Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 25E
Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 4,000,000 p per year. The variable cost of each component is 2,000 p, and the components are sold for 3,000 p each. The company sold 5,000 components during the prior year. (p denotes the peso, Argentina’s national currency. Several countries use the peso as their monetary unit. On the day this exercise was written, Argentina’s peso was worth .104 U.S. dollar. In the following requirements, ignore income taxes.)
Required: Answer requirements (1) through (4) independently.
- 1. Compute the break-even point in units.
- 2. What will the new break-even point be if fixed costs increase by 10 percent?
- 3. What was the company’s net income for the prior year?
- 4. The sales manager believes that a reduction in the sales price to 2,500 p will result in orders for 1,200 more components each year. What will the break-even point be if the price is changed?
- 5. Should the price change discussed in requirement (4) be made?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 4,000,000 p per year. The variable cost of each component is 2,000 p, and the components are sold for 3,000 p each. The company sold 5,000 components during the prior year. ( p denotes the peso, Argentina’s national currency. Several countries use the peso as their monetary unit. On the day this exercise was written, Argentina’s peso was worth .104 U.S. dollar. In the following requirements, ignore income taxes.)Required: Answer requirements (1) through (4) independently.1. Compute the break-even point in units.2. What will the new break-even point be if fixed costs increase by 10 percent?3. What was the company’s net income for the prior year?4. The sales manager believes that a reduction in the sales price to 2,500 p will result in orders for 1,200 more components each year. What will the break-even point be if the price is changed?5. Should the…
Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm
machinery. The firm's fixed costs are 4,000,000 p per year. The variable cost of each component is 2,000 p,
and the components are sold for 3,000 peach. The company sold 5,000 components during the prior year.
(p denotes the peso, Argentina's national currency. Several countries use the peso as their monetary unit.
On the day this exercise was written, Argentina's peso was worth 0.104 U.S. dollar. In the following
requirements, ignore income taxes.)
Required:
1. Compute the break-even point in units.
2. What will the new break-even point be if fixed costs increase by 10 percent?
Nashville Co. presently incurs costs of about 12 million Australian dollars (A$) per year for research and development expenses in Australia. It sells the products that are designed each year, and all of the products sold each year are invoiced in U.S. dollars. Nashville anticipates revenue of about $20 million per year, and about half of the revenue will be from sales to customers in Australia. The Australian dollar is presently valued at $1 (1 U.S. dollar), but it fluctuates a lot over time. Nashville Co. is planning a new project that will expand its sales to other regions within the United States, and the sales will be invoiced in dollars. Nashville can finance this project with a 5-year loan by (1) borrowing only Australian dollars, or (2) borrowing only U.S. dollars, or (3) borrowing one-half of the funds from each of these sources. The 5-year interest rates on an Australian dollar loan and a U.S. dollar loan are the same.
If Nashville wants to use the form of financing that will…
Chapter 7 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 7 - Prob. 1RQCh. 7 - What is the meaning of the term unit contribution...Ch. 7 - What information is conveyed by a...Ch. 7 - What does the term safety margin mean?Ch. 7 - Prob. 5RQCh. 7 - Delmarva Oyster Company has been able to decrease...Ch. 7 - In a strategy meeting, a manufacturing companys...Ch. 7 - What will happen to a companys break-even point if...Ch. 7 - Prob. 9RQCh. 7 - How can a profit-volume graph be used to predict a...
Ch. 7 - List the most important assumptions of...Ch. 7 - Why do many operating managers prefer a...Ch. 7 - Prob. 13RQCh. 7 - East Company manufactures VCRs using a completely...Ch. 7 - When sales volume increases, which company will...Ch. 7 - What does the term sales mix mean? How is a...Ch. 7 - A car rental agency rents subcompact, compact, and...Ch. 7 - How can a hotels management use cost-volume-profit...Ch. 7 - How could cost-volume-profit analysis be used in...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Explain briefly how activity-based costing (ABC)...Ch. 7 - Fill in the missing data for each of the following...Ch. 7 - Prob. 24ECh. 7 - Rosario Company, which is located in Buenos Aires,...Ch. 7 - The Houston Armadillos, a minor-league baseball...Ch. 7 - Prob. 27ECh. 7 - Europa Publications, Inc. specializes in reference...Ch. 7 - Tims Bicycle Shop sells 21-speed bicycles. For...Ch. 7 - A contribution income statement for the Nantucket...Ch. 7 - Refer to the income statement given in the...Ch. 7 - Hydro Systems Engineering Associates, Inc....Ch. 7 - Disk City, Inc. is a retailer for digital video...Ch. 7 - CollegePak Company produced and sold 60,000...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Consolidated Industries is studying the addition...Ch. 7 - Serendipity Sound, Inc. manufactures and sells...Ch. 7 - Prob. 41PCh. 7 - The European Division of Worldwide Reference...Ch. 7 - Prob. 43PCh. 7 - Celestial Products, Inc. has decided to introduce...Ch. 7 - Prob. 45PCh. 7 - Jupiter Game Company manufactures pocket...Ch. 7 - Prob. 47PCh. 7 - Condensed monthly income data for Thurber Book...Ch. 7 - Cincinnati Tool Company (CTC) manufactures a line...Ch. 7 - Ohio Limestone Company produces thin limestone...Ch. 7 - Prob. 51PCh. 7 - Colorado Telecom, Inc. manufactures...Ch. 7 - Prob. 53CCh. 7 - Prob. 54CCh. 7 - Niagra Falls Sporting Goods Company, a wholesale...
