Kylie's Cookies is considering the purchase of a larger oven that will cost $2,200 and will increase her fixed costs by $30. What would happen if she purchased the new oven torealize the variable cost savings of $0.10 per cookie, and what would happen if she raised her price by just $0.20? She feels confident that such a small price increase will decreasethe sales by only 25 units and may help her offset the increase in fixed costs. Given the following current prices how would the break-even in units and dollars change if she doesn'tincrease the selling price and if she does increase the selling price? Complete the monthly contribution margin income statement for each of these cases.Round your answers to two decimal places. Round break-even units to a whole number.Selling Price, Variable Cost and Fixed Cost Change AnalysisSales Price per UnitVariable Cost per UnitContribution Margin per UnitFixed CostsBreak-even in UnitsBreak-even in DollarsSalesVariable CostsWith CurrentPrice$1.700.30Fixed Costs$1.40Net Income$420Unit Sales, Expected300$510Contribution MarginWith Decreased With Increased SP,VC andIncreased FC$$$$Decreased VC,and Increased FCMonthly Contribution Margin Income Statement$With CurrentPrice800With Decreased With Increased SP,VC andDecreased VC,Increased FCand Increased FC

Income Statement: An income statement helps organizations in calculating the profits or losses…

Answered: Kylie's Cookies is considering the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 6 years. The new machine will cost $3,770 a year to operate, as opposed to the old machine, which costs $4,225 per year to operate. Also, because of increased capacity, an additional 21,700 donuts a year can be produced. The company makes a contribution margin of $0.10 per donut. The old machine can be sold for $8,700 and the new machine costs $31,700. The incremental annual net cash inflows provided by the new machine would be (Ignore income taxes.): Multiple Choice O O O O $455 $2,170 $6,530 $2,625
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $24 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 35% will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 52% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case? a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? The…
There is excitement in the air! The new UltraGuard flea collar is about to be introduced to the market. The collar will feature enhanced protection, increased longevity and is environmentally friendly. It will be priced at $9.40 and has unit variable costs of $3.45. The company expects to sell 50,000 UltraGuard collars during the next six months. Some of the sales will come at the expense of the current product, the PetArmor collar, priced at $6.50 with variable costs of $2.80. Projected sales for the PetArmor collar are 95,000 units (without the introduction of the UltraGuard). The market analyst estimates that the UltraGuard collar will cannibalize 20,000 PetArmor collars during the introductory 6 month period. The company is planning a sales promotion campaign to target veternarians at the time of the new product launch. The company is going to invest $ 75,000 in printed materials and samples. How many PetArmor collars will be sold at the breakeven volume of UltraGuard collars?…
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the IRR of the PJX5? (ROUND TO 2 DECIMAL PLACES.) a. The PJX5 will cost $1.79 million fully installed and has a 10 year life. It will be depreciated to a book value of $146,115.00 and sold for that amount in year 10. b. The Engineering Department spent $23,587.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $16,144.00. d. The PJX5 will reduce operating costs by $310,064.00 per year. e. CSD’s marginal tax rate is 30.00%. f. CSD is 62.00% equity-financed. g. CSD’s 13.00-year, semi-annual pay, 6.37% coupon bond sells for $1,010.00. h. CSD’s stock currently has a market value of $21.43 and Mr. Bensen believes the market estimates…
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Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $10.50 and the large kites would be $23.50. The variable cost per unit is $5.05 and $11.10, respectively. Jill, the owner, feels that she can sell 2,600 of the small kites and 1,700 of the large kites each year. The fixed costs would be $2,100 a year and the depreciation expense is $900. The tax rate is 21 percent. What is the annual operating cash flow?
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Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the IRR of the PJX5? a. The PJX5 will cost $1.97 million fully installed and has a 10 year life. It will be depreciated to a book value of $173,984.00 and sold for that amount in year 10. b. The Engineering Department spent $49,587.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $15,509.00. d. The PJX5 will reduce operating costs by $430,356.00 per year. e. CSD’s marginal tax rate is 26.00%. f. CSD is 66.00% equity-financed. g. CSD’s 19.00-year, semi-annual pay, 5.73% coupon bond sells for $1,031.00. h. CSD’s stock currently has a market value of $20.05 and Mr. Bensen believes the market estimates that dividends will grow at…
Bathrooms and kitchens are typically the most important selling features of s home. Rouse Builders could differentiate the homes by upgrading the atmos and kitchens. The upgrades would cost $22,000 per home bur would enable Rouse Builders to increase the selling prices by $38.500 per home (Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Rouse Builders makes the upgrades, what will the new co-phus price per home be? Should the company differentiate in product in this manner?

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