Sweet Nature Corporation manufactures “Sweet ‘n Salty” trail mix. Last month, the company produced and sold 800,000 units and sold them at a price of $4 each. Related information appears below: Item Total Cost Utilities for factory $17,000 Advertising (based on number of website page views) 22,000 Costs for product packaging 125,000 Chocolate pieces and dried fruit 152,800 Wages for factory cleaning staff 275,000 Rent of factory and equipment 350,000 Salaries for office staff 475,000 Wages for production crew 486,000 Insurance on the factory 18,000 Nuts (e.g. peanuts, cashews and almonds) 878,950 Required: a. Identify all costs above as either a product cost (specifically DM, DL or OH) or a period cost (PC). b. The company uses the cost-plus approach to pricing and wants to achieve an approximate profit of 25 percent. Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you recommend to improve its profitability Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $4 per unit. e. For next month, the company is considering whether it should use a higher quality chocolate in its product line. If so, its costs for chocolate would increase by $0.25 per unit. If the change is made, the company anticipates that unit sales will increase by 8 percent. What is the projected net income under this scenario? f. Instead, the company is also considering upgrading their production equipment to improve the packaging process and prolong the product’s shelf life. If so, its costs for rent on equipment would increase by $40,000 and the company anticipates that unit sales will increase by 15,000 units. What is the projected net income under this scenario? g. Would you recommend either course of action in part e or part f? Briefly explain
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Sweet Nature Corporation manufactures “Sweet ‘n Salty” trail mix. Last month, the company produced and sold
800,000 units and sold them at a price of $4 each. Related information appears below:
Item Total Cost
Utilities for factory $17,000
Advertising (based on number of website page views) 22,000
Costs for product packaging 125,000
Chocolate pieces and dried fruit 152,800
Wages for factory cleaning staff 275,000
Rent of factory and equipment 350,000
Salaries for office staff 475,000
Wages for production crew 486,000
Insurance on the factory 18,000
Nuts (e.g. peanuts, cashews and almonds) 878,950
Required:
a. Identify all costs above as either a product cost (specifically DM, DL or OH) or a period cost (PC).
b. The company uses the cost-plus approach to pricing and wants to achieve an approximate profit of 25 percent.
Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you
recommend to improve its profitability
Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and
unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $4 per
unit.
e. For next month, the company is considering whether it should use a higher quality chocolate in its product line. If
so, its costs for chocolate would increase by $0.25 per unit. If the change is made, the company anticipates that
unit sales will increase by 8 percent. What is the projected net income under this scenario?
f. Instead, the company is also considering upgrading their production equipment to improve the packaging process
and prolong the product’s shelf life. If so, its costs for rent on equipment would increase by $40,000 and the
company anticipates that unit sales will increase by 15,000 units. What is the projected net income under this
scenario?
g. Would you recommend either course of action in part e or part f? Briefly explain
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