Sales of a product toy named Scooby estimated at 80,000 pieces annually with a rate of 6 pu. Its variable mfg costs are 2.50 pu with S&D and general expenses related to Scooby is 59,000 on annual basis. Its fixed manufacturing costs (excluding depreciation) at 45,000 on annual basis. Investment made is 350,000 with related to various moulds & equipment. The equipment have a 3 year life with ending salvage value of 20,000 where it was followed SLM depreciation.The rate of tax will be at 40%. Required: Estimated increase in annual level of net income from the planned manufacture and sale of Scooby toys.

Sales of a product toy named Scooby estimated at 80,000 pieces annually with a rate of 6 pu. Its variable mfg costs are 2.50 pu with S&D and general expenses related to Scooby is 59,000 on annual basis. Its fixed manufacturing costs (excluding depreciation) at 45,000 on annual basis. Investment made is 350,000 with related to various moulds & equipment. The equipment have a 3 year life with ending salvage value of 20,000 where it was followed SLM depreciation.The rate of tax will be at 40%. Required: Estimated increase in annual level of net income from the planned manufacture and sale of Scooby toys.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 2CE

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Question

Investment made is 350,000 with related to various moulds & equipment. The equipment have a 3 year life with ending salvage value of 20,000 where it was followed SLM depreciation.The rate of tax will be at 40%.

Required:

Estimated increase in annual level of net income from the planned manufacture and sale of Scooby toys.

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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