K Fancy Pasty Puffs is considering building a new plant in Europe. It predicts sales at the new plant to be 37,000 units at $5/unit. Below is a listing of estimated expenses % of Annual Expense Category Materials Labor Overhead Marketing/Admin Total Annual Expenses $15,000 $20,000 $50,000 $30,000 that are Fixed 10% 20% 50% 70% A European firm was contracted to sell the product and will receive a commission of 15% of the sales price. No US home office expenses will be allocated to the new facility The unit variable cost for the company is OA. $2.47 OB. $3.11 OC. $1.72 OD. $1.39 4

K Fancy Pasty Puffs is considering building a new plant in Europe. It predicts sales at the new plant to be 37,000 units at $5/unit. Below is a listing of estimated expenses % of Annual Expense Category Materials Labor Overhead Marketing/Admin Total Annual Expenses $15,000 $20,000 $50,000 $30,000 that are Fixed 10% 20% 50% 70% A European firm was contracted to sell the product and will receive a commission of 15% of the sales price. No US home office expenses will be allocated to the new facility The unit variable cost for the company is OA. $2.47 OB. $3.11 OC. $1.72 OD. $1.39 4

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 11P: Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting...

See similar textbooks

Similar questions

DETERMINING DAILY COST OF HOLDING A shipment of new connectors for semiconductors needs to go from San Jose to Singapore for assembly.The value of the connectors is $1,750, and holding cost is 40% per year. One airfreight carrier can ship theconnectors 1 day faster than its competitor, at an extra cost of $20.00. Which carrier should be selected?APPROACH c First we determine the daily holding cost and then compare the daily holding cost withthe cost of faster shipment.
Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Western Jeans Co. Question Content Area a. Prepare a differential analysis dated July 6 on whether to reject (Alternative 1) or accept (Alternative 2) the Childs order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisReject (Alt. 1) or Accept (Alt. 2) OrderJuly 6 Line Item Description Reject Order(Alternative 1) Accept Order(Alternative 2) Differential Effects(Alternative 2) Revenues $Revenues…
A production Enterprise is considering introduction of a new product into the market. Detailed calculations of expected revenues are presented in the table below: Thousands euro Revenues Closing balance Account payables Year 1 Inventory of production materials Inventory of finished products 700 The firm's analysts estimated that investment outlays to start the production (investment, research and development) would amount to EUR 650 thousand. Average variable costs account for about 55% of revenues. Depreciation of investment outlays amounts to 33,33% annually. After the 3rd year, the fixed assets are expected to have a market value of 100 thousand Euro (despite being fully depreciated). The performed analysis suggests that implementation of the project would cause overheads at the company to rise by ca. EUR 100 thousand annually. The table below presents forecast for the share of liabilities, production materials and stock in revenues: Year 1 14% 12% Year 2 8% 800 Year 2 14% 11% Year…
Suppose a BMW executive in Germany is trying to decide whetherthe company should continue to manufacture an engine component or purchase itfrom Frankfurt Corporation for $50 each in the next year Demand for the comingyear is expected to be the same as for the current year, 200,000 units. Data for thecurrent year is as follows: If BMW makes the components, the unit costs of direct material will increase by10%. If BMW buys the components, 30% of the fixed costs will be avoided. Theother 70% will continue regardless of whether the components are manufactured orpurchased. Assume that variable overhead varies with output volume. (1) Prepare a schedule that compares the make-or-buy alternatives. Show totals andamounts per unit. Compute the numerical difference between making and buying.Assume that the capacity now used to make the components will become idle if thecomponents are purchased
You want to establish your own business and are thinking about releasing a new Customers will pay P150 for it, according to market research, and your sales team believes they can sell at least 1,000 units every month. The equipment you'll need to make the product will require a monthly fixed cost of P400,000 and lease of facility at P500,000.Costs of producing the product are direct labor P20, direct mate1ials Pl5, shipping P5 and sales commission PlO. What is the breakeven point? Will this be a profitable venture? Justify you answer
Hawthorn Ltd manufacturers a number of specialised electronic components, including the advanced X1000. Hawthorn Ltd has the capacity to produce 10 000 units of X1000 per year. Currently it is operating at 80 per cent capacity. The selling price for X1000 is $100 per unit. The variable cost per unit is $30. Fixed cost allocated to producing X1000 is $100 000 per year. Hawthorn Ltd receives a special order for 3000 units of X1000. The opportunity cost associated with taking this special order is:
Suppose a BMW executive in Germany is trying to decide whetherthe company should continue to manufacture an engine component or purchase itfrom Frankfurt Corporation for $50 each in the next year Demand for the comingyear is expected to be the same as for the current year, 200,000 units. Data for thecurrent year is as follows: If BMW makes the components, the unit costs of direct material will increase by10%. If BMW buys the components, 30% of the fixed costs will be avoided. Theother 70% will continue regardless of whether the components are manufactured orpurchased. Assume that variable overhead varies with output volume. Assume also that the BMW capacity in question can be rented to a localelectronics firm for $1,150,000 for the coming year, Prepare a schedule thatcompares the net relevant costs of the three alternatives: make, buy and leavecapacity idle, buy and rent. Which is the most favorable alternative? By how muchin total?
Suppose a BMW executive in Germany is trying to decide whetherthe company should continue to manufacture an engine component or purchase itfrom Frankfurt Corporation for $50 each in the next year Demand for the comingyear is expected to be the same as for the current year, 200,000 units. Data for thecurrent year is as follows: If BMW makes the components, the unit costs of direct material will increase by 10%. If BMW buys the components, 30% of the fixed costs will be avoided. Theother 70% will continue regardless of whether the components are manufactured orpurchased. Assume that variable overhead varies with output volume. (1) Prepare a schedule that compares the make-or-buy alternatives. Show totals andamounts per unit. Compute the numerical difference between making and buying. Assume that the capacity now used to make the components will become idle if thecomponents are purchased Direct material Direct labor Factory overhead, variable Factory overhead, fixed Total costs $5,000,000…
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
The management of a company is to decide to accept an export order for 1000 units per month at 70 per unit. Its present position is as follows: Manufacturing Capacity 4000 units per month Present sales 3000 units per month Selling price per unit 100 yehTotal cost per unit 80 Total fixed cost 60,000 per month Additional Shipping Expenses 4000 Do you advise the proposal to be accepted?
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
1.The coffee is sold in individual packets of 300 grams at RM 6.00 each. In developing the company's financial strategy for the year 2022, the company's president has accumulated all data on projected operation as follows: Expected sales volume Variable costs: 300,000 packets per annum RM 2.00 per packet RM 1.00 per packet RM 0.50 per packet RM 150,000 per annum RM 90,000 per annum Cost of coffee Cost of labour Selling and distribution Administrative expenses Other variable expenses Calculate the following: i. Break-even point in packets and sales value ii. Total net profit for the year iii. Contribution per sales ratio