Reference no: EM131116563
- Break-Even Point and Target Profit Measured in Sales Dollars (Multiple Products). Hi-Tech Incorporated produces two different products with the following monthly data (these data are the same as the previous exercise).
-
|
Cell |
GPS |
Total |
| Selling price per unit |
$100 |
$400 |
|
| Variable cost per unit |
$ 40 |
$240 |
|
| Expected unit sales |
21,000 |
9,000 |
30,000 |
| Sales mix |
70 percent |
30 percent |
100 percent |
| Fixed costs |
|
|
$1,800,000 |
- Assume the sales mix remains the same at all levels of sales.
- Required:
-
Round your answers to the nearest hundredth of a percent and nearest dollar where appropriate. (An example for percentage calculations is 0.434532 = 0.4345 = 43.45 percent; an example for dollar calculations is $378.9787 = $379.)
- Using the information provided, prepare a contribution margin income statement for the month similar to the one in Figure 6.5 "Income Statement for Amy's Accounting Service".
- Calculate the weighted average contribution margin ratio.
- Find the break-even point in sales dollars.
- What amount of sales dollars is required to earn a monthly profit of $540,000?
- Assume the contribution margin income statement prepared in requirement a is the company's base case. What is the margin of safety in sales dollars?
32.Changes in Sales Mix. Hi-Tech Incorporated produces two different products with the following monthly data (these data are the same as the previous exercise).
|
Cell |
GPS |
Total |
| Selling price per unit |
$100 |
$400 |
|
| Variable cost per unit |
$ 40 |
$240 |
|
| Expected unit sales |
21,000 |
9,000 |
30,000 |
| Sales mix |
70 percent |
30 percent |
100 percent |
| Fixed costs |
|
|
$1,800,000 |
Required:
- If the sales mix shifts to 50 percent Cell and 50 percent GPS, would the break-even point in units increase or decrease? Explain. (Detailed calculations are not necessary but may be helpful in confirming your answer.)
- Go back to the original projected sales mix. If the sales mix shifts to 80 percent Cell and 20 percent GPS, would the break-even point in units increase or decrease? Explain. (Detailed calculations are not necessary but may be helpful in confirming your answer.)
Break-Even Point and Target Profit Measured in Sales Dollars (Multiple Products). Hi-Tech Incorporated produces two different products with the following monthly data (these data are the same as the previous exercise).
Cell GPS Total
Selling price per unit $100 $400
Variable cost per unit $ 40 $240
Expected unit sales 21,000 9,000 30,000
Sales mix 70 percent 30 percent 100 percent
Fixed costs $1,800,000
Assume the sales mix remains the same at all levels of sales.
Required
Round your answers to the nearest hundredth of a percent and nearest dollar where appropriate. (An example for percentage calculations is 0.434532 = 0.4345 = 43.45 percent; an example for dollar calculations is $378.9787 = $379.)
a.Using the information provided, prepare a contribution margin income statement for the month similar to the one in Figure 6.5 "Income Statement for Amy's Accounting Service".
b.Calculate the weighted average contribution margin ratio.
c.Find the break-even point in sales dollars.
d.What amount of sales dollars is required to earn a monthly profit of $540,000?
e.Assume the contribution margin income statement prepared in requirement a is the company's base case. What is the margin of safety in sales dollars?
32.Changes in Sales Mix. Hi-Tech Incorporated produces two different products with the following monthly data (these data are the same as the previous exercise).
Cell GPS Total
Selling price per unit $100 $400
Variable cost per unit $ 40 $240
Expected unit sales 21,000 9,000 30,000
Sales mix 70 percent 30 percent 100 percent
Fixed costs $1,800,000
Required:
a.If the sales mix shifts to 50 percent Cell and 50 percent GPS, would the break-even point in units increase or decrease? Explain. (Detailed calculations are not necessary but may be helpful in confirming your answer.)
b.Go back to the original projected sales mix. If the sales mix shifts to 80 percent Cell and 20 percent GPS, would the break-even point in units increase or decrease? Explain. (Detailed calculations are not necessary but may be helpful in confirming your answer.)
