Required information[The following information applies to the questions displayed below.]Xcite Equipment Co. manufactures and markets a number of rope products.Management is considering the future of Product XT, a special rope for hang gliding, thathas not been as profitable as planned. Since Product XT is manufactured and marketedindependently of the other products, its total costs can be precisely measured. Nextyear's plans call for a $260 selling price per 100 yards of XT rope. Its fixed costs for theyear are expected to be $304,200, up to a maximum capacity of 550,000 yards of rope.Forecasted variable costs are $182 per 100 yards of XT rope.3. Prepare a contribution margin income statement showing sales, variable costs, andfixed costs for Product XT at the break-even point.XCITE EQUIPMENT CO.Contribution Margin Income Statement (at Break-Even)-$ per unitUnitsContribution margin< PrevS10Product XTTotalof 10wwwNext

Break even point :— It is the point of production where total cost is equal to total revenue. At…

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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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Cox Electric makes electronic components and has estimated the following for a new design of one of its products: Fixed cost = $10,000 Material cost per unit = $ 0.15 Labor cost per unit = $ 0.10 Revenue per unit = $ 0.65 These data are given in the file CoxElectric. Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost rom total revenue. Create a spreadsheet model and construct a 1-way table and determine the breakeven point (use intervals of 10,000 units). Group of answer choices 20,000 - 30,000 10,000 - 20,000 30,000 - 40,000 25,000 30,000 20,000
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"That old equipment for producing oil drums is worn out,” said Jillian Rafuse, president of Hondrich Company. "We need to make a decision quickly." The company is trying to decide whether it should rent new equipment and continue to make its oil drums internally or whether it should discontinue production and purchase them from an outside supplier. The alternatives follow: Alternative 1: Rent new equipment for producing the oil drums for $100,000 per year. Alternative 2: Purchase oil drums from an outside supplier for $17.40 each. Hondrich Company's costs per unit of producing the oil drums internally (with the old equipment) are given below. These costs are based on a current activity level of 40,000 units per year: Direct materials Direct labour Variable overhead Fixed overhead ($1.25 supervision, $1.80 depreciation, and $4.00 general company overhead) Total cost per unit $ 6.00 8.00 3.20 7.05 $24.25 The new equipment would be more efficient and, according to the manufacturer, would…
Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its productionequipment. Cari Heat (CH) is evaluating two options for its production equipment:upgrading or replacing. The company manufactures and sells 7,500 heaters every year, eachpriced at $920. The current production equipment, which was acquired at a cost of$2,150,000, has been in use for just two years and is subject to straight-line depreciation overa five-year useful life. Furthermore, it possesses no terminal disposal value, but it can becurrently sold for $650,000.The following table presents data for the two alternatives:A B C1 Choice Upgrade Replace2 One-time equipment costs $3,500,000 $5,200,0003 Variable manufacturing cost per Heater $180 $904 Remaining useful life of equipment (years) 3 35 Terminal disposal value of equipmentRequired0 01. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade itsproduction line or replace it? 2. Assuming that all other data are as…
Sheffield Corp. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $27 and Sheffield would sell it for $62. The cost to assemble the product is estimated at $19 per unit and the company believes the market would support a price of $66 on the assembled unit. What decision should Sheffield make and why? O Process further because the company will be better off by $16 per unit. O Sell before assembly because the company will be better off by $15 per unit. O Sell before assembly because the company will be better off by $4 per unit. O Process further because the company will be better off by $12 per unit.
This-Test-Is-a-Breeze, Inc. owns a warehouse in Wilmington, DE. The company has decided to use the warehouse for the production of plastic polymers. To do so the company will forgo the option of renting the warehouse to a third party, which would have generated $50,000 of annual cash inflow. The $50,000 that the company is forgoing to pursue another investment is: Sunk Cost Opportunity Cost Erosion Cost Variable Cost
A distributor of fasteners is opening a new plant and considering whether to use a mechanized process or a manual process to package the product. The manual process will have a fixed cost of $36,234 and a variable cost of $2.14 per bag. The mechanized process would have a fixed cost of $84,420 and a variable cost of $1.85 per bag. The company expects to sell each bag of fasteners for $2.75. a) What is the break-even point for the manual process (in units)? b) What is the break-even point for the mechanized process (in units)? c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: 1) Use equations to set profit of manual process equal to mechanized process and solve for quantity; 2) (Excel) If you have a break-even for each process - have only one cell that represents quantity that be used to calculates costs/revenues for each process and use Goal…
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Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28 per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correct decision using the sell or process further decision rule and why? Process further because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $28 per unit. O Process further because profits will be greater by $5 per unit. eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer
Alternate cost structures, uncertainty, and sensitivity analysis. Corporate Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Corporate would pay a commission for its printing at a rate of $20 for every 500 pages printed. The company currently charges $0.20 per page to its customers. The paper used in printing costs the company $0.05 per page and other variable costs, including hourly labor, amount to $0.10 per page. Required: What is the company’s breakeven point under the current leasing agreement? What is it under the new commission-based agreement? For what range of sales levels will Corporate prefer (a) the fixed lease agreement and (b) the commission agreement? Do this question only if you have covered the chapter appendix in your class. Corporate estimates that the company is equally likely to sell 20,000, 30,000,…
Cox Electric makes electronic components and has estimated the following for a new design of one of Its products. Fixed Cost = $15,000 Material Cost per Unit = $0.19 Labor Cost per Unit = $0.14 MY NOTES ASK YOUR TEACHI Revenue per Unit = $0.69 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produce profit is calculated by subtracting the fixed cost and total variable cost from total revenue. If Cox Electric makes 43,100 units of the new product, what is the resulting profit (In whole dollars)? $
AMD is contemplating a decision to either continue producing a unique line of microprocessors, or discontinue production. • The AMD factory manufactures approximately 100,000 of such processors and generates $3,000,000 in revenues and incurs $2,000,000 in variable costs. • AMD estimates that if the product is discontinued ADM would save $ 1,500,000 in fixed manufacturing costs in engineering support and depreciation costs of production equipment. • Should AMD keep or discontinue production of this product line?

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