point that you computed in requirement 27PROBLEM S-20 CVP Applications Break Even Analysie Cost Structure; Target Sales LOS-1, LOS-3,LOS-4, LOS-, LOS-6, LOS-8Northwood Company manufactures baskethalls. The company has a ball that sells for 525.Al present, the ball is manufactured in a small plant that relies heavily on direct labor workers.Th, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost.Last year, the company sold 30,000 of these balls, with the following results:Sales (30,000 balls)Variable expenses.$750,000450,000Contribution marginFixed expenses..300,000210.000$ 90.000Net operating income.Reguired:Compute (a na ponext yearRefer to the original data. The company is discussing the construction of a new, automated5.manufacturing plant. The new plant would slash variable expenses per ball by 40%, but itwould cause fixed expenses per year to double. If the new plant is built, what would be thecompany's new CM ratio and new break-even point in balls?6.Refer to the data in (5) above.If the new plant is built, how many balls will have to be sold next year to carn the samenet operating income, $90,000, as last year?Assume the new plant is built and that next year the company manufactures and sellsa.b.30,000 balls (the same number as sold last year). Prepare a contribution format incomestatement and compute the degree of operating leverage.If you were a member of top management, would you have been in favor of constructingthe new plant? Explain.C.

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Answered: PROBLEM S-20 CVP Applicatione: Break…

Business

Accounting

PROBLEM S-20 CVP Applicatione: Break Even Analysie Cost Structure: Target Sales

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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Mastery Problem: Contribution Margin, Cost-Volume-Profit Analysis and Break-Even Point (Overview) Fixed, Variable and Mixed Costs An appreciation of cost behavior is needed in order for management to understand and predict profitability as the costs of material, labor and other operating expenses and levels of production and sales change. It's important to review the cost behavior of fixed, variable and mixed costs before contribution margins, cost-volume-profit analysis, and break-even points. 1. In the table below, Have-A-Seat Inc. has outlined many of the costs associated with producing office chairs. With respect to the production and sale of office chairs, classify each cost as: a.fixed b.mixed c.variable. a. Pressure-molded plastic for chair frames b. Pension cost: $0.50 per employee hour on the job c. Insurance premiums for inventory: $2,100 per month plus $0.01 for each dollar of inventory over $2 million d. Property taxes: $120,000 per year for…
Contribution Margin, Cost-Volume-Profit Analysis and Break-Even Point (Overview) Fixed, Variable and Mixed Costs An appreciation of cost behavior is needed in order for management to understand and predict profitability as the costs of material, labor and other operating expenses and levels of production and sales change. It's important to review the cost behavior of fixed, variable and mixed costs before contribution margins, cost-volume-profit analysis, and break-even points. 1. In the table below, Have-A-Seat Inc. has outlined many of the costs associated with producing office chairs. With respect to the production and sale of office chairs, classify each cost as fixed, mixed, or variable. a. Pressure-molded plastic for chair frames b. Pension cost: $0.50 per employee hour on the job c. Insurance premiums for inventory: $2,100 per month plus $0.01 for each dollar of inventory over $2 million d. Property taxes: $120,000 per year for the factory building and…
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