The Peterson Corporation manufactures a product that it sells for $73.50. The variable costs are $37.00 per unit and the annual fixed costs are $992,500. Peterson's capacity is 106,500 units per year but is currently only selling 88,500 units per year. This is not expected to change in the future. Peterson was approached to provide 31,500 units as a one-time order for a price of $49.00 per unit. If Peterson accepts the special order,

The Peterson Corporation manufactures a product that it sells for $73.50. The variable costs are $37.00 per unit and the annual fixed costs are $992,500. Peterson's capacity is 106,500 units per year but is currently only selling 88,500 units per year. This is not expected to change in the future. Peterson was approached to provide 31,500 units as a one-time order for a price of $49.00 per unit. If Peterson accepts the special order,

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $62 per unit and fixed costs per year will be $240,000. Assuming sales of 1,200 units, what is the full selling price of a globe with a 0.30 markup? Round to two decimal places.
Exon is selling a commercial heating unit at the price of $100.000 per unit. The variable cost of producing this unit is $75,000. Exon is considering offering credit tems to their customers which would allow payment to be delayed one month. Exon predicts that offering these terms will increase monthly sales from 50 units to 60 units. Exon does not expect the inreased production to change variable cost and Exon does not expect to charge a higher price. The appropiate discount rate is 1% a month The probability of payment that would make Exon indifferent between granting credit and the present policy is
Fixed selling costs are $1,000,000 per year. Variable selling costs of $4 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Faulkland expects to produce only 400,000 units next year. The product normally sells for $40 each. A customer has offered to buy 60,000 units for $30 each. The customer will pay the transportation charge on the units purchased. If Faulkland accepts the special order, the effect on income would be a: a) $60,000 increase. b) $180,000 increase. c) $420,000 increase. d) $600,000 decrease.
Fixed selling costs are $500,000 per year. Variable selling costs of $2 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Southern expects to produce only 400,000 units next year. The product normally sells for $50 each. A customer has offered to buy 50,000 units for $24 each. The customer will pay the transportation charge on the units purchased. If Southern produces the special order, the effect on income would be a a. $650,000 increase b. $650,000 decrease c. $550,000 decrease d. $550,000 increase e. None of the above
The Chimes Clock Company sells a particular clock for $40. The variable costs are $23 per clock and the breakeven point is 230 clocks. The company expects to sell 280 clocks this year. If the company actually sells 430 clocks, what effect would the sale of additional 150 clocks have on operating income? Explain your answer. The sale of an additional 150 clocks would operating income by the amount of The total effect would amount to
BBB Company has capacity to produce 150,000 units a year and sell it for $96 each. The costs of producing and selling 150,000 units are as follows (attached) Required 1. Suppose BBB is currently producing and selling 120,000 units. At this level of production and sales, its fixed costs are the same as given in the preceding table. WWW Company wants to place a onetime special order for 30,000 units at $75 each. Should BBB accept this one-time special order? Show your calculations. 2. Suppose BBB is currently producing and selling 150,000 units. (a) should BBB accept WWW offer one-time special order? Show your calculations. (b) at what price would BBB be indifferent between accepting the special order and continuing to sell to its regular customers at $96 per unit.
An electronics firm is currently manufacturing anitem that has a va riable cost of $.50 per unit and a selling priceof $1.00 per unit. Fixed costs are $14,000. Current volume is30,000 units. The firm can substantially improve the productquality by adding a new piece of equipment at an additional fixedcost of $6,000. Variable cost would increase to $.60, but volumeshould jump to 50,000 units due to a higher-quality product.Should the company buy the new equipment?
ABC company sells its products for $16 per item. The fixed cost of the company are 240000 per year and the variable cost per item is $8. The management has been offered an opportunity to move into a smaller facility, which would lower the fixed cost to 200000 however, the variable cost per item would actually increase to $9 at this new facility management had come to your advice. Please calculate the brake even units required for both of the above scenarios. Give these 2 numbers to management. Then give your recommendations to the management team. As to whether they should move to the new facility or not.