The company is planning to use a new material throughout 2023. This will reducevariable costs by 10%. Fixed costs are expected to remain unchanged.As the factory's output is nearing its annual output capacity of 38,000 units, thecompany plans to increase the selling price by 5%. This will decrease sales volume by20%.Use cost-volume-profit analysis to determine whether the company should proceedwith the plan.

Step 1: To analyze whether the company should proceed with the plan, we can use cost-volume-profit…

Answered: The company is planning to use a new…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7EA: Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per...

See similar textbooks

Similar questions

Wisconsin Snowmobile Corporation is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $30,000, but inventory would increase by $250,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 13.5 percent. a-1. Determine the extra cost or savings of switching over to level production. a- 2. Should the company go ahead and switch to level production? multiple choice Yes No b. How low would interest rates need to fall before level production would be feasible? Note: Input your answer as a percent rounded to the nearest whole number.
Calculate the Margin Of Safety in units and in sales dollars? The President of Benoit is under pressure from shareholders to increase operating income by 50% in 2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this a realistic goal? Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a…
Frieden’s management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $360,000 per month. However, variable expenses would decrease by $9 per unit. Selling price would not change. Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement.
In 2019, Preston Company provided the following data: Sales price per unit P100; Variable cost per unit P60; Total fixed cost at P1,500,000. For 2020, Preston Company is planning to buy a machine that will reduce the production workers and cut the sales price of the product at the same time. The new machine will increase the fixed cost by P500,000 due to depreciation; variable cost per unit will decrease by 25% due to reduction of direct workers; and the sales price will be reduced by 10%. What is the break-even units in 2020? 44,444 45,000 50,000 37.500
In 2019, Reyes Company provided the following data: Sales price per unit P100; Variable cost per unit P60; Total fixed cost at P1,500,000. For 2020, Papa Company is planning to buy a machine that will reduce the production workers and cut the sales price of the product at the same time. The new machine will increase the fixed cost by P500,000 due to depreciation; variable cost per unit will decrease by 25% due to reduction of direct workers; and the sales price will be reduced by 10%. What is the profit (before tax) if the company produces and sells 45,000 units in 2020? a.28,000 b.25,000 c.27,000 d.26,000 What is the break-even units in 2020? a.37.500 b.50,000 c.44,444 d.45,000 What is the profit if the company operates at 45,000-unit volume? a.P600,000 b.P300,000 c.P 45,000 d.None of the above
The management of Valencia Manufacturing Company is desirous of increasing operating incomeby 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018.Determine the number of units that must be sold to earn this target operating profit. Is this a realisticgoal?
In 2019, Crest Company provided the following data: Sales price per unit P100; Variable cost per unit P60; Total fixed cost at P1,500,000. For 2020, Crest Company is planning to buy a machine that will reduce the production workers and cut the sales price of the product at the same time. The new machine will increase the fixed cost by P500,000 due to depreciation; variable cost per unit will decrease by 25% due to reduction of direct workers; and the sales price will be reduced by 10%. What is the profit (before tax) if the company produces and sells 45,000 units in 2020? 25,000 26,000 27,000 28,000
In 2019, Papa Company provided the following data: Sales price per unit P100; Variable cost per unit P60; Total fixed cost at P1,500,000. For 2020, Papa Company is planning to buy a machine that will reduce the production workers and cut the sales price of the product at the same time. The new machine will increase the fixed cost by P500,000 due to depreciation; variable cost per unit will decrease by 25% due to reduction of direct workers; and the sales price will be reduced by 10%. What is the profit (before tax) if the company produces and sells 45,000 units in 2020?* 27,000 25,000 O 28,000 26,000
In 2019, Papa Company provided the following data: Sales price per unit P100; Variable cost per unit P60; Total fixed cost at P1,500,000. For 2020, Papa Company is planning to buy a machine that will reduce the production workers and cut the sales price of the product at the same time. The new machine will increase the fixed cost by P500,000 due to depreciation; variable cost per unit will decrease by 25% due to reduction of direct workers; and the sales price will be reduced by 10%. What is the break-even units in 2020? * 45,000 O 44,444 O 37.500 O 50,000
Ore Company produces bookcases. Sales were good in 2019. However, with the slowdown in the economy, the Chief Financial Officer is concerned about the sales for 2020. The income statement for 2020 is as follows: Sales revenue $600,000 Less: Variable costs $360,000 Contribution margin $240,000 Less: Fixed costs $140,000 Net profit $100,000 The company expects to sell 60,000 units in 2020. Compare different types of cost behaviours to do the following: (a) Use cost-volume-profit analysis to determine the breakeven point in units and in dollars. (b) Use cost-volume-profit analysis to determine the margin of safety in units and in dollars. (c) Assuming that cost behaviour pattern remains unchanged, compute the decrease in net income if sales revenue dropped by $200,000 in 2020.
The Future company for furniture is considering an expansion plan from the current production level of 120000 units to 132000 units. Fixed cost will increase by $24,000 and variable cost will increase by $ 1.5 /unit for each extra unit. Currently the fixed cost is $ 220,000, variable cost is $5 /unit and selling price is $10. The company will decrease the selling price by 10% to be able to sell the new volume of 132000 units. Should the company expand by working extra hours? By adding new machines? What is Q indifferent (quantity at which the increase in fixed cost equals the increase in variable cost) for this situation?
Sonora, Inc. is launching a new product that it estimates will sell for $95 per unit. Annual demand is estimated to be 98,000 units. Sonora estimates that using its current manufacturing technology, it can manufacture the units for $37 per unit, but if it purchases a new machine, the units can be manufactured for $36 per unit. Sonora has a target profit of 20% return on sales. Under target costing, what is the target cost for the new product?

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS