.(a). Compute the CM ratio and break-even point if the new…Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below. Selling price per unit Variable expense per unit Fixed expense per month Unit sales per month Required: 1. What is the company's margin of safety? $ 30 $ 16 $ 11,340 960 Note: Do not round intermediate calculations. 2. What is the company's margin of safety as a percentage of its sales? Note: Round your percentage answer to 2 decimal places (i.e. .1234 should be entered as 12.34). 1. Margin of safety (in dollars) 2. Margin of safety percentage %The company’s marketing team estimates that sales volume could be increased to 5,000 units per month if the sales price was lowered from $150 to $125 per unit. The production manager has confirmed that they have the capacity to increase production to this level. Assume that the cost pattern will not vary at the increased level of production. If management decreases the price, what would the impact on monthly sales, income and costs be? For each figure, indicate whether the change will result in an increase, decrease or no change in the sales, income and cost. Would you recommend the reduction in sales price? Why or Why not? (Show all supporting calculations). (NOTE: ignore taxes or other costs not specifically mentioned in the questions.)
