a)b)Recent economic conflitions are forcing MegaCorp to drop its price from $50 to $40 per unit, butthe company expects its sales to rise from 600,000 to 750,000 units. The company producesexactly enough units to meet sales expectations and the company's current cost of production is$38 per unit. Of that $38 per unit, $10 per unit is a result of fixed costs, which was calculated bydividing the fixed costs by expected sales of 600,000. Fixed costs will remain the same despite theprice and production changes. Suppose MegaCorp would like to maintain a 21% target operatingincome on its sales revenue. To achieve this target, the company must lower its variable cost ofproduction by:O $2.40 per unit.O$25.60 per unit.O $4.40 per unit.O $33.60 per unit.Show Transcribed TextThe costs listed below relate to a variety of different decision situations.CostDecisionMake or buy1. Direct labor2. Original cost of old equipmentEquipment replacement3. Incremental production costsSell or process further4. Rent expensePurchase or lease a buildingWhich of the costs shown here is irrelevant to the related decision?02O04013

Honor Code:As per the Honor Code, I can only address one question at a time.As you haven't specified…

Answered: Recent economic conflitions are forcing…

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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Lusk Corporation produces and sells 14,300 units of Product X each month. The selling price of Product X is $25 per unit, and variable expenses are $19 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company
Chalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 156,200 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,084,500. Production engineers have advised management that they expect unit labor costs to rise by 10 percent and unit materials costs to rise by 15 percent in the coming year. Of the $20 variable costs, 25 percent are from labor and 50 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 12 percent. It is also expected that fixed costs will rise by 10 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: A. Compute the volume in units and the dollar sales level…
Brandon Corporation, the maker of a variety of rubber products, is in the midst of a business downturn and has many idle facilities. Nationwide Tire Company has approached Brandon to produce 400,000 oversized tire tubes for $3.00 each. Brandon predicts that its variable costs will be $3.20 each. Its fixed costs, which had been averaging $2.50 per unit on a variety of products, will now be spread over twice as much volume. The president commented, "Sure we will lose $.20 each on the variable costs, but we will gain $1 per unit by spreading our fixed costs over more units. Therefore, we should take the offer because it would gain us $.80 per unit." Brandon currently has a volume of 400,000 units, sales of $1,600,000, variable costs of $1,200,000, and fixed costs of $1,000,000. Required: a. Compute the impact on operating profit if the special order is accepted. b. Based on your calculations, explain why you agree or do not agree with the president. c. Would it be beneficial for Brandon…
h
Chalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 110,200 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,079,500. Production engineers have advised management that they expect unit labor costs to rise by 10 percent and unit materials costs to rise by 15 percent in the coming year. Of the $20 variable costs, 25 percent are from labor and 50 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 12 percent. It is also expected that fixed costs will rise by 10 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: a. Compute the volume in units and the dollar sales level…
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit. a. Compute the break-even point. Break-even point b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point? Note: Round your answer to the nearest whole number. New break-even point units Profitability will be less Profitability will be more units c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
Chalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 183,800 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,087,500. Production engineers have advised management that they expect unit labor costs to rise by 10 percent and unit materials costs to rise by 15 percent in the coming year. Of the $20 variable costs, 25 percent are from labor and 50 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 12 percent. It is also expected that fixed costs will rise by 10 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: a. Compute the volume in units and the dollar sales level…
The fixed costs of Chun Company are $309,000 and the total variable costs for its only product are 45% of the sales price, which is $100. Chun currently sells 7,400 units per month and is looking to sell more. Consider each of the following independently: The marketing manager thinks sales are too low in St. Kitts and Nevis and suggests that sales there would be increased by 120 units per month if an additional $9,000 per month was spent advertising there. What should be the effect on monthly income if this additional advertising is done? (DECREASE BY 2400, DECREASE BY 4975, INCREASE BY 404,600, OR INCREASE BY 329400)

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