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Company X produces widgets. The following information relates to the its current production: Sale price per unit:
Variable costs per unit:$400
Manufacturing
$240
Marketing and administrative
$70
Total fixed costs:
Manufacturing
Marketing and administrative
$760,000 $230,000
A special sales order request was received for 7400 widgets at a price of $350 per widget. Assuming fixed costs remain unchanged, how would operating income be affected if the special order is accepted? (NOTE: Assume the company has capacity and that regular sales are not affected by the special order.)
To determine how the special order affects operating income, we need to calculate the incremental revenue and incremental costs associated with the order. Here are the steps:Calculate the total revenue from the special order: [ \text{Total Revenue} = \text{Special Order Price per Unit} \times \...
Read MoreWaterbury Inc., manufactures and sells RF17, a specialty raft used for whitewater rafting. In 2021, due to increased competition, Waterbury must reduce its selling price to $315 in order to sell 20,000 units. Total fixed costs is $1,680,000. The company expects to be able to reduce the investment in the division to $2,100,000 but still requires a 20% rate of return on investment. If fixed costs cannot be reduced in this time frame, what is the target variable cost per unit? Remember: enter whole integer numbers without Ks, commas, decimals, $, etc.
Calculate the required return on investment (ROI): [ \text{Required ROI} = \text{Investment} \times \text{Rate of Return} ] [ \text{Required ROI} = $2,100,000 \times 0.20 = $420,000 ]Determine the total revenue needed to achieve the required ROI: [ \text{Total Revenue} = \text{Total Fixed ...
Read MoreCompanies that are considered price-setters usually employ the approach to pricing products.
A. cost-plus pricing
B. percentage pricing
C. target costing
D. cost plus one
A. cost-plus pricing...
Read MoreCompanies that are considered price-takers usually employ the approach to pricing products.
A. cost-plus pricing
B. percentage pricing
C. target costing
D. cost plus one
C. target costing...
Read MoreCompanies that are considered price-takers usually employ the approach to pricing products.
A. cost-plus pricing
B. percentage pricing
C. target costing
D. cost plus one
cost-plus pricing...
Read MoreThe contribution margin income statement of Top of the Crop Coffee for January follows
1. | Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. |
2. | Compute the coffee shop's margin of safety in dollars. |
3. | Use the coffee shop's operating leverage factor (using the . Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. |
Requirement 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed.Be...
Read MoreWhat is the company's contribution margin per unit? Contribution margin percentage? Total contribution margin? | |
2. | What would the company's monthly operating income be if the company sold |
3. | What would the company's monthly operating income be if the company had sales of ? |
4. | What is the breakeven point in units? In sales dollars? |
5. | How many units would the company have to sell to earn a target monthly profit of ? |
6. | Management is currently in contract negotiations with the labor union. If the negotiations fail, direct labor costs will increase by %, and fixed costs will increase by |
7. | Return to the original data for this question and the rest of the questions. What is the company's current operating leverage factor (round to two decimals)? |
8. | If sales volume increases by %, by what percentage will operating income increase? |
9. | What is the company's current margin of safety in sales dollars? What is its margin of safety as a percentage of sales? |
10. | Say the company adds a second size of SD card (512GB in addition to 256GB). A 512GB SD card will sell for ? Is this volume higher or lower than previously needed (in Requirement 5) to achieve the same target profit? Why? |
Requirement 1. What is the company's contribution margin per unit? Contribution margin percentage? Total contribution margin?Begin by identifying the formula. Sales price per unit–Variable cost per unit=Contribution margin per unit Part 2The contribution margin per...
Read MoreRequirement 1. Which lease option is more attractive for the company under its current sales expectations? Calculate the total lease cost under Option A and Option B.Begin by identifying the formula to calculate the total costs. Total fixed expenses (lease)+Total variable expenses (lease)...
Read MoreFirst identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach. (Abbreviations used: Avg. = average, and CM = contribution margin.)(Fixed expenses+Operating income) ÷Weighed-avg. CM per unit=Breakeven sales in ...
Read MoreBegin by identifying the general formula to compute the breakeven sales in units.(Fixed expenses+Operating income) ÷Contribution margin per unit=Breakeven sales in units15...
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