The divisional manager has decided to increase the advertising budget by $250,000. This will increase sales revenues by $1 million. By how much will operating income increase or decrease as a result of this action? Use your answers from part 1 to determine the amount.

The divisional manager has decided to increase the advertising budget by $250,000. This will increase sales revenues by $1 million. By how much will operating income increase or decrease as a result of this action? Use your answers from part 1 to determine the amount.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter1: Introduction To Cost Management

Section: Chapter Questions

Problem 6E: Each of the following scenarios requires the use of accounting information to carry out one or more...

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Kindly, answer the following: a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these changes, what will be the company’s increase or decrease in profit? b. The president is convinced that a 10% reduction in the selling price, combined with an increase of P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes, how much is the company’s expected profit? c. A new package for the product is being considered to induce sales. This package costs P0.60 per unit. Considering the new package cost, how many units would have to be sold each month to earn a profit ofP90,000?
Each of the following scenarios requires the use of accounting information to carry out one or more of the following managerial activities: (1) planning, (2) control and evaluation, (3) continuous improvement, or (4) decision making. a. MANAGER: At the last board meeting, we established an objective of earning an after-tax profit equal to 20 percent of sales. I need to know the revenue that we need to earn in order to meet this objective, given that we have 250,000 to spend on the promotional campaign. Once I have estimated sales in units, we then need to outline a promotional campaign that conforms to our budget and that will take us where we want to be. However, to compute the targeted sales revenue, I need to know the unit sales price, the unit variable cost, and the associated fixed production and support costs. I also need to know the tax rate. b. MANAGER: We have problems with our procurement process. Our accounts payable department is spending 80 percent of its time resolving discrepancies between the purchase order, receiving order, and suppliers invoice. Incorrect part numbers on the purchase orders, incorrect quantities ordered, and wrong parts sent (or the incorrect quantity) are just a few examples of sources of discrepancies. A complete redesign of the process has been suggested, which will allow us to eliminate virtually all of the errors and, at the same time, significantly reduce the number of clerks needed in purchasing, receiving, and accounts payable. This redesign promises to significantly reduce costs, decrease lead time, and increase customer satisfaction. c. MANAGER: This overhead cost report indicates that we have spent significantly more on inspection, purchasing, and production than was budgeted. An investigation has revealed that the source of the problem is faulty components from suppliers. A supplier evaluation has revealed that by selecting five suppliers with the best quality records (out of 15 currently used), the number of defective components will be dramatically reduced, thus producing significant overhead savings by reducing the demand for inspections, reordering, and rework. d. MANAGER: A large local firm has approached me and has offered to sell us one of the components used in our small enginesa component that we are currently producing internally. I need to know costs that we would avoid if this component is purchased so that I can assess the economic merits of this offer. e. MANAGER: Currently, our deluxe lawn mower is losing money. We need to increase profits. I would like to know how much our profits would be if we reduce our variable costs by 50 per mower while maintaining our current sales volume. Also, marketing claims that if we increase advertising expenditures by 1,000,000 and cut prices by 15 percent, we can increase the number of mowers sold by 25 percent. I would like to know which approach offers the most profit, or if a combination of the approaches may be best. f. MANAGER: We are implementing a major quality improvement program. We will be increasing the investment in prevention and detection activities with the expectation of driving down both internal and external failure costs. I expect to see trend reports for all categories of quality costs. I want to see if improving quality really does reduce costs and improve profitability. g. MANAGER: Our engineering design department has proposed a new design for our product. The new design promises to reduce post-purchase costs and, as a consequence, increase market share. I need to know the cost of producing this new design because it uses some new components and requires some different manufacturing processes. I would then like to have a projected income statement based on the new market share and new production costs. The planned selling price will be the same, or maybe even 10 percent lower. Projections based on the two price scenarios would be needed. h. MANAGER: My engineers have said that by redesigning our two main production processes, we can reduce move time by 90 percent and wait time by 85 percent. This would decrease cycle time and virtually eliminate the need to carry finished goods inventories. On-time deliveries would also increase dramatically. This would produce cost savings of nearly 20,000,000 per year. Market share and revenues would also increase. Required: 1. Describe each of the four managerial responsibilities. 2. Identify the managerial activity or activities applicable for each scenario, and indicate the role of accounting information in the activity.
