The company is planning to use a new material throughout 2023. This will reducevariable costs by 10%. Fixed costs are expected to remain unchanged.As the factory's output is nearing its annual output capacity of 38,000 units, thecompany plans to increase the selling price by 5%. This will decrease sales volume by20%.Use cost-volume-profit analysis to determine whether the company should proceedwith the plan.

Step 1: To analyze whether the company should proceed with the plan, we can use cost-volume-profit…

Answered: The company is planning to use a new…

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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A new product will cost $750,000 to design, test prototypes, and set up for production. Net revenue the first year is projected to be $225,000. Marketing is unsure whether future year revenues will (a) increase by $25,000 per year as the product’s advantages become more widely known or (b) decrease by 10% per year due to competition. A third pattern of increasing by $25,000 for one year and then decreasing by 10% per year has been suggested as being more realistic. The firm evaluates projects with a 12% interest rate, and it believes that this product will have a 5-year life. Calculate the present worth and rate of return for each scenario.
What is the margin, turnover and ROI if the existing company performs the same next year AND it adds the proposed investment? Paul company has the following data for its most recent year end: Sales $1,400,000 Variable Expenses $756,000 Contribution Margin $644,000 Fixed Expenses $410,000 NOI $234,000 AIso Paul is considering an investment in new equipment that willcost $250,000. The new equipment is projected to produce saIes of$420,000 and have variabIe costs of 60% of sales and fixed costs of$114,000.
3) If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits. Hint: If you expand capacity, you will have to pay additional fixed costs of $25,000. Remember that fixed costs are fixed within the relevant range. If you expand capacity then you are outside this range. If you expand capacity then you can make revenue on 500 additional units at the normal price and would pay variable costs on 500 additional units. Please consider the incremental profit or loss of expanding capacity. The incremental profit is the increase in revenues minus the increase in costs of adding 500 more units. If the incremental profit of expanding capacity is positive then you should do so.
After preparing the original estimates, management determined that its variable manufacturing cost of leaf blowers would increase by 20 percent, and the variable selling cost of hedge clippers could be expected to increase by $1.00 per unit. However, management has decided not to change the selling price of either product. In addition, management has learned that its leaf blower has been perceived as the best value on the market, and it can expect to sell three times as many leaf blowers as each of its other products. Under these circumstances, determine how many units of each product CTC would have to sell in order to break even in 20x2.
Coronado Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Sharon Lee, the company’s sales manager, prepared the following sales forecast for 2022. The forecasted sales prices include a 5% increase in the acoustic guitar price and a 10% increase in the electric guitar price, to cover anticipated increases in raw materials prices. Sales Price 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Acoustic guitar sales $1,250 240 270 310 340 Electric guitar sales $2,100 400 350 320 360 On December 31, 2021, Coronado had 30 acoustic guitars in stock—fewer than the desired inventory level of 96 guitars, based on the following quarter’s sales. The company has budgeted for sales of 240 acoustic guitars in the first quarter of 2023. Prepare the 2022 production budget for acoustic guitars. Production…
Calculate the Margin Of Safety in units and in sales dollars? The President of Benoit is under pressure from shareholders to increase operating income by 50% in 2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this a realistic goal? Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a…
What is the reduction in Variable manufacturing cost

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