FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- Applying Differential Analysis to Alternative Profit Scenarios Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $1,881,000. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, $0.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 990,000 and annual capacity is 1,210,000 units. REQUIRED The company would like to increase profitability in the upcoming year. Estimate the effect of the following separate proposals on annual profits. a. A 15% increase in the unit selling price would likely decrease annual sales by 99,000 units. Note: enter all numbers as positive numbers, do NOT use a negative sign. x . Net estimated profits would increase ✔ by $ 0 b. A 10% decrease in the unit selling price would likely increase…arrow_forwardCurrent Attempt in Progress Marigold Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Sales Value Additional at Split-off Variable Costs Further Processing Sales Value after Product $160600 Green lumber $24800 $185400 28300 125000 175000 Rough lumber Sawdust 20100 105000 133200 Which products should be processed further? O All three products. Green lumber and rough lumber O Rough lumber and sawdust. Green lumber and sawdust. )arrow_forward4. Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $76,500, and the result is 5,900 gallons of anderine and 7,900 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $9.00 per gallon and the dofinol for $6.00 per gallon. Alternatively, the anderine can be processed further at a cost of $8.10 per gallon (of anderine) into cermine. It takes 3 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $60. Required: 1. Which alternative is more cost effective and by how much?NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by $fill in the blank 2 2. What if the production of anderine into cermine required additional purchasing and quality…arrow_forward
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