he production cost information for Blossom's Salsa is as follows: Blossom's Salsa Production Costs April 2020 Production 23, 000 Jars of Salsa Ingredient cost (variable) $13,800 Labor cost (variable ) 9,660 Rent (fixed) 4,300 Depreciation (fixed) 6,000 Other (fixed) 1,400 Total $35, 160 The company is currently producing and selling 345,000 jars of salsa annually. The jars sell for $7.00 each. The company is considering lowering the price to $6.30. Suppose this action will increase sales to 391,000 jars. What is the incremental cost associated with producing an extra 46, 000 jars of salsa?

he production cost information for Blossom's Salsa is as follows: Blossom's Salsa Production Costs April 2020 Production 23, 000 Jars of Salsa Ingredient cost (variable) $13,800 Labor cost (variable ) 9,660 Rent (fixed) 4,300 Depreciation (fixed) 6,000 Other (fixed) 1,400 Total $35, 160 The company is currently producing and selling 345,000 jars of salsa annually. The jars sell for $7.00 each. The company is considering lowering the price to $6.30. Suppose this action will increase sales to 391,000 jars. What is the incremental cost associated with producing an extra 46, 000 jars of salsa?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 2CE

See similar textbooks

Similar questions

Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Porter's Paints produces high-end industrial paint primer and sells the primer for $45 per gallon. The company's variable cost is $21.60 per gallon of primer. Annual fixed costs related to the primer are $197,145. Porter expects to sell 18,000 gallons of primer in 2021. What is 2021 expected profit?
Santana Rey expects sales of Business Solutions’s line of computer workstation furniture to equal 300 workstations (at a sales price of $3,300 each) for 2019. The workstations’ manufacturing costs include the following. Direct materials $ 750 per unit Direct labor $ 400 per unit Variable overhead $ 60 per unit Fixed overhead $ 24,000 per year The selling expenses related to these workstations follow. Variable selling expenses $ 45 per unit Fixed selling expenses $ 3,500 per year Santana is considering how many workstations to produce in 2019. She is confident that she will be able to sell any workstations in her 2019 ending inventory during 2020. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations.Required:1. Complete the following income statements using absorption costing.2. Complete the following income statements using variable costing.
Evercreen manufactures products that sell at $ 37 each. The company can produce 50,000 units per year. The costs of producing and selling the 50,000 units are as follows: Total cost Unit cost Details 800000 16 Direct Material 200000 4 Direct Labor 50000 1 Variable manufacturing costs 150000 3 Fixed manufacturing costs 200000 4 Variable selling expenses 100000 2 Fixed selling expenses 1500000 30 Total cost Required: Assuming that the company is currently producing and selling 50,000 units as mentioned above. HighStar has requested, with its desire to book a one-time special order for 10,000 units, at a price of $ 23 per unit. Note that Evercreen will not bear any variable selling expenses for special orders. If Evercreen accepts Highstar's request, it will have to reduce its regular sales to regular customers by 10,000 units. For financial considerations only, should Evercreen accept this special request or…
Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 40,000 ceiling fans and 50,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $52 $15 Unit variable cost $12 $9 Direct fixed cost $25,200 $48,000 Common fixed selling and administrative expenses total $78,000.See screenshots
Santana Rey expects sales of Business Solutions’ line of computer workstation furniture to equal 300 workstations (at a sales price of $3,700 each) for 2021. The workstations’ manufacturing costs include the following. Direct materials $ 760 per unit Direct labor $ 300 per unit Variable overhead $ 60 per unit Fixed overhead $ 14,400 per year Selling and administrative expenses for these workstations follow. Variable $ 35 per unit Fixed $ 3,500 per year Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are…
Consider the production cost information for Mama Italiano Sauce given below: Mama Italiano Sauce Production Cost Budget April 2008 Production - Jars of sauce 20,000 Ingredient cost (variable) $16,000 Labor cost (variable) 9,000 Rent (fixed) 4,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $36,000 The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.70 per jar. Suppose this action will increase sales to 318,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce? Round to two decimal places.
Voyage Sail Makers manufactures sails for sailboats. The company has the capacity to produce 37,000 sails per year and is currently producing and selling 30,000 sails per year. The following information relates to current production: Sales price per unit $185 Variable costs per unit: Manufacturing $60 Selling and administrative $20 Total fixed costs: Manufacturing $700,000 Selling and administrative $300,000 If a special pricing order is accepted for 5,700 sails at a sales price of $170per unit, and fixed costs remain unchanged, what is the change in operating income? (Assume the special pricing order will require variable manufacturing costs and variable selling and administrative costs.)
Garcia Co. sells snowboards. Each snowboard requires direct materials of $105, direct labor of $35, and variable overhead of $50. The company expects fixed overhead costs of $645,000 and fixed selling and administrative costs of $111,000 for the next year. It expects to produce and sell 10,500 snowboards in the next year. What will be the selling price per unit if Garcia uses a markup of 15% of total cost? (Round your answer to 2 decimal places.) Selling Price _____________ Per Unit
Spring Manufacturing sold 610,000 units of its product for $98 per unit in 2019. Variable cost per unit is $50, and total fixed costs are $1,870,000. Required: Calculate (a) contribution margin and (b) operating income. Spring’s current manufacturing process is labor intensive. Jim Gate, Spring’s production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,770,000. The variable costs are expected to decrease to $35 per unit. Spring expects to maintain the same sales volume and selling price next year. How would acceptance of Gate’s proposal affect your answers to (a) and (b) in requirement 1? Should Spring accept Gate’s proposal? Explain.
A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. 1. The Swiss Interior Company's management team is concerned about the selling expenses associated with the product and wants to reduce the variable selling expense per unit by 30%, which will see a simultaneous reduction in the total fixed selling expenses by $30,000. If they are able to accomplish this feat, it is expected that sales volume for the year will fall by 162⁄3% below normal capacity. What must the new selling price per unit be if the company wishes to meet the shareholders’ profit objective for 2021? How will these changes impact the percentage margin of safety? 2. What are the advantages and disadvantages of the scattergram method as compared…
Spring Manufacturing sold 610,000 units of its product for $98 per unit in 2019. Variable cost per unit is $50, and total fixed costs are $1,870,000.Required:1. Calculate (a) contribution margin and (b) operating income.2. Spring’s current manufacturing process is labor intensive. Jim Gate, Spring’s productionmanager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,770,000. The variable costs are expected to decrease to $35 per unit. Spring expects to maintain the same sales volume and selling price next year. How would acceptance of Gate’s proposal affect your answers to (a) and (b) in requirement 1?3. Should Spring accept Gate’s proposal? Explain.