The following are estimates relating to the 2020 budget of Thermo Blast that produces specialized ornaments for the Caribbean: Selling Price-- Variable cost per Ornament- Fixed annual cost----- Nett Profit (After tax)-- Income tax rate------- -$1500 ------$700 ---$120000 -$800000 --25% The mid-year review of the income statement revealed that sales were not at the expected level. For the six months of the year to June 2020, 320 units were sold at the estimated selling price with variable cost as planned. However, the net profit projection for 2020 would not be achieved unless management decisions are made. The following mutually exclusive alternatives were presented to management: a) The selling price should be reduced by $150. This reduction in selling price will allow 1500 units to be sold for the balance of the year. The budgeted fixed cost and variable cost per unit will remain unchanged. b) The variable cost per unit will be reduced by $50 by sourcing less expensive direct material. Also, the selling price will be reduced by $200 and the expected sales for the

The following are estimates relating to the 2020 budget of Thermo Blast that produces specialized ornaments for the Caribbean: Selling Price-- Variable cost per Ornament- Fixed annual cost----- Nett Profit (After tax)-- Income tax rate------- -$1500 ------$700 ---$120000 -$800000 --25% The mid-year review of the income statement revealed that sales were not at the expected level. For the six months of the year to June 2020, 320 units were sold at the estimated selling price with variable cost as planned. However, the net profit projection for 2020 would not be achieved unless management decisions are made. The following mutually exclusive alternatives were presented to management: a) The selling price should be reduced by $150. This reduction in selling price will allow 1500 units to be sold for the balance of the year. The budgeted fixed cost and variable cost per unit will remain unchanged. b) The variable cost per unit will be reduced by $50 by sourcing less expensive direct material. Also, the selling price will be reduced by $200 and the expected sales for the

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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Crane Company has accumulated the following budget data for the year 2022. 1. Sales: 31,100 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour. 3. Inventories (raw materials only): beginning, 10,100 pounds; ending, 15,100 pounds. 4. Selling and administrative expenses: $170,000; interest expense: $30,000. 5. Income taxes: 20% of income before income taxes.
Below are estimates related to Sando's 2022 budget, a company that specializes in crafting unique ornaments for the Caribbean:  Selling Price: $2500  Variable Cost per Ornament: $1625  Fixed Annual Cost: $140,000  Net Profit (After Tax): $600,000  Income Tax Rate: 25% Upon reviewing the income statement mid-year, it was evident that sales did not meet the expected levels. For the first half of the year up to June 2022, 360 units were sold at the projected selling price with variable costs aligning with the plan. However, achieving the projected 2022 net profit appears unlikely without management intervention. Several mutually exclusive options have been presented for consideration: a) Option 1: Reduce the selling price by $180. This adjustment would enable the sale of 1700 units for the remainder of the year. Both the budgeted fixed costs and variable costs per unit will remain unchanged. b) Option 2: Lower the variable cost per unit by $60 by sourcing more cost-effective…
Magnify Corporation manufactures and sells two types of decorative lamps, Knox and Ayer. The following data are available for the year 2020. (Click the icon to view the information.) Calculate (1) the cost of goods sold budget (label it Schedule 7) (2) the operating (nonmanufacturing) costs budget (label it Schedule 8) and (3) the operating income budget for the year ending December 31, 2020. (1). Begin by calculating (1) the cost of goods sold budget (label it Schedule 7) for the year ending December 31, 2020. Schedule 7: Cost of Goods Sold Budget for the Year Ending December 31, 2020 Beginning finished goods inventory, January 1, 2020 Direct materials used Direct manufacturing labor Manufacturing overhead Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory, December 31, 2020 Cost of goods sold Business Function 356,000 72,200 146,400 Marketing Distribution Administration costs (2). Calculate the operating (nonmanufacturing) costs budget…
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