33.CVP Sensitivity Analysis (Single Product). Bridgeport Company has monthly fixed costs totaling $200,000 and variable costs of $40 per unit. Each unit of product is sold for $50. Bridgeport expects to sell 30,000 units each month (this is the base case).
Required:
For each of the independent situations in requirements b through d, assume that the number of units sold remains at 30,000.
a.Prepare a contribution margin income statement for the base case.
b.Refer to the base case. What would the operating profit be if the unit sales price increases 10 percent?
c.Refer to the base case. What would the operating profit be if the unit variable cost decreases 20 percent?
d.Refer to the base case. What would the operating profit be if total fixed costs decrease 20 percent?22.Make-or-Buy Decision. Coffee Mugs, Inc., currently manufactures ceramic coffee mugs. Management is interested in outsourcing production to a reputable manufacturing company that can supply the cups for $2 per unit. Coffee Mugs produces 100,000 mugs each year. Variable production costs are $0.80 and annual fixed costs are $150,000. If production is outsourced, all variable costs and 40 percent of annual fixed costs will be eliminated.
Perform differential analysis using the format presented in Figure 7.2 "Make-or-Buy Differential Analysis for Best Boards, Inc." and explain which alternative is best, Alternative 1 (producing internally) or Alternative 2 (outsourcing).
24.Customer Decision. Consulting Group LLC has two customers. Customer One generates $150,000 in income afterdirect fixed costs are deducted, and Customer Two generates $200,000 in income after direct fixed costs are deducted.Allocated fixed costs total $300,000 and are assigned 30 percent to Customer One and 70 percent to Customer Two based on several different cost drivers. Total allocated fixed costs remain the same regardless of how these costs are assigned to customers.
Calculate the amount of allocated fixed costs to be assigned to each customer, and determine the profit or loss for each customer. Should Consulting Group drop Customer Two? Explain.
- 29.Net Present Value Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000. The company's required rate of return is 11 percent.
-
Required:
- Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.
- Find the net present value of this investment using the format presented in Figure 8.2 "NPV Calculation for Copy Machine Investment by Jackson's Quality Copies".
- Should the company purchase the blueprint machine? Explain.
Net Present Value Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000.
The company's required rate of return is 11 percent.
Required:
a.Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.
b.Find the net present value of this investment using the format presented in Figure 8.2 "NPV Calculation for Copy Machine Investment by Jackson's Quality Copies".
c.Should the company purchase the blueprint machine? Explain.
30.Internal Rate of Return Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000. The company's required rate of return is 11 percent (this is the same data as the previous exercise).
Required:
a.Use trial and error to approximate the internal rate of return for this investment proposal. Round to the nearest dollar.
b.Should the company purchase the blueprint machine? Explain.
31. Payback Period Calculation. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000 (this is the same data as the previous exercise). Determine the payback period for this investment using the format shown in Table 8.1 "Calculating the Payback Period for Jackson's Quality Copies".
33.CVP Sensitivity Analysis (Single Product). Bridgeport Company has monthly fixed costs totaling $200,000 and variable costs of $40 per unit. Each unit of product is sold for $50. Bridgeport expects to sell 30,000 units each month (this is the base case).
Required:
For each of the independent situations in requirements b through d, assume that the number of units sold remains at 30,000.
- Prepare a contribution margin income statement for the base case.
- Refer to the base case. What would the operating profit be if the unit sales price increases 10 percent?
- Refer to the base case. What would the operating profit be if the unit variable cost decreases 20 percent?
- Refer to the base case. What would the operating profit be if total fixed costs decrease 20 percent?
Internal Rate of Return Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000. The company's required rate of return is 11 percent (this is the same data as the previous exercise).
Required:
- Use trial and error to approximate the internal rate of return for this investment proposal. Round to the nearest dollar.
- Should the company purchase the blueprint machine? Explain.
Payback Period Calculation. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000 (this is the same data as the previous exercise). Determine the payback period for this investment using the format shown in Table 8.1 "Calculating the Payback Period for Jackson's Quality Copies".