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
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Textbook Question
Chapter 7, Problem 34P
Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $600,000.
Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.)
Required:
- 1. Calculate Disk City’s break-even point for the current year in number of video disks.
- 2. What will be the company’s net income for the current year if there is a 10 percent increase in projected unit sales volume?
- 3. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $16?
- 4. In order to cover a 30 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Disk City establish for the coming year?
- 5. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1), (2), and (3) above. Show how the solution will change if the following information changes: the selling price is $17 and the annual fixed costs are $640,000.
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"Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $600,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.).
"Required:
1.Calculate Disk City’s break-even point for the current year in number of video disks.
2.What will be the company’s net income for the current year if there is a 10 percent increase in projected unit sales volume?
3.What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $16?
4.In order to cover a 30 percent increase in…
In order to cover a 20 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Disk City establish for the coming year?
The Bremer Co. manufactures cordless telephones Bremer is planning to implement a JIT production system, which requires annual tooling costs of $150,000. Bremer estimates that the following annual benefits would arise from JIT production.
a. Average inventory will decline by $700,000 from $900,000 to $200,00
b. Insurance, space, materials handling, and setup costs, which currently total $200,00 would decline by 30%
c. The emphasis on quality inherent in JIT system would reduce rework costs by 20% Bremer currently incurs $350,000 on rework.
d. Better quality would eneble Bremer to raise the prices of its products by $3 per unit. Bremer sells $30,000 unit each year.
Bremer required rate of return on inventory investment is 12% per year
Required:
Calculate the net benefit or cost to the Bremer Corporation From implementing a JIT production system.
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...
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