Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 18, Problem 40P
Olin Company manufactures and distributes carpentry tools. Production of the tools is in the mature portion of the product life cycle. Olin has a sales force of 20. Salespeople are paid a commission of 7 percent of sales, plus expenses of $35 per day for days spent on the road away from home, plus $0.50 per mile. They deliver products in addition to making the sales, and each salesperson is required to own a truck suitable for making deliveries.
For the coming quarter, Olin estimates the following:
On average, a salesperson travels 6,000 miles per quarter and spends 38 days on the road. The fixed marketing and administrative expenses total $400,000 per quarter.
Required:
- 1. Prepare an income statement for Olin Company for the next quarter.
- 2. Suppose that a large hardware chain, MegaHardware, Inc., wants Olin Company to produce its new SuperTool line. This would require Olin Company to sell 80 percent of total output to the chain. The tools will be imprinted with the SuperTool brand, requiring Olin to purchase new equipment, use somewhat different materials, and reconfigure the production line. Olin’s industrial engineers estimate that cost of goods sold for the SuperTool line would increase by 15 percent. No sales commission would be incurred, and MegaHardware would link Olin to its EDI system. This would require an annual cost of $100,000 on the part of Olin. MegaHardware would pay shipping. As a result, the sales force would shrink by 80 percent. Should Olin accept MegaHardware’s offer? Support your answer with appropriate calculations.
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Sunland Diesel owns the Fredonia Barber Shop. He employs 4 barbers and pays each a base rate of $1,440 per month. One of the barbers serves as the manager and receives an extra $520 per month. In addition to the base rate, each barber also receives a commission of $9.15 per haircut.Other costs are as follows.
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$enter a dollar amount rounded to 2 decimal places
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Compute the break-even point in units and dollars.
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Kevin Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base salary of $1,440 per month. One of the
barbers serves as the manager and receives an extra $565 per month. In addition to the base salary, each barber also receives a
commission of $8.50 per haircut.
Other costs are as follows.
Advertising
$250
per month
Rent
$1,100
per month
Barber supplies
$0.35
per haircut
Utilities
$150 per month plus $0.15 per haircut
Magazines
$35
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Kevin currently charges $15.00 per haircut.
Chapter 18 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 18 - Define price elasticity of demand. Give an example...Ch. 18 - What are the features of a perfectly competitive...Ch. 18 - How do you calculate the markup on cost of goods...Ch. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - What is price discrimination? Is it legal?Ch. 18 - Prob. 8DQCh. 18 - Prob. 9DQCh. 18 - Suppose that Alpha Company has four product lines,...
Ch. 18 - How does absorption costing differ from variable...Ch. 18 - What are some advantages and disadvantages of...Ch. 18 - Prob. 13DQCh. 18 - Prob. 14DQCh. 18 - Describe the product life cycle. How do unit-level...Ch. 18 - Ventana Window and Wall Treatments Company...Ch. 18 - Kaune Food Products Company manufactures canned...Ch. 18 - Pattison Products, Inc., began operations in...Ch. 18 - Refer to Cornerstone Exercise 18.3. Required: 1....Ch. 18 - Saginaw Company is a garden products wholesale...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Refer to Cornerstone Exercise 18.6. Required: 1....Ch. 18 - Budgeted unit sales for the entire countertop oven...Ch. 18 - Prob. 10ECh. 18 - Prob. 11ECh. 18 - Prob. 12ECh. 18 - Prob. 13ECh. 18 - Many different businesses employ markup on cost to...Ch. 18 - Flaherty, Inc., has just completed its first year...Ch. 18 - During its first year of operations, Snobegon,...Ch. 18 - Prob. 17ECh. 18 - Otero Fibers, Inc., specializes in the manufacture...Ch. 18 - Data for Torleson Company are as follows:...Ch. 18 - Eastman, Inc., manufactures and sells three...Ch. 18 - Prob. 21ECh. 18 - The following information pertains to three...Ch. 18 - Thebes Company had the following information: What...Ch. 18 - Banwood Company has the following information for...Ch. 18 - Jasmine Companys expected sales were 2,000 units...Ch. 18 - Prob. 26PCh. 18 - Snyder Company produced 90,000 units during its...Ch. 18 - The following information pertains to Vladamir,...Ch. 18 - Jellison Company had the following operating data...Ch. 18 - San Mateo Optics, Inc., specializes in...Ch. 18 - Haysbert Company provides management services for...Ch. 18 - Sulert, Inc., produces and sells gel-filled ice...Ch. 18 - Prob. 33PCh. 18 - Dana Baird was manager of a new Medical Supplies...Ch. 18 - Bill Fremont, division controller and CMA, was...Ch. 18 - Dantrell Palmer has just been appointed manager of...Ch. 18 - Prob. 37PCh. 18 - Porter Insurance Company has three lines of...Ch. 18 - Porter Insurance Company has three lines of...Ch. 18 - Olin Company manufactures and distributes...Ch. 18 - Shannon, Inc., has two divisions. One produces and...Ch. 18 - Prob. 42P
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