Rachmin Inc. manufactures several models of computer monitors. The basic model sells for $330 and has variable costs of $285 per unit. The deluxe model sells for $510 and has variable costs of $375 per unit. The professional model sells for $1,800 and has variable costs of $1,200 per unit. Total fixed expense is $433,500 per year. In general, the company sells six basic models and three deluxe models for every professional model sold. Required (A) Compute the number of basic models, deluxe models, and professional models that are sold at the breakeven point. (B) Check you answer to (A) by preparing a contribution margin income statement for Rachmin Inc. for the year. (C) According to the authors of the textbook, how do risk and uncertainty relate to Cost-Volume Profit (CVP) analysis?

Rachmin Inc. manufactures several models of computer monitors. The basic model sells for $330 and has variable costs of $285 per unit. The deluxe model sells for $510 and has variable costs of $375 per unit. The professional model sells for $1,800 and has variable costs of $1,200 per unit. Total fixed expense is $433,500 per year. In general, the company sells six basic models and three deluxe models for every professional model sold. Required (A) Compute the number of basic models, deluxe models, and professional models that are sold at the breakeven point. (B) Check you answer to (A) by preparing a contribution margin income statement for Rachmin Inc. for the year. (C) According to the authors of the textbook, how do risk and uncertainty relate to Cost-Volume Profit (CVP) analysis?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Standlar Company makes and sells wireless speakers. The price of the standard model is $360 and its variable expenses are $210. The price of the deluxe model is $500 and its variable expenses are $300. The price of the superior model is $1,600 and its variable expense per unit is $600. The total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. What is the overall sales revenue of Standlar at break-even point? a.$778,800 b.$480,000 c.$648,000 d.$387,200 e.$550,000
HighValu Incorporated manufactures a moderately priced set of lawn furniture (a table and four chairs) that it sells for $270. The company currently manufactures and sells 6, 900 sets per year. The manufacturing costs include $94 for direct materials and $54 for direct labor per set. The overhead charge per set is $44, which consists entirely of fixed costs. Highvalu is considering a special purchase offer from a large retail firm, which has offered to buy 690 sets per year for three years at a price of $186 per set. Highvalu has the available plant capacity to produce the order and expects no other orders or profitable alternative uses of the plant capacity. Required: 1. What is the total relevant cost per unit to produce the units requested by the retail firm? 2. What is the estimated net effect on annual operating income if Highvalu accepts the special sales order?
SEved Spring Corp. has two divisions, Daffodil and Tulip. Daffodil produces a gadget that Tulip could use in its production. Tulip currently purchases 170,000 gadgets for $13.90 on the open market. Daffodil's variable costs are $7 per widget while the full cost is $11.45. Daffodil sells gadgets for $14.40 each. If Daffodil is operating at capacity, what would be the minimum transfer price Daffodil would accept for an internal transfer? Multinic Choice $7.40 $1.45 $13.90 $14.40
SE Spring Corp. has two divisions, Daffodil and Tulip. Daffodil produces a gadget that Tulip could use in its production. Tulip currently purchases 195,000 gadgets for $14.40 on the open market. Daffodil's variable costs are $7.90 per widget while the full cost is $12.20. Daffodil sells gadgets for $15 each. If Daffodil is operating at capacity, what would be the maximum transfer price Tulip would pay internally? Multiple Choice $7.90 $12.20 $14.40 $14.90
Maple Incorporated manufactures a product that costs $33 per unit plus $45,000 in fixed costs each month. Maple currently sells 4,000 of these units per month for $63 each. If Maple leased a machine for $12,000 a month, it could add features to the product that would allow it to increase the selling price. It would cost an additional $8 per unit to add these features. How much would Maple have to charge for the product with additional features to make it worthwhile to lease the machine?
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 $5.50 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: Annual fixed costs Variable cost per switch Machine A $632,400 1.78 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 235,000 switches per year and what is the total cost of that alternative? Required 1 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Machine B $ 860,100 0.80 Minimum number of switches For each machine, what is the minimum number of switches that…
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 $5.20 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 $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 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 230,000 switches per year and what is the total cost of that alternative?
Waterways packages some of its products into sets for home installations. One set (small) sells for $77 with variable costs of production for the set at $50. Another set (large) sells for $149 with variable costs of $99. The parts for the $77 set take 9 machine hours to produce. The parts for the $149 set take 20 machine hours to produce.Given the information above, and assuming all of the package sets produced can be sold each month, illustrate the best use of machine hours. (Round answers to 2 decimal places, e.g. 5.25.) Small Set Large Set Contribution margin per unit of limited resource $ $
Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0-1,900 units, and monthly production costs for the production of 1,600 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses. Suppose it sells each birdbath for $24. Calculate the unit contribution margin and contribution margin ratio for each birdbath sold. Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,800 units.
Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each product requires time on a single machine. The machine has a monthly capacity of 540 hours. Total market demand for the two products is limited to 2,000 units of TI-12 and 1,000 units of TI-28 monthly. Talbot is currently producing and selling 1,500 TI-12 models and 780 TI-28 models each month. Cost and machine-usage data for the two products are shown in the following spreadsheet, which analysts at Talbot use for production planning purposes: Price Less variable costs per unit Material Labor Overhead Contribution margin per unit Fixed costs Manufacturing Marketing and administrative Machine hours per unit Machine hours used Machine hours available Quantity produced Maximum demand Profit Required A Required B TI-12 Model TI-28 Model TI-12 $ 80 23 29 8 $ 20 units units 0.1
Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each product requires time on a single machine. The machine has a monthly capacity of 540 hours. Total market demand for the two products is limited to 2,000 units of TI-12 and 1,000 units of TI-28 monthly. Talbot is currently producing and selling 1,500 TI-12 models and 780 TI-28 models each month. Cost and machine-usage data for the two products are shown in the following spreadsheet, which analysts at Talbot use for production planning purposes: Price Less variable costs per unit Material Labor Overhead Contribution margin per unit Fixed costs Manufacturing Marketing and administrative Machine hours per unit Machine hours used Machine hours available Quantity produced Maximum demand Profit TI-12 $ 80 Required A Required B 23 29 8 $ 20 0.1