It's Your Turn. Show Us What YouKnowShannon's Brewery in Keller, Texas isconsidering using a sales team to help itpenetrate market areas not served by itscurrent distributors. However, Shannon Carter,the CEO, wants to know whether it would becheaper to hire an independent outside salesforce rather than hire and train his own salespersonnel. Estimates are that the costs ofhiring, training, and maintaining his own salesforce would entail fixed costs of salaries andadministrative overhead of $300,000 peryear. These sales people would also receive a2.9% commission on all sales. If going with theindependent sales force option, all costs wouldbe variable in that these reps would be paid acommission of 10.8% on all sales. At whatlevel of sales will the costs of each sales forcebe equal? Round your answer to the nearestdollar value. Round your answer to thenearest one dollar.

Let the level of sales be ‘$ X’. At $ X level, the cost of hiring outside sales force and cost of…

Answered: It's Your Turn. Show Us What You Know…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 5EB: Assume you are the warehouse manager for Vinnies Vinyls, a multi-location business specializing in...

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Assume you are the warehouse manager for Vinnies Vinyls, a multi-location business specializing in vinyl records. Vinniess operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to Vinnies stores. The manager of the West store has some concerns relating to the stores financial performance and has asked for your help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. (Hint: it may be helpful to perform a vertical analysis.)
M4 Engineering has two divisions, the Fabrication Division and the Airplane Division. The Airplane Division may purchase engine mounting clamps from the Fabrication Division or from outside suppliers. The Fabrication Division sells engine mounting clamps both internally and externally. The market price for is $5,000 per 100 mounting clamps. The following conversation took place between the controllers of the Fabrication Division and Airplane Division: • Airplane Division: I hear you are having problems selling mounting clamps out of your division. Maybe I can help. • Fabrication Division: You've got that right. We're producing and selling at about 90% of our capacity to outsiders. Last year we were selling 100% of capacity. Would it be possible for your division to pick up some of our excess capacity? After all, we are part of the same company. • Airplane Division: What kind of price could you give me? • Fabrication Division: Well, you know as well as I that we are under strict profit…
You are the warehouse manager for a multi-location business specializing in old style vinyl records. The company operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to the stores. The manager of the West store has concerns relating to the store’s financial performance and has asked for help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. It may be helpful to perform a vertical analysis (i.e., perform a vertical analysis). warehouse west store sales $18,920 $43,860 cost of goods sold 9,082 21,053 gross profit $9,838 $22,807 selling expenses 860 2,752 Wges expenses 4,730 15,351 costs allocated from corporate 2,838 4,386 total expenses $8,428 $22,489 operating…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the Introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE belleves that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which Is representative, manufacturing overhead totaled $2,091,000 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Personal $ 1,448,200 1,034,000 Commercial $ 661,000 708,500 Total $ 2,109,200 1,742,500 Management has determined that overhead costs are caused by three cost drivers. These…
Pain is Good Company manufactures a line of premium hot sauces. The company’s managers would like to increase the operating income generated from its best selling sauce Rajin’ Cajun. The product’s sales staff is doubtful that the current customer base would accept a price increase. However, they are confident that the product’s customer base can be expanded without incurring any additional costs. Management has concluded after consulting with key members of the product’s manufacturing and sales teams that all costs for the product line are currently at the lowest level possible. Given the following information for the Rajin’ Cajun line, what is management’s best option for increasing the product line’s operating income by $10,000? Sales Price . . . $5.00 Unit Fixed Cost at current sales volume . . . $0.50 Total Variable Costs at current sales volume . . . $8,750 Current Sales Volume . . . 5,000 units A. Eliminate fixed costs and decrease variable cost per…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
VVH Training is a company that provides expert training sessions on how to run your business and make it profitable. They offer these training sessions in their offices and offer catering services during the sessions. You have been hired to complete a profitability analysis and you decided to start by completing a cost analysis of the business, in order to figure out for each training sessions, what costs are fixed and what costs are variable. You were able to gather the following information about the associated costs: Instructor: $11,000 per session Training Material: $2,500 per session and $35 per attendee Catering Services: Food: $75 per attendee Setup/cleanup: $25 per attendee Fixed fee: $5,000 per training session The catering company has also offered VVH Training a 1,000$ discount per session, if they are willing to leave their brochures on the dinner table as a form of advertising. VVH has accepted the offer saying that it is a no-brainer Required: plot a…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…

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