Indicate with reasons what the level of production and the

Assignment Help Accounting Basics

Reference no: EM13482528

Zimmerman Manufacturing limited produces and sells one product, a three foot Canadian flag. During 20X6 the companymanufactured and sold 50,000 flags at $26.00 each. Existing production capacity is 60,000 flags per year.

In formulating the 20X7 budget, magament isfaced with several decisions concerning product pricing andoutput. The following information is available.

1) A market survey shows that the sales volume depends on thesales price. For each $1drop in selling price, sales volume wouldincrease by 10,000 flags.

2) The companys expected cost structure for 20X7 is asfollows

a) Fixedcost (regardless of production or sales activities),$360,000
b) Variable cost(including production, selling, and administrative expenses)$15

3) To increase annual capacity form the present 60,000 to90,000 flags, additional investment for plant building and equipment and the like of $500,000 would be necessary. The estimated average life of the investment would be 10 years, so the fixed costs would increase by an average of $50,000 per year. (expansion of less than 30,000 additional units of capiticy would cost sightly less than $50,000

Indicate with reasons what the level of production and the selling price should be for the coming year. Also indicate wheterthe company should approve the plant expansion. Show calculations. Ignore income tax considerations and the time value of money.

Reference no: EM13482528

Questions Cloud

What are the advantages and disadvantages of setting a : spruce enterprises operates a chain of lumber stores. in 2008 corporate management examined industry-level data

You compare the cancelled checks with the entries in the : the malamura company deposits all receipts in the bank and makes all payments by check. on november 30 its cash account

A 10-year service agreement with quality maintenance : on january 1 2013 nrc credit corporation leased equipment to brand services under a direct financing lease designed to

Assuming that the books have not been closed what are the : a partial trial balance of julie hartsack corporation is as follows on december 312008.dr. cr.supplies on hand

Indicate with reasons what the level of production and the : zimmerman manufacturing limited produces and sells one product a three foot canadian flag. during 20x6 the

Being a marketing manager of a pharmaceutical company at : being a marketing manager of a pharmaceutical company at domestic scale list down the core competencies of your firm

Calculate i ending inventory ii cost of goods sold iii : you have the following information for company xyz for themonth ended june 30 2007. company xyz uses a periodic method

From the following bank statement please 1 complete the : from the following bank statement please 1 complete the bank reconciliation for ricks deli and 2 do not provide

Kaizen costing is a method that many japanese companies : kaizen costing is a method that many japanese companies have found effective in reducing costs. from a behavioral point

User Account

All Pages