3. Compare the financial results from Question 1 and 2 and highlight your observation regarding contribution. Based on your calculations, what is the relationship between volume and cost?
Regarding our observation of contribution, we can see the significant change having a variable cost of $1,725( base case) and $1,625(revised freight cost). The contribution margin of the trans-load jump from 25 %, without review, to 50% after revised freight cost. If your company has a low contribution margin, it is more difficult to cover your fixed costs and earn income. One option for improving your margins is reducing costs. You can negotiate with contractors to slim resources or acquisition costs, cut labor or reduce wasted resources. Moreover, the time of paying back under the revised freight cost is less than the base case time.
…show more content…
It is when a company recuperates it expensive before earning a profit. In both cases, the trans-load is working above the break-even.
According to the calculation, increasing volume at the same expensive cost will increase profit. Nonetheless, revising the freight cost and reducing its variable cost to 6% per container (1,625) from the base case (1,725), will affect the company profit positively. For example, with 10,000 containers(phase 1), the company earned a profit of $40,000/year, and with 60,000 containers(phase 3), the gain is $5,040,000 regarding the base case. After the 6% off in the variable cost, the firm could make a 3.85% phase1, 34,2% phase 2, 45,65% phase 3 of increase in its
Assume that interest in a new basis for cost accounting at Destin Brass Products remains high. In the following month, quantities produced and sold, activities, and costs were all at standard. How much higher or lower would the net income reported under the activity-transaction-based system be than the net income that will be reported under the present, more traditional system? Why?
Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B
In the table the improvements only considering units shipped are highest among the letters A-D opposed to G-H. The A-D warehouses are respectively: Denver, Portland, Chicago, and Boston. The G-H warehouses are respectively: Atlanta, St. Louis, Los Angeles, and Fargo. The most impressive improvements in order from greatest to least considering shipping were for Denver, Portland, and Chicago. It is vital the company takes notice of Chicago 's improvement due to the larger volume it also held in 2012 than other warehouse locations. However, the question is comparing performance during the first five months of the years; thus, we need to look at the unit and cost analysis when comparing the shipments. Notice St. Louis cost per unit shipped is the only successful improvement. The cost for the first five months of 2012 was $9.97, that then lowered to $9.07 for the first five months of 2013. We find this information by taking the warehouse cost and dividing by the shipped units that year. For example $23,232 divided by 2,331 units makes $9.97 while caculating 2013 yeilds an improved $9.07. Other warehouses grew in cost per unit shipped during the 5 months when considering 2012 and 2013. Additionally, Denver was on strike and had 15 days
a. To maximize profit earned during this period, which production capacity should TMMC in 2000 decide to build - 10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice.
1. Given the following information about purchases and sales during the year, compute the cost to be assigned to ending inventory under each of three methods: (a) average-cost, (b) FIFO, and (c) LIFO. (Show your work.)
If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows:
We utilize CVP to measure the cost of production. Based on the cost-volume-profit (CVP) analysis, the New Hampshire Company will receive a profit if they sell $60,000 umbrellas. Management has agreed to sell 5,000 umbrellas to the touring business. The Hampshire Company's sales revenue will be $55,000; therefore, their
In this paper I will be defining the term graph sequence, recursion formulas and arithmetic sequence. I will also solve the two problems given. Lastly, I will tell how the sums compare to one another.
After carrying out relevant cost-volume-profit analyses for companies with multiple products, the management must try to maximize the sales of the product class with the highest contribution margin, relative to the other products. This can be done through an increase in production volume. What can the company afford to invest for additional “C” capacity? To reach the 1,750,000 units capacity = (1,200,000 + FC) / CM = (1,200,000 + FC) / 3.224 FC = 752,000 To reach the 1,800,000 units capacity = (1,200,000 + FC) / CM = (1,200,000 + FC) / 3.224 FC = 913,200 To get the investment for additional “C” capacity, get the incremental change between the required fixed cost for 1.75 million capacity and the required fixed cost for 1.8 million capacity = 913,200-752,000 =161, 200 4. Calculate each of the three products’ break-even points using the data in Exhibit 3. Why is the sum of these three volumes not equal to the 1,100,000 units aggregated break-even volume?
These costs relate to a product that will be marketed in 1999. It is estimated that these costs will be recouped by December 31, 2001. The equipment has no alternative future use. What is the amount of research and development costs that should be
Question 2. Evaluate the manner in which Randall and Hubbard have implemented their investment center concept. The pitfalls did they apparently not anticipate.
The relationship between cost volume and profit is shown by cost-volume-profit analysis. It is an
B. Compute the net benefit to the company of manufacturing (rather than purchasing) a unit of C15. Repeat the calculation for a unit of C19.
To prepare the contribution margin statement it is necessary to assess which costs are variable and which are fixed. The variable costs are those which are incurred as each unit is produced, varying with the production levels, while the fixed costs remain the same regardless of the level of production (Bragg, 2012). The foundation of contribution costing is to deduct the variable costs from the revenue that is realized for each unit sold, this is known as the contribution as it is this surplus of revenue after variable costs will contribute towards the fixed costs, and then provide for the profit (Drury, 2006; Watts, 2004). The absorption statement may be converted into a contrition statement as shown in table 1.
The cost has increased by a significant amount and this would decrease the company’s raw material