**Rippey Corporation Unit Cost Analysis and Special Order Considerations**Rippey Corporation manufactures a single product with the following unit costs for a production run of 5,000 units:- **Direct materials:** $60- **Direct labor:** $30- **Factory overhead (40% variable):** $90- **Selling expenses (60% variable):** $30- **Administrative expenses (20% variable):** $15**Total cost per unit:** $225### Special Order DetailsA company recently approached Rippey Corporation with a proposal to purchase 1,000 units at a price of $225 each. Currently, these units are sold to dealers for $412.50 each. Rippey Corporation has the capacity to produce these additional 1,000 units, and accepting the special order would not incur any extra selling expenses.### Required Analysis**A. Profit Calculation on Original 5,000 Units:**- Determine the profit earned by Rippey Corporation on the original order of 5,000 units.**B. Special Order Decision:**- Decide whether Rippey Corporation should accept the special order if the goal is to maximize short-run profits.- Analyze the impact on income from accepting the special order.**C. Pricing Strategy for Desired Profit Increase:**- Calculate the minimum price Rippey Corporation should set for the special order to achieve an increased profit of $7,500. Round this price to the nearest cent.

The profit is calculated as difference between revenue and total expenses. The special order would…

Answered: Rippey Corporation manufactures a…

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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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?
Alpha Company currently manufactures and sells 1,000 units of a single product. The following data are per unit costs for 1,000 units: Direct materials £2,400 Direct labour 960 Factory overhead (30% variable) 1,800 Selling expenses (50% variable) 900 Administrative expenses (10% variable) 840 Total per unit £6,900 Recently, Tango Company approached Alpha Company about buying 100 units for £5,100 each. Currently, the model is sold to dealers for £7,800. Assume there is additional capacity for 60 more units and the company has to reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customers. What is the net income if the special order of 100 units is accepted? a. £831,960. b. £876,960. c. £1,011,600. d. £900,000.
Martinez Products manufactures a line of desk chairs. Martinez's production operations are divided into two departments — Department 1 and Department 2. The company uses a process costing system. Martinez incurred the following costs during the year to produce 26,300 chairs: Department 1 $860,500 Department 2 $295,000 If Martinez sells 22,700 chairs during the year, what will be the cost per chair produced? (Round your answer to two decimal places.) A. $37.91 B. $50.90 C. $43.94 D. 32.72
Chip Jones ahoy manufactures the cloth for sails. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year. The following information relates to current production: $175 Sales price per unit Variable costs per unit: Manufacturing Selling and administrative Total fixed costs: Manufacturing Selling and administrative LEFE $62 $20 $700,000 $250,000 Assume that a special pricing order is accepted for 5600 sails at a sales price of $150 per unit. This special order requires both variable manufacturing and variable selling and administrative costs, as well as incremental fixed costs of $400,000. What will be the impact on operating income? Operating income decreases by $380,800.
Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the motor used to power the scooter, but is considering buying the motor from an outside supplier. The manufacturing costs for Riders to make 20,000 motors are as follows: Cost per motor Direct material $28.50 Direct labor $13.25 Overhead $18.00 An outside supplier offers to supply Riders with all the motors it needs at $55.00 per unit. If Riders buys the motors from the supplier, it will still incur 80% of its overhead costs. Based on the above information, the financial advantage (disadvantage) of buying the 20,000 motors from the outside supplier is: a. ($265,000) b. None of the other answers are correct c. $95,000 d. ($193,000) e. $23,000
The machining division of ITA International has a capacity of 2,000 units. Its sales and cost data are: Selling price per unit $75 Variable manufacturing costs per unit 20 Variable selling costs per unit 3 Total fixed manufacturing overhead 175,000 The machining division is currently selling 1,800 units to outside customers, and the assembly division of ITA International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If the assembly division is currently buying from an outside supplier at $72 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price? The company profits would by $
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Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $130,000, which includes fixed costs of $90,000 and variable costs of $40,000. The company can buy the part from an outside supplier for $3.30 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $179,000 profit. If Harvey Automobiles makes the part, what will its operating income be? $179,000 greater than if the company bought the part $49,000 greater than if the company bought the part $49,000 less than if the company bought the part $79,000 greater than if the company bought the part
Liguanea Pharmaceuticals Limited (LPL) currently sells a product the “sovereign” for $2200. This price is based on annual demand. Analysis indicates that if the company increase the price by $100 annual demand will fall by 400 units. At the current price 4,000 units are demanded. The product has the following cost structure per unit: Direct material $225 Direct labour $75 Direct expenses $150 Variable overheads $90 Fixed overheads $300 Variable selling expense $60 Fixed selling expenses $450 Management wants to know the optimal production quantity and its maximum profits. Determine the price equation Determine the optimal price and quantity Determine the optimal profits.
Mainstay Auto uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit. If Mainstay Auto makes the part, what will its operating income be? Select one: a. $150,000 greater than if the company bought the part b. $30,000 greater than if the company bought the part c. $30,000 less than if the company bought the part d. $54,000 greater than if the company bought the part e. $54,000 less than if the company bought the part
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball Is manufactured In a small plant that relles heavly on direct labor workers. Thus, varlable expenses are high, totallng $15.00 per ball, of which 60% Is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: $ 1,450,000 Sales (58,800 balls) variable expenses Contribution margin Fixed expenses 870,000 580,000 374,000 Net operating income 206,000 Required: 1. Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per ball. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio and the break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable…
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