Gadubhai Santana Rey sees that Business Solutions's line of computer desks and chairs is popular, and she is finding it hard to keep up withdemand. Santana only has 772 direct labor hours available. She must determine the best sales mix given her limited hours Informationabout the desks and chairs followsSelling price per unitVariable costs per unitContribution margin per unitDirect labor hours per unitMaximum demand per quarterContribution margin per unitDirect labor hours per unitContribution margin per direct labor hourMaximum number of units to be soldHours required to produce maximum unitsDesksFor most profitable sales mix$ 939.00420.00$ 519.00Required:Determine the best sales mix and the contribution margin the business will earn at that sales mix (Round per unit amounts to 2decimal places.)Hours dedicated to the production of each productUnits produced for most profitable sales mixContribution margin per unitTotal contribution margin4 hours166 desks$SDesksChairs$427.75280.00$147.75519.00 $Desks129.75 $4Desks1666643 hours48 chairs664ChairsThe company does not have enough hours to fill maximum demand.147.7549.25Chairs48144ChairsTotalTotal8084772

Contribution margin = Contribution margin is basically the difference between sales revenue and…

Answered: Santana Key sees that Business…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 1CE: Ventana Window and Wall Treatments Company provides draperies, shades, and various window...

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Subject :- Accounting
Howard Cooper, the president of Jordan Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 3. Standard rate and variable costs Service rate per hour $ 84.00 Labor cost 33.00 Overhead cost 6.60 Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative 3.50 $517,000 145,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 31,000 hours of services in Year 3. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Jordan charges customers $79 per hour, the firm can achieve 39,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same…
I need help with this one please thank you.
The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.
Ventana Window and Wall Treatments Company provides draperies, shades, and various window treatments. Ventana works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Ventanas income statement for last year is as follows: Ventana wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year. Required: 1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round the percentage to two significant digits.) 2. A customer orders draperies and shades for a remodeling job. The job will have the following costs: What is the price that Ventana will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.) 3. What if Ventana wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round the percentage to two significant digits.) What is the bid price Ventana will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.)
Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incremental fixed costs would be and how many radios must be sold to cover these costs. In response, Betty Johnson, the marketing manager, gathered data for the current products to help in projecting overhead costs for the new product. The overhead costs based on 30,000 direct labor hours follow. (The high-low method using direct labor hours as the independent variable was used to determine the fixed and variable costs.) All depreciation. The following activity data were also gathered: Betty was told that a plantwide overhead rate was used to assign overhead costs based on direct labor hours. She was also informed by engineering that if 20,000 radios were produced and sold (her projection based on her marketing study), they would have the same activity data as the recorders (use the same direct labor hours, machine hours, setups, and so on). Engineering also provided the following additional estimates for the proposed product line: Upon receiving these estimates, Betty did some quick calculations and became quite excited. With a selling price of 26 and just 18,000 of additional fixed costs, only 4,500 units had to be sold to break even. Since Betty was confident that 20,000 units could be sold, she was prepared to strongly recommend the new product line. Required: 1. Reproduce Bettys break-even calculation using conventional cost assignments. How much additional profit would be expected under this scenario, assuming that 20,000 radios are sold? 2. Use an activity-based costing approach, and calculate the break-even point and the incremental profit that would be earned on sales of 20,000 units. 3. Explain why the CVP analysis done in Requirement 2 is more accurate than the analysis done in Requirement 1. What recommendation would you make?
Kelson Sporting Equipment, Inc., makes two types of baseball gloves: a regular model and a catchers model. The firm has 900 hours of production time available in its cutting and sewing department, 300 hours available in its finishing department, and 100 hours available in its packaging and shipping department. The production time requirements and the profit contribution per glove are given in the following table: Assuming that the company is interested in maximizing the total profit contribution, answer the following: a. What is the linear programming model for this problem? b. Develop a spreadsheet model and find the optimal solution using Excel Solver. How many of each model should Kelson manufacture? c. What is the total profit contribution Kelson can earn with the optimal production quantities? d. How many hours of production time will be scheduled in each department? e. What is the slack time in each department?
Curl is entering the professional hairdryer market. Research shows that their customers wish to pay S307 or less for each dryer. The estimated cost per unit for each dryer is $160 and the target operating income per unit is $16. The management of Curl is considering the use of the cost-plus approach rather than the target-cost approach. Cost accountants at the manufacturer have collected the following information: Direct Materials /unit 50 Direct labor/unit 30 Variable overhead 30 Fixed costs annually 206,250 Estimated production for year one 3,750 1. Do you think that it's a good idea for Curl to use the cost-plus approach to price the hairdryer? 2. What strategies could Curl's management use to make a profit if the company insisted on using the cost-plus approach to price the hairdryer?
Howard Cooper, the president of Walton Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 1: Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost Expected fixed costs. Facility maintenance Selling, general, and administrative $ 65.00 30.00 5.65 3.40 $ 316,000 120,000 Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 29,000 hours of services in Year 1. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Walton charges customers $60 per hour, the firm can achieve 34,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same…
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's products appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required 1 Required 2 Required 3 Recliner $ 1,184 $ 800 Complete this question by entering your answers in the tabs below. Additional contribution margin per hour Required: 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for…
Maggie Co manufactures two video consoles: handheld and home. The handheld are smaller and less expensive than the home consoles. Since the intro of the home model profits have been steadily declining. Management believes it is because of the inaccurate allocation of costs to the products, particularly since the volume of home console sales have been increasing. Upon investigation, you find that overhead cost is currently assigned to products based on their direct labor costs. Data showed that overhead last year was $1,440,000 based on 28,000 handheld consoles and 10,000 home consoles. Direct materials and direct labor costs were as follows: HANDHELD HOME TOTAL Direct Materials $ 750,000 $ 684,000 $ 1,434,000 Direct Labor 1,160,400 439,600 1,600,000 Management, after a careful study, has determined that overhead are caused by three cost drivers. These cost drivers and their costs for last year are as follows: COST DRIVER ASSIGNED COSTS…
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's products appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required 1 Recliner $ 1,260 $ 900 Required 2 6 hours Required 3 Complete this question by entering your answers in the tabs below. Sofa Required: 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $50 per…

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