Reference no: EM1371714
Poole Company has collected the following data after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $285,000; administrative expenses $280,000 (20% variable and 80% fixed); manufacturing overhead $360,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.
Hint:
Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.
Instructions
(a) Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.)
(b) Compute the break-even point in units and sales dollars for the first year.
(c) The company has a target net income of $310,000. What is the required sales in dollars for the company to meet its target?
(d) If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?
(e) The company is considering a purchase of equipment that would reduce its direct labor costs by $104,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $360,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $240,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break-even point in sales dollars. Comment on the effect each of management's proposed changes has on the break-even point.
|
Determine the transfer coefficients
: Two identical company's save money from polluting. A company's marginal savings from emitting an amount are given by 10 - 2e. The two firms differ in their impact on ambient pollution concentrations.
|
|
Arguments against permits
: It is argued that Africa should endorse hunting, charging big fees for permits to kill animals
|
|
Prepare a presentation on death of a salesman
: Explain what is the underlying theme developed throughout the play- and how do the elements of the drama (characters, setting/staging, plot, structure, style, imagery, etc) reflect this?
|
|
Anheuser busch inbev joining
: AB acted as a well-managed business that takes actions necessary to remain competitive in a competitive market.
|
|
Compute break-even point and margin of safety ratio
: Poole Company has collected the following data after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000; direct materials $511,000; direct labor $285,000;
|
|
Persuasive essay
: Suppose that you have been invited to speak to an assembly, athletic players meeting or other group at your former high school. You are talking about your career and what you have achieved.
|
|
Competitive environment
: A company operating in a purely competitive environment is faced with a market price of $250. The company total cost function (short run) is
|
|
Maximizing the profit of recycling
: AMS recently instituted an in-house reprocessing program. The profits of this program include not only the benefits to the environment of recycling but also the goodwill generated by AMS's leadership in this area.
|
|
Efficient amount of pollution control
: The Environment Ministry in Japan proposed new carbon tax in order to meet Japan obligations to decrease carbon dioxide emissions under Kyoto Treaty.
|