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
- Spartan Corporation, a U.S. company, manufactures green eyeshades for sale in the United States and Europe. All manufacturing activities take place in Michigan. During the current year, Spartan sold 8,400 green eyeshades to European customers at a price of $ 10.40 each. Each eyeshade costs $4.20 to produce. For each independent scenario, determine the source of the gross income from sale of the green eyeshades. b. Half of Spartan's production assets are located outside the United States.arrow_forwardBandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products,a football helmet for the North American market, requires a special plastic. During the quarter ending June30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost thecompany RM171,000. (The currency in Malaysia is the ringgit, which is denoted here by RM.)According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost ofRM8 per kilogram.Required:1. What cost for plastic should have been incurred to make 35,000 helmets? How much greater or less isthis than the cost that was incurred?2. Break down the difference computed in (1) above into a materials price variance and a materialsquantity variance.arrow_forwardGregg Manufacturing has one plant located in Belgium and another plant located in the United States. The Belgium plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Belgium plant is operating at 70 per cent capacity. In Belgium, the income tax rate is 30 per cent; in the United States, the corporate income tax rate is 35 per cent. The market price of the component is £280 and the Belgium plant's costs to manufacture the component are as follows: Direct materials £30Direct labour 50Variable overhead 12Fixed overhead 56 Refer to Figure 20-10. What is the minimum transfer price that the Belgium division would be willing to accept? Group of answer choices £280 £148 £136 £92arrow_forward
- A glass company produces paperweights for export. The paperweights were sold at P125 each which does not include shipping cost of P20 per paperweights. These paperweights are then marked-up in Japan of P560 per paperweights. The workers in the factory are paid, on the average, the equivalent of P420 per day and it is estimated that the average daily output per worker is 70 paperweights. The cost of the material is estimated at P44 per paperweigh ts. The fixed cost for the operation is P6M a year. The company operates 288 days a year. 1. What is the break-even point?arrow_forwardBandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company's products, a football helmet for the North American market, requires a special plastic. During the quarter ending 30 June, the company manufactured 35,000 helmets, using 32,000 kilograms of plastic in the process. The plastic cost the company RM 208,000. (The currency in Malaysia is the ringgit, which is denoted here by RM.) According to the standard cost card, each helmet should require 0.8 kilograms of plastic, at a cost of RM 7.3 per kilogram. Required: 1. a. What cost for plastic should have been incurred in the manufacture of the 35,000 helmets? b. How much greater or less is this than the cost that was incurred? 2. Break down the difference computed above in terms of a materials price variance and a materials quantity variance.arrow_forwardConner Manufacturing has one plant located in Italy and another plant located in the United States. The Italian plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Italian plant is operating at 75 per cent capacity. In Italy, the income tax rate is 32 per cent; in the United States, the corporate income tax rate is 35 per cent. The market price of the component is £240 and the Italian plant's costs to manufacture the component are as follows: Direct materials £60Direct labour 40Variable overhead 20Fixed overhead 30 Which transfer price would be in the best interest of the overall company? Group of answer choices £240 £100 £150 £120arrow_forward
- Levi Strauss has some of its jeans stone-washed under a contract with independent U.S. Garment Corp. If U.S. Garment's operating cost per machine is $16,000 per year for years 1 and 2 and then it increases by $1000 per year through year 5, what is the equivalent uniform annual cost per machine (years 1-5) at an interest rate of 11% per year? The equivalent uniform annual cost per machine is $arrow_forwardDG Company is the exclusive importer of spare parts of automobile products in Ghana. The parts sell for GHS40 per unit and has variable cost of GHS28 per unit. The company’s fixed expenses are GHS180,000 per year. The company plans to sell 16,000 units of the product in 2016. Required: (i) What is the break-even point in units and Ghana cedis? (ii) What sales level in units and in sales value is required to earn an annual profit of GHS60,000? (iii) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by GHS4 per unit. What is the company’s new break-even point in units and sales value? (iv) Explain the effects of the changes in variable expenses on the break-even of the company.arrow_forward1. Refer to the original data. Assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the tmits. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Comprany accepts the order, by how much will profits increase or decrease for the year? 2. Assume the srune situation as that described in requirement 2, except that the company expects to sell 30,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 5,000 Rets. If the Army's order is accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular…arrow_forward
- Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.00 p per unit. Fixed costs are expected to amount to 60,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 3.00 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 10 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth .104 U.S. dollar.) Required:1. Suppose management alters its current plans by spending an additional amount of 5,000 p on advertising and increases the selling price to 6.00 p per unit. Calculate the profit on 60,000 units.2. The Sorde Company has just approached Corrientes to make a special one-time purchase of 10,000 units. These units would not be sold by the sales…arrow_forwardPlease solve all questionsarrow_forwardCorrientes Company produces a single product in its Buenos Aires plant that currently sells for 6.60 p per unit. Fixed costs are expected to amount to 56,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.00 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 11 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth $0.010 U.S. dollar.) 2. The Sorde Company has just approached Corrientes to make a special one-time purchase of 11,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Corrientes would have to charge per unit on this special order to earn additional profit of 30,800 p.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
GOVERNANCE OF GLOBAL ISSUES THROUGH INTERNATIONAL TRADE AGREEMENTS| IE EXPLAINS; Author: IE University;https://www.youtube.com/watch?v=1hBf1VzO3K8;License: Standard Youtube License