CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter14: The Balanced Scorecard And Corporate Social Responsibility

Section: Chapter Questions

Problem 2PB: Strategic initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new...

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Strategic Initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company’s gross profit is 25% of sales, and its target gross profit percentage is 30%. The company’s current monthly sales revenue is $480,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit. Cost makeup of Procedure 1: Direct Labor $fill in the blank 1 Direct…
CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,400,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales. Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 0 (b) Assuming an income tax rate of 38 percent, what dollar sales volume is currently…
Strategic initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company's gross profit is 25% of sales, and its target gross profit percentage is 30%. The company's current monthly sales revenue is $510,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 50% direct labor, 25% direct materials, and 25% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. Required: 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit. Cost makeup of Procedure 1: Direct Labor Direct Materials Overhead…
GreenLawns provides a lawn fertilizing and weed control service. The company is adding a special aeration treatment as a low-cost extra service option that it hopes will help attract new customers. Management is planning to promote this new service in two media: radio and direct-mail advertising. A media budget of 3,000 is available for this promotional campaign. Based on past experience in promoting its other services, GreenLawns has obtained the following estimate of the relationship between sales and the amount spent on promotion in these two media: S=2R210M28RM+18R+34M, where S = total sales in thousands of dollars R = thousands of dollars spent on radio advertising M = thousands of dollars spent on direct-mail advertising GreenLawns would like to develop a promotional strategy that will lead to maximum sales subject to the restriction provided by the media budget. a. What is the value of sales if 2,000 is spent on radio advertising and 1,000 is spent on direct-mail advertising? b. Formulate an optimization problem that can be solved to maximize sales subject to the media budget of spending no more than 3,000 on total advertising. c. Determine the optimal amount to spend on radio and direct-mail advertising. How much in sales will be generated?
Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company’s gross profit is 25% of sales, and its target gross profit percentage is 30%. The company’s current monthly sales revenue is $600,000.The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costsof production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2.Instructions1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 wouldneed to be for the company to meet its target gross profit.2. The company’s actual labor cost is $114,000 for Procedure 1. Determine the actual cost of…
Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company's profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces. Last year, the company sold 735,000 units at an average unit selling price of $3.60. The variable costs were $1,852,200, and the fixed costs were $508,032.
Vice President for Sales and Marketing at Waterways Corporation is planning for production needs to meet sales demand in the coming year. He is also trying to determine how the company's profits might be increased in the coming year. This problem asks you to use cost-volume-profit concepts to help Waterways understand contribution margins of some of its products and decide whether to mass-produce any of them. Waterways markets a simple water control and timer that it mass-produces, Last year, the company sold 630,000 units at an average unit selling price of $4.40. The variable costs were $1,663,200, and the fixed costs were $742,896. Show Transcribed Text Margin of safety in dollars What is the margin of safety, both in dollars and as a ratio? (Round ratio to 0 decimal places, e.g. 25%.) Margin of safety ratio 3 $ Ć %
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company's operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initial Added Cost Variable Cost Variable Savings Recycle and reuse production materials $ 5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $ 1,000 per year $ 33,000 per year Replace assembly room light fixtures with natural light 120,000 $ 180 per month $ 220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Identify which CSR activities Green Manufacturing should…
Making pricing decisions Snappy Plants operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Snappy Plants has $5,100,000 in assets. Its yearly fixed costs are $650,000, and the variable costs for the potting soil container label, seedling, and labor for each gallon-size plant total $1.90. Snappy Plants' volume is currently 500,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.25 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Requirements Snappy Plants' owners want to earn an 11% return on investment on the company’s assets. What does Snappy Plants's target full product cost? Given Snappy Plants' current costs, will its owners be able to achieve their target profit? Assume Snappy Plants has identified ways to cut its variable costs to $1.75 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the…
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company's operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initial Added Cost Variable Cost Variable Savings Recycle and reuse production materials $ 5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $ 1,000 per year $ 33,000 per year Replace assembly room light fixtures with natural light 120,000 $ 180 per month $ 220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Identify which CSR activities Green Manufacturing should…
Making pricing decisions Green Thumb operates a commercial plant nursery, where it propagates plants for garden centers throughout the region. Green Thumb has $5,300,000 in assets. Its yearly fixed costs are $625,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.70. Green Thumb’s volume is currently 490,000 units. Competitors offer the same plants, at the same quality, garden centers for $400 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Requirements Green Thumbs owners want to earn a 10% return on the company’s assets. What has Green Thumb’s target full product cost? Given Green Thumb’s current costs, will its owners be able to achieve their target profit? Assume Green Thumb has identified ways to cut its variable costs to $1.55 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target…
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company's operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initial Added Cost Variable Cost Variable Savings Recycle and reuse production materials $ 5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $ 1,000 per year $ 33,000 per year Replace assembly room light fixtures with natural light 120,000 $ 180 per month $ 220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Identify which CSR activities Green Manufacturing should…