Marathon Company makes and sells a single product. The current selling price is $20 per unit. Variable expenses are $12 perunit, and fixed expenses total $59,800 per month. (Unless otherwise stated, consider each requirement separately.)Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople ispaid a salary of $2,500 per month. Calculate the monthly operating income (or loss) that would result from changing thecompensation plan to a salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,350units per month. Calculate the monthly operating income (or loss) that would result from changing the compensation plan toa salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,200 units per month.Assuming that the sales volume of 7,200 units per month achieved in part g could also be achieved by increasing advertisingby $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss?Which strategy would you recommend?

The operating income (loss) may be computed using variable costing or absorption costing. The…

Answered: Marathon Company makes and sells a…

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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[The following information applies to the questions displayed below.] Astro Company sold 22,500 units of its only product and reported income of $60,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 45% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $155,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($55 per unit) Variable costs ($50 per unit) Contribution margin Fixed costs Income 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. (Round your answers to 2 decimal places.) Contribution margin Contribution Margin Ratio Numerator: Contribution margin per unit $ 1 Fixed costs per unit $ 1,237,500 1,125,000 112,500 52,500 $ 60,000 $ Denominator: Selling price…
Whitewater Inc sells a product that has variable costs of $40 and a selling price of $95. Its current sales total $304,000 per month. Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month. The company is considering a proposal that will increase the selling price by 10%, increase the fixed manufacturing costs by 10%, and increase the fixed selling and administrative costs by $1,500. Part 1: Compute the company's current break-even point in units. Part 2: Compute the company's current income and the current margin of safety. Part 3: Compute the new contribution margin per unit assuming the proposal is accepted. Part 4: Compute the new break-even point in units assuming the proposal is accepted. Part 5: Compute the company's income assuming the proposal is accepted and sales total 3,300 units. Part 6: Should the proposal be accepted?
During a slack period, a manufacturer can sell 3000 articles per month at a price of $1.20 each. A $200,000 investment is used which is depreciated over a 20-year life. An annual fixed cost of $20,000 myst be considered well as an annual maintenance cost of $10,000. The production cost is $1.10 per item. The manufacturer's tax rate is 45%. Should the factory shut down?
Astro Company sold 22,000 units of its only product and reported income of $70,200 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 46% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $154,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($54 per unit) Variable costs ($48 per unit) Contribution margin Fixed costs Income Sales level required in dollars Numerator: 3. Compute the sales level required in both dollars and units to earn $240,000 of target income for next year with the machine installed. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) Sales level required in units Numerator: $ 1,188,000 1,056,000 1…
Kling Inc. has only two retail and two wholesale customers. Information relating to each customer for 2020 follows: (Click the icon to view the customer-level operating income.) (Click the icon to view the data.) Kling's annual distribution-channel costs are $32,000 for wholesale customers and $13,000 for retail customers. The company's annual corporate costs are $45,000. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, Kling could save corporate-sustaining costs only if the company completely shuts down. Requirement Prepare a customer-cost hierarchy report. First, determine the formula and then enter the amounts to calculate the total customer costs for each customer. (Abbreviations used: W. = West; E. = East; Dist. = Distribution; oper. = operating; inc. = = income.) W. Region E. Region Stock Inc. Darby Corp + + + || || Total customer-level costs
According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year 2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketing manager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton's standard variable cost is $44 per hour, and its standard fixed cost is $1,320,000. Required Develop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours. Flexible Budget 44,000 Hours Flexible Budget Flexible Budget 49,000 Hours 54,000 Hours
Astro Company sold 23,000 units of its only product and reported income of $264, 600 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 44% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($56 per unit) $ 1, 288,000 Variable costs ($35 per unit ) 805, 000 Contribution margin 483,000 Fixed costs 218,400 Income $ 264,600 Problem 18 - 3A (Algo) Part 1 1. Compute the break - even point in dollar sales for next year assuming the machine is installed. (Round your answers to 2 decimal places.)
Boulevard Company expects to sell 500,000 units in 2021 at P100 per unit. Variable manufacturing costs in producing the product amount to P40 per unit and fixed manufacturing costs amount to P25.00 per unit. A special order from Devil Company of 50,000 units were made at an offered price of P57.50 per unit. Regular sales from customers will not be affected from this transaction. However, in order to meet the specifications and requirements of Boulevard Company, overtime pay would be incurred amounting to P7.50 per unit. Determine the effect in income when the special order is accepted. Indicate whether increase or decrease 1. 500,000 increase 2. 750,000 decrease 3. 875,000 increase 4. None of the above Group of answer choices 1 2 3 4
Using the data below, estimate the direct labor costs per unit for 2021. Consider carefully the labor effort required, on average, to get one unit of sale. Selling price per unit is $70. Ending inventory each year is zero. Production capacity is #20,000 per year. Inflation is zero. It is a several week warranty. REVENUE Direct Materials Factory & Equipment Lease Utilities Selling and Administration Maintenance Legal Fees Direct Labour Patent Amortization Utilities Selling and Administration Maintenance Legal Fees Direct Labour Patent Amortization Profit Warranty replacements (#) O5.00 to 5.50 O 5.51 to 5.99 O 5.90 to 6.10 O 6.11 to 6.20 O 6.21 to 6.50 O No answer text provided. Year 2018 Year 2019 $896,000 $1,085,000 234,000 150,000 59,000 242,400 65,000 O 78,000 O 59,000 242,400 65,000 0 78,000 0 67,600 200 288,000 150,000 68,000 264,000 80,000 23,000 96,000 30,000 68,000 264,000 80,000 23,000 96,000 30,000 86,000 500 Year 2020 $1,204,000 324,000 150,000 74,000 277,600 123,000 11,000…

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