Brief Exercise 18-8

 

Brief Exercise 18-8

Rice Company has a unit selling price of $630, variable costs per unit of $410, and fixed costs of $200,000. Compute the break-even point in units using (a) the mathematical equation and (b) unit contribution margin. (Round answers to 0 decimal places, e.g. 1,225.)

		(a) Mathematical Equation		(b) Unit contribution margin
Break-even point			units

 

 

Brief Exercise 18-10

For Flynn Company, variable costs are 65% of sales, and fixed costs are $186,000. Management’s net income goal is $68,000. Compute the required sales in dollars needed to achieve management’s target net income of $68,000. (Use the contribution margin approach.) (Round answer to 0 decimal places, e.g. 1,225.)

Required sales

$

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Brief Exercise 18-11 For Astoria Company, actual sales are $10,093,000, and break-even sales are $6,692,000. Warning Don’t show me this message again for the assignment Ok   Cancel

 

 

 

Compute the margin of safety in dollars. Margin of safety $ Warning Don’t show me this message again for the assignment Ok   Cancel   Link to Text

 

 

 

 

Compute the margin of safety ratio. (Round margin of safety ratio to 0 decimal places, e.g. 1,225.) Margin of safety ratio

Expand Your Critical Thinking 18-1 Creative Ideas Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Capital-Intensive Labor-Intensive Direct materials $5 per unit $5.50 per unit Direct labor $6 per unit $8.00 per unit Variable overhead $3 per unit $4.50 per unit Fixed manufacturing costs $2,574,000 $1,581,000 Creative Ideas’ market research department has recommended an introductory unit sales price of $33. The incremental selling expenses are estimated to be $512,000 annually plus $2 for each unit sold, regardless of manufacturing method. With the class divided into groups, answer the following. (a) Calculate the estimated break-even point in annual unit sales of the new product if Creative Ideas Company uses the: (Round answers to 0 decimal places, e.g. 5,275.) (1) Capital-intensive manufacturing method. (2) Labor-intensive manufacturing method.   Capital-Intensive Labor-Intensive Break-even point in units   (b) Determine the annual unit sales volume at which Creative Ideas Company would be indifferent between the two manufacturing methods. (Round answer to 0 decimal places, e.g. 5,275.) Annual unit sales volume   units Warning Don’t show me this message again for the assignment Ok   Cancel

 

 

 

Brief Exercise 19-16

The Rock Company produces basketballs. It incurred the following costs during the year.

Direct materials		$14,250
Direct labor		$25,950
Fixed manufacturing overhead		$12,300
Variable manufacturing overhead		$29,800
Selling costs		$21,400

What are the total product costs for the company under variable costing?

Total product costs		$
Exercise 19-17 (Part Level Submission) Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs. Variable Costs per Unit Direct materials $8.18 Direct labor $3.76 Variable manufacturing overhead $6.32 Variable selling and administrative expenses $4.25 Fixed Costs per Year Fixed manufacturing overhead $262,080 Fixed selling and administrative expenses $229,009 Siren Company sells the fishing lures for $27.25. During 2017, the company sold 81,000 lures and produced 96,000 lures. Warning Don’t show me this message again for the assignment Ok   Cancel

 

 

 

(a)   Assuming the company uses variable costing, calculate Siren’s manufacturing cost per unit for 2017. (Round answer to 2 decimal places, e.g.10.50.) Manufacturing cost per unit $ Warning Don’t show me this message again for the assignment Ok   Cancel

Exercise 19-7 PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 80% of its sales and provide a contribution margin ratio of 15%. Brake repair represents 20% of its sales and provides a 35% contribution margin ratio. The company’s fixed costs are $15,710,000 (that is, $78,550 per service outlet). Warning Don’t show me this message again for the assignment Ok   Cancel               Calculate the dollar amount of each type of service that the company must provide in order to break even. (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.) Oil changes $ Brake repair $                 Brief Exercise 22-1 For the quarter ended March 31, 2017, Croix Company accumulates the following sales data for its newest guitar, The Edge: $320,300 budget; $328,900 actual. Prepare a static budget report for the quarter. CROIX COMPANY Sales Budget Report For the Quarter Ended March 31, 2017 Product Line Budget Actual Difference Guitar: The Edge $ $ $     Brief Exercise 22-4 Gundy Company expects to produce 1,292,400 units of Product XX in 2017. Monthly production is expected to range from 70,100 to 110,100 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $7, and overhead $9. Budgeted fixed manufacturing costs per unit for depreciation are $5 and for supervision are $3. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments. (List variable costs before fixed costs.) GUNDY COMPANY Monthly Flexible Manufacturing Budget For the Year 2017 $ $ $ $ $ $ $ $ $ Warning Don’t show me this message again for the assignment Ok   Cancel   Link to Text

 

 

 

20-CD   

CURRENT DESIGNS

Current Designs faces a number of important decisions that require incremental analysis. Consider each of the following situations independently.

Situation 1

Recently, Mike Cichanowski, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to inquire about the possibility of Current Designs producing “floating coolers” for a promotion his company was planning. These coolers resemble a kayak but are about one-third the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip. The company would be interested in purchasing 100 coolers for the upcoming summer. It is willing to pay $250 per cooler. The brewing company would pick up the coolers upon completion of the order.

Mike met with Diane Buswell, controller, to identify how much it would cost Current Designs to produce the coolers. After careful analysis, the following costs were identified.

Direct materials	$80/unit	Variable overhead	$20/unit
Direct labor	$60/unit	Fixed overhead	$1,000

Current Designs would be able to modify an existing mold to produce the coolers. The cost of these modifications would be approximately $2,000.

Instructions

(a)

Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers.

(b)

Discuss additional factors that Mike and Diane should consider if Current Designs is currently operating at full capacity.

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