Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 10, Problem 8P
The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales—24,000 units
Selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit.
Required:
- 1. Calculate the selling price per unit. (Hint: Let “X” equal the selling price and express selling expense as a percentage of “X.”)
- 2. Prepare an absorption costing income statement for the year ended December 31, 2016.
- 3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory
overhead are all fixed but other costs are fully variable.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
[The following information applies to the questions displayed below.]
Charlevoix Cases makes mobile phone cases. The company has collected the following price and cost characteristics:
Sales price
Variable costs
Fixed costs
$ 12.00 per case
5.50 per case
391,950 per year
Assume that the company plans to sell 75,300 units annually. Consider requirements (b), (c), and (d) independently of each other.
Required:
a. What will be the operating profit?
b. What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent?
Note: Do not round intermediate calculations.
c. What is the impact on operating profit if variable costs per unit decrease by 20 percent? Increase by 10 percent?
Note: Do not round intermediate calculations.
d. Suppose that fixed costs for the year are 20 percent lower than projected and variable costs per unit are 20 percent higher tha
projected. What impact will these cost changes have on operating profit for the year? Will profit…
Two alternative machines will produce the same product, but one is capable of higher quality work, which can be expected to return greater revenue. The following are relevant data. Determine
which is the better alternative, assuming repeatability and using SL. depreciation, an income-tax rate of 26%, and an after-tax MARR of 11%.
Capital investment
Life
Calculate the AW value for the Machine A
AWA(11%) 5 (Round to the nearest dollar)
Terminal BV (and MV)
Annual receipts
Annual expenses
Machine A
$18,000
11 years
$4,000
$157,000
$129,000
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year.
Machine
$29,000
6 years
50
$178,000
$164,000
Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows:
Year
NOI
1
$ 1,030,000
2
1,030,000
3
1,030,000
4
1,210,000
5
1,260,000
6
1,310,000
7
1,349,000
8
1,389,170
A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required:
a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…
Chapter 10 Solutions
Principles of Cost Accounting
Ch. 10 - What is the difference between absorption costing...Ch. 10 - Distinguish between product costs and period...Ch. 10 - What effect will applying variable costing have on...Ch. 10 - What are the advantages and disadvantages of using...Ch. 10 - Prob. 5QCh. 10 - What is the difference between gross margin and...Ch. 10 - Why are there objections to using absorption...Ch. 10 - What are common costs?Ch. 10 - How is a contribution margin determined, and why...Ch. 10 - What are considered direct costs in segment...
Ch. 10 - What is cost-volume-profit analysis?Ch. 10 - Prob. 12QCh. 10 - What steps are required in constructing a...Ch. 10 - What is the difference between the contribution...Ch. 10 - What impact does income tax have on the break-even...Ch. 10 - Define differential analysis, differential...Ch. 10 - Prob. 17QCh. 10 - Prob. 18QCh. 10 - What are distribution costs?Ch. 10 - What is the purpose of the analysis of...Ch. 10 - In cost analysis, what determines which costs...Ch. 10 - Yellowstone Fabricators uses a process cost system...Ch. 10 - Using the information presented in E10-1, prepare...Ch. 10 - The chief executive officer of Acadia, Inc....Ch. 10 - The following production data came from the...Ch. 10 - A company had income of 50,000, using variable...Ch. 10 - The fixed overhead budgeted for Ranier Industries...Ch. 10 - Columbia Products Inc. has two divisions, Salem...Ch. 10 - The sales price per unit is 13 for the Voyageur...Ch. 10 - Teton, Inc. sells its only product for 50 per...Ch. 10 - A new product is expected to have sales of...Ch. 10 - Augusta Industries manufactures and sells two...Ch. 10 - A company has sales of 1,000,000, variable costs...Ch. 10 - Prob. 13ECh. 10 - A company has prepared the following statistics...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Redwood Industries needs 20,000 units of a certain...Ch. 10 - Prob. 18ECh. 10 - Biscayne Industries has determined the cost of...Ch. 10 - Roosevelt Enterprises has determined the cost of...Ch. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Arctic Software Inc. has two product lines. The...Ch. 10 - Prob. 7PCh. 10 - The production of a new product required Zion...Ch. 10 - Grand Canyon Manufacturing Inc. produces and sells...Ch. 10 - Prob. 10PCh. 10 - Emerald Island Company is considering building a...Ch. 10 - Royale Aluminum desires an after-tax income of...Ch. 10 - Deuce Sporting Goods manufactures a high-end model...Ch. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 1MCCh. 10 - Denali Company manufactures household products...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Marina Manufacturing is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000 Compute the degree of operating leverage before and after the purchase of the new equipment and interpret your results. (Round answers to 2 decimal places, eg. 15.25) Degree of operating leverage Before After eTextbook and Mediaarrow_forwardKindly answer the three questions below. Thank youarrow_forwardA company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 Calculate NPV of both products (to 1 d.p.) assuming a discount rate of 7%. Which product should be chosen and why?arrow_forward
- Urmila benarrow_forwardA product is currently reported on the balance sheet at a cost of $29. The selling price of the product is currently $30 and disposal costs are $3. If the company had to buy the product today, it would pay $28. The product has a normal profit margin on sales of 30%. What amount should the product be valued at under each of the following methods? Lower of Cost or Market (LCM) Lower of Cost of Net Realizable Value (LCNRV)arrow_forwardA company is planning to manufacture rocking chairs. The fixed cost is $40,000 and the cost pre rocking chair is $80. Each rocking chair will be sold for $180. In the space below, type in the formula for the revenue function, R(x), from the sale of x rocking chairs.arrow_forward
- 1. Should SS upgrade its production line or replace it? Show your calculations 2. Suppose the one-time equipment cost to replace the production equipment is negotiable.All other data are as given previously. What is the maximum one-time equipment cost that SSwould be willing to pay to replace the old equipment rather than upgrade it?arrow_forwardI need help with answers 2,3, and 4. Thank you!arrow_forwardSuppose that a manufacturer can produce a part for $11.00 with a fixed cost of $7,000. Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $13.00, which includes transportation. a. If the anticipated production volume is 1,300 units, compute the total cost of manufacturing and the total cost of outsourcing. b. What is the best decision? a. The total cost of manufacturing is $.arrow_forward
- 1) A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 2, 6, and 3 respectively. MARR is 0.08 per year. D01 D02 OS FIRST COST, $ 138,000 962,000 АОС, $ SV, $ 113,000 70,000 138,000 36,000 352,000 a) Draw the cash flow for all of alternatives. b) Which alternative will be selected on the basis of PW calculation? Why? c) If OS increases 20% each year, which alternative will be more economical (PW method)? d) Which alternative will be selected if AW method is used?arrow_forwardSee picturearrow_forwardsolve a and b based on data in the images provided. a.What are the minimum and maximum transfer prices for the 12,300 batteries needed in the next 6 months that would be acceptable to the Battery and the Auto Divisions? Why are these the minimum and maximum prices? b.What is the projected total operating income for AMP Industries for the next six months if the internal transfer of the 12,300 batteries takes place at $11,280 per unit? What is AMP Industries’ projected total operating income if the internal transfer does not take place? Assume there is no external market for the batteries produced by the Battery Division.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License