Sunland Company produces face cream. Each bottle of face cream costs $11 to produce and can be sold for $18. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $17 each. Sunland Company could sell the sunscreen bottles for $25 each. Face cream must be processed further because its profit is $8 each. Face cream must not be processed further because it decreases profit by $17 each. Face cream must not be processed further because costs increase more than revenue. Face cream must be processed further because it increases profit by $7 each.

Sunland Company produces face cream. Each bottle of face cream costs $11 to produce and can be sold for $18. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $17 each. Sunland Company could sell the sunscreen bottles for $25 each. Face cream must be processed further because its profit is $8 each. Face cream must not be processed further because it decreases profit by $17 each. Face cream must not be processed further because costs increase more than revenue. Face cream must be processed further because it increases profit by $7 each.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6EA: Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in...

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Coronado Industries produces face cream. Each bottle of face cream costs $11 to produce and can be sold for $15. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $16 each. Coronado Industries could sell the sunscreen bottles for $21 each. Face cream must not be processed further because costs increase more than revenue. Face cream must be processed further because its profit is $5 each. Face cream must not be processed further because it decreases profit by $16 each. Face cream must be processed further because it increases profit by $4 each.
Coronado Makeup produces face cream. Each bottle of face cream costs $12 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. Coronado Makeup could sell the sunscreen bottles for $23 each. What should Coronado Makeup do? Face cream must be further processed because it increases operating income by $1 each. O Face cream must not be further processed because incremental revenue is less than incremental processing costs. O Face cream must be further processed because its operating income is $9 each. Face cream must not be further processed because it decreases operating income by $3 each.
Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in the production of the boxed lunches. The costs to make the cookies are: A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased, 10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?
Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
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A manufacturing firm is making auto parts. The machine operators do the packaging and fill the shipping boxes. Each box should contain 60 parts, but the operators fill the boxes by eye, so the average parts per box is 63. Each auto part costs $1. The company realizes that they are wasting parts by overfilling the boxes and decides to automate the packaging which reduces the average parts per box to 60. The equipment would cost $65,000 and SL depreciation with 7-year depreciable life and $10,000 salvage value would be used. Cost of maintaining the equipment is $8,000 annually. The firm manufactures 800K auto parts each year. The combined federal and state incremental tax rate is 30%. Assume a 7-year analysis period and MARR of 10%. 1. What is the after-tax present worth? 2. What is the after-tax payback period? (No-return payback period)
Crystal Clear Products produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-cumfilter that only purifies water meant for drinking. The unit that attaches to the faucet is sold for $90 and has variable costs of $25. The pitcher-cum-filter sells for $110 and has variable costs of $20. Crystal Clear sells two faucet models for every three pitchers sold. Fixed costs equal $1,200,000. Q1. What is the breakeven point in unit sales and dollars for each type of filter at the current sales mix?
Crystal Clear Products produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-cumfilter that only purifies water meant for drinking. The unit that attaches to the faucet is sold for $90 and has variable costs of $25. The pitcher-cum-filter sells for $110 and has variable costs of $20. Crystal Clear sells two faucet models for every three pitchers sold. Fixed costs equal $1,200,000. Q1. Crystal Clear is considering buying new production equipment. The new equipment will increase fixed cost by $208,000 per year and will decrease the variable cost of the faucet and the pitcher units by $5 and $10, respectively. Assuming the same sales mix, how many of each type of filter does Crystal Clear need to sell to break even?
A company produces wooden tables. The company has fixed costs of $1600, and it costs an additional $50 per table. The company sells the tables at a price of $157 per table. If the company needs to earn a profit of $7200, how much money in costs should it be prepared to cover? It should be prepared to cover Round to the nearest whole number.
Sammy Co. currently sells 1,000 units of product M for P2 each. Variable costs are P1.50. A discount store has offered P1.70 per unit for 400 units of product M. The managers believe that if they accept the special order, they will lose some sales at the regular price. Determine the number of units they could lose before the order become unprofitable
Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 615 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.14 for each plastic tub. Dairymaid has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairymaid could further process each batch of plain yogurt into 13,120 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairymaid would sell each individual portion for $0.40. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt into…