Top management is unhappy with the investment center's return on investment (ROD) It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action 1 2 3 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%) Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $160,000 Reduce average operating assets by 3% Return on Investment Action 1 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, eg. 1.57%) Action 21 Action 31 Save for Later % Return on investment Attempts: 0 of 1 used Submit Answer P
please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 24% each of the last three years. Casey is considering a capital budgeting project that would require a $4,300,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 20%. The project would provide net operating income each year for five years as follows: Sales $ 4,200,000 Variable expenses 1,920,000 Contribution margin 2,280,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 780,000 Depreciation 860,000 Total fixed expenses 1,640,000 Net operating income $ 640,000 Click here to…
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You have been hired by the McClosky Corporation and they manufacture industrial dye. Milestone 3:I. Budgeted Balance SheetJ. Cash BudgetK. Budget Presentation and please address the following questions:(1) The sales manager would like to increase the sales price by 10 next quarter, what will be the projected revenues be for the 2nd quarter. (2) The production manager would like to purchase new equipment for next quarter due to the fact that their competitor has purchased equipment which cost $50,000. Will the company be able to make the purchase or will you need more information?(3) The CEO feels that the cash budget is not necessary, please explain to the CEO why cash budgeting is important to the organization.(4) Please explain the to the management team how a competitor’s actions can affect business planning.
The CEO of XYZ company has $1 million to spend to improve the company's operations. Although the money could be used to create another division, a new budget system is needed to track expenses and create responsibility budget reports. Even when the company earns profit, there are no reports to explain the reasons. Make a recommendation for the way the funds should be used. Defend your position.
91) Toward the end of the fiscal year, the owner of a small company came back from lunch concerned because he had learned that a business targeted to the same customers as his was planning on spending $150,000 on promotion. As soon as he arrived at the office, he called his financial manager and said, "I want to budget $150,000 for next year's promotion." Which method of promotional budgeting did the owner want to use? A) the objective-task method B) the percentage-of-sales method C) the competitive-parity method D) the bottom-up method E) the pull-push method
1. Compute the Springfield club’s return on investment (ROI) 2. Assume that the manager of the club is able to increase sales by $70,000 and that, as a result, net operating income increases by $18,200. Further assume that this is possible without any increase in operating assets. What would be the club’s return on investment (ROI)? 3. Assume that the manager of the club is able to reduce expenses by $14,000 without any change in sales or operating assets. What would be the club’s return on investment (ROI)? In addition of finding the ROI for each question, can you help me also to find the Margin and Turnover value for each question from 1-3 also? Thanks a lot for your help!
On these Excel sheets, you will need to prepare a complete projected income statement in the contribution format for each scenario, in the manner of a flexible budget. The cells will be checked for appropriate formulas, when appropriate. Please highlight the specific answer to the question being posed. Carolina Manufacturing Company has been operating at a loss for several years. A management team has assembled to determine what course of action to take next year to reach profitability. They begin by reviewing the most recent income statement (below). Sales (45,000 units at $15) Less cost of goods sold: Gross margin Less operating expenses Net loss Direct materials Direct labor Manufacturing overhead Carolina Manufacturing Company Income Statement For the Year Ended December 31 Selling expenses Variable Sales commissi Shipping Fixed (advertisi Administrative expenses Variable (billing Fixed (salaries 135,000 117,450 147,750 40,500 8,100 180,000 2,700 72.000 $675,000 400,200 274,800…
A large enterprise has just gained a major contract, which will generate additional income over a two-year period but will also require extra resources. At the same time, however, they are planning to expand into eCommerce sales. What type of budget/s would they need to prepare, and why? What methods could they use to fund the website expansion?
The Martins know that setting up some projected Income Statements are important. They need to look at what the first year of operations might look like and if possible they will need to look at the years thereafter to get an impression of what the long term might look like. RM Purchases: $132,000* (Raw Material Purchases is a part of COGS) Sales Salaries: 80,000 Advertising: 3,000 Travel: 2,000 Revenue: 360,000 Financing Costs: 10,000 Office Lease: 13,000 Depreciation: 38,000 Income Taxes: 22,000 Admin Salary: 40,000 A second financial statement that is key to understanding a business is the Balance Sheet. The Martins have estimated the following accounts to be a part of their initial Balance Sheet. Trade Receivables: $35,000 Cash: 15,000 Short Term Loan: 30,000 Share Capital: 100,000 Long Term Liabilities: 60,000 Property, Plant:…