Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,000 sails per year. The following information relates to current production. If a special sales order is accepted for 4,500 sails at a price of $120 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs per unit: Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200,000 Increase by $160,000 Increase by $150,000 Increase by $140,000 Increase by $170,000 O Increase by $180,000 O

Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,000 sails per year. The following information relates to current production. If a special sales order is accepted for 4,500 sails at a price of $120 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs per unit: Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200,000 Increase by $160,000 Increase by $150,000 Increase by $140,000 Increase by $170,000 O Increase by $180,000 O

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,.000 sails per year, The following information relates to current production. If a special sales order is accepted for 2,000 sails at a price of $87 per unit, and fixed costs increase by $20,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs unit: per Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200 000 Increase by S14,000 Decrease by S4,000 ) Decrease by S14,000 ) Decrease by S6,000 () Increase by S6,000 ()
Peru Company, which manufactures sneakers, has enough capacity available to accept a special order of 20,000 pairs of sneakers at Ph 6.00 a pair. The normal selling price is Ph 10.00 a pair. Variable manufacturing costs are Ph 4.50 a pair, and fixed manufacturing costs are Ph 1.50 a pair. Peru will not incur any selling expenses as a result of the special order. What could be the effect on operating income if the special order could be accepted without affecting normal sales? O Ph 0 Ph 30,000 increase Ph 90,000 increase O Ph 120,000 increase
Metalex Roofing Ltd manufactures roofing sheets whose normal selling price is GH¢20 per sheet. The variable cost of producing the product is GH¢8. A foreign distributor has offered to purchase 3,000 sheets for GH¢10 per sheet. This is a one-time order that would not affect the company's regular business. The annual capacity is 10,000 sheets, but Metalex is currently producing and selling only 5,000 sheets. Fixed costs are unaffected by the order. a. Should Metalex accept the offer? b. Assuming Metalex has no spare capacity and the order will result in a loss of production of 300 sheets. Should the order be accepted?
Muscat Inc. has been manufacturing its own Camera for its Mobile Phone. The company is currently operating at 100% of capacity. Variable manufacturing overhead cost is OMR 3 per unit. The direct materials and direct labor cost per unit to make the camera are OMR 4 and OMR 6, respectively, fixed cost is OMR 50,000. Normal production is 50,000 Mobile Phone per year.
The Cozy Company manufactures slippers and sells them at $10 a pair. Variable manufacturing cost is $5.75 a pair, and allocated fixed manufacturing cost is $1.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 25,000 pairs of slippers at $7.50 a pair. Cozy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $43,750 increase (c) $143,750 increase, or (d) $187,500 increase? Show your calculations.
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.80 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 141,450 $ 188,325 Variable cost per switch 0.57 0.25 Required: For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? What volume level would produce the same total costs regardless of the machine purchased? What is the most profitable alternative for producing 155,000 switches per year and what is the total cost of that alternative
Sundial Company manufactures and sells watches for $44 each. Tick−Tock Company has offered Sundial $25 per watch for a one−time order of 5,700 watches. The total manufacturing cost per watch is $29 per unit and consists of variable costs of $21 per watch and fixed overhead costs of $8 per watch. Assume that Sundial has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order? A. decrease of $22,800 B. increase of $22,800 C. increase of $142,500 D. decrease of $142,500
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.20 per switch. Vista 's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.50 per switch. Vista's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Annual fixed costs Variable cost per switch Machine A $632,400 1.78 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 235,000 switches per year and what is the total cost of that alternative? Required 1 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Machine B $ 860,100 0.80 Minimum number of switches For each machine, what is the minimum number of switches that…
The Comfy Company manufactures slippers and sells them at $11 a pair. Variable manufacturing cost is a $5 pair, and allocated fixed manufacturing cost is a $3 pair. It has enough idle capacity available to accept a one-time-only special order of 5000 pairs of slippers at $8 a pair. Comfy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $15000 increase, (c) $25000 increase, or (d) $40000 increase? Show your calculations. The HoustonCompany manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 38 Variable manufacturing overhead 15 Fixed manufacturing overhead allocated 18 Total manufacturing cost per unit $75 The Cushion Company has offered to sell…
Required information [The following information applies to the questions displayed below.] Praveen Company manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding that has not been as profitable as planned. Because Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $310 selling price per unit. Its fixed costs for the year are expected to be $421,600. Variable costs for the year are expected to be $186 per unit. 2. Prepare a contribution margin income statement for Product XT at the break-even point. PRAVEEN COMPANY Contribution Margin Income Statement (at Break-Even) - Product XT Units $ per unit Total Less: Less: Sales Variable cost Contribution margin Fixed costs Income