[The following information applies to the questions displayed below.j The following information is available for Fairmount Industries from year 1 operations: Sales revenue (47,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) $ 1,615,000 $ 242,000 547,000 329,000 162,000 173,000 43,000 164,000 16,000 $ 1,676,000 $ (61,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $24,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
[The following information applies to the questions displayed below.j The following information is available for Fairmount Industries from year 1 operations: Sales revenue (47,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) $ 1,615,000 $ 242,000 547,000 329,000 162,000 173,000 43,000 164,000 16,000 $ 1,676,000 $ (61,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $24,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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