Solve complete questions Problem 9-2 Deciding Whether to Add or Drop a Product (LO1-CC3) (Algo)Pam LaRose is the chief executive of Sturdy Furniture Inc. (SFI), which makes top-quality office furniture. LaRose would like adviceconcerning the advisability of eliminating the model A1 table. This table has been among the company's best-selling products, but itseems unprofitable.A condensed statement of operating income for the company and for the model A1 table for the quarter ended September 30 follows:Model A1tableAllProductsSalesCost of sales:$1,300,000* $5,900,000Direct materials520,0001,534,000Direct labour312,0001,357,000Fringe benefits (20% of direct labour)Variable manufacturing overhead62,400271,40015,60059,000Building rent and maintenance16,90059,000DepreciationTotal cost of salesGross marginSelling and administrative expenses:Product managers' salariesSales commissions (5% of sales)Fringe benefits (20% of salaries and commissions)ShippingGeneral administrative expensesTotal selling and administrative expenses83,200147,5001,010,1003,427,900289,9002,472,10042,900147,50065,000295,00021,58088,50020,000236,000208,000944,000357,4801,711,000Net operating income (loss)R(67,580) R 761,100The following additional data have been supplied by the company:a. Direct labour is a variable cost at SFI.b. All of the company's products are manufactured in the same facility and use the same equipment. Building rent, maintenance anddepreciation are allocated to products using various bases. The equipment does not wear out through use; it eventually becomesobsolete.c. There is ample capacity to fill all orders.d. Dropping the model A1 table would have no effect on sales of other product lines.e. Inventories of work in process or finished goods are insignificant.f. Shipping costs are traced directly to products.g. General administrative expenses are allocated to products on the basis of sales dollars. There would be no effect on the totalgeneral administrative expenses if the model A1 table was dropped.h. If the model A1 table was dropped, the product manager would be laid off.Required:a-1. At current level of sales, compute the effect of net operating income if the Model A1 table is dropped.in net operating income by$1-b. Would you recommend that the model A1 table be dropped?Yes○ No2. What would sales of the model A1 table have to be, at minimum, in order to justify retaining the product? (Hint. Set this up as abreak-even problem, but include only the relevant costs from Requirement (1).) (Round "Contribution margin ratio" to 2 decimalplaces and final answer to the nearest whole number.)Sales volume$

Contribution margin is determined after subtracting the variable costs (like materials, labor) from…

Required: a-1. At current level of sales, compute the effect of net operating income if the Model A1 table is dropped. in net operating income by $ 1-b. Would you recommend that the model A1 table be dropped? Yes O No 2. What would sales of the model A1 table have to be, at minimum, in order to justify retaining the product? (Hint. Set this up as a break-even problem, but include only the relevant costs from Requirement (1).) (Round "Contribution margin ratio" to 2 decimal places and final answer to the nearest whole number.) Sales volume $

Required: a-1. At current level of sales, compute the effect of net operating income if the Model A1 table is dropped. in net operating income by $ 1-b. Would you recommend that the model A1 table be dropped? Yes O No 2. What would sales of the model A1 table have to be, at minimum, in order to justify retaining the product? (Hint. Set this up as a break-even problem, but include only the relevant costs from Requirement (1).) (Round "Contribution margin ratio" to 2 decimal places and final answer to the nearest whole number.) Sales volume $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 8E: Refer to Exercise 10.7 for data. At the end of Year 2, the manager of the Houseware Division is...

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Ethics and professional conduct in business Erin Haywood was recently hired as a cost analyst by Wind River Medical Supplies Inc. Oneof Erin’s first assignments was to perform a net present value analysis for a new warehouse.Et-in performed the analysis and calculated a present value index of 0.8. The plant manager.ZuhairBarbat, is very intent on purchasing the warehouse because he believes that more storage space is needed. Zuhair asks Erín into his office and the following conversation takes place: ZubairErín, you’re new here, aren’t you? EHii: Yes, sir. Zubair: V.dl, Erin, let me tell you something. ¡m not at all pleased with the capital investment analysis that you performed on this new warehouse. T need that warehouse for my production. If I dont get it, where am I going to place our output? Erín: Hopefully with the customer, sir. Zithair: Now don’t get smart with me. Erín: No, really. I was being serious. My analysis does not support constructing a new ware- house. The numbers don’t lie: the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse dots not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse. Zubair Listen, you need to understand sonwthing. The headquarters people will not allow mv to build the warehouse if the numbers dont add up. You know as well as I that many assump tions go into your net present value analysis. Why don’t you relax some of your assumptions so that the f́nancial savings will offset the cost? Erín: I’m willing to discuss my assumptions with you. Maybe I overlooked something. Zubafr Good. Here’s what I want you to do. 1 see in your analysis tha you don’t project greater sales as a result of the warehouse. It seems to me, if we can store more goxLs, then will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think you’ll see that the numbers will work out. Why don’t you work it through and come back with a new analysis? I’m really counting on you on this one. Let’s get off to a good start together and see if we can get this project accepted. What is your advice to Erin?
Required Information Problem 1-45 (Algo) Cost Data for Managerial Purposes (LO 1-3) [The following information applies to the questions displayed below.] B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You's owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year (before the proposed contract). Sales revenue Costs Labor Equipment lease B-YOU Annual Income Statement Rent Supplies Officers' salaries Other costs Total costs Operating profit (loss) $ 580,000 260,000 46,000 35,000 36,000 160,000 26,000 $ 563,000 $ 17,000 If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $86,500. The equipment lease will increase by 20 percent. Supplies will increase by an estimated 10 percent and other costs by 15…
Problem 1-47 (Algo) Cost Data for Managerial Purposes (LO 1-3) Langholm Bistro is a popular restaurant in a small, coastal village. Brian Langholm, who opened the restaurant five years ago, has seen It grow steadily. Currently, Langholm's is only open for dinner, but many of the regular customers have been asking Brian to consider opening for lunch as well. Brian has been talking to his accountant about the financial Impact of the expanded services on the overall business. He knew that the bistro did not make much money and he was concerned that the new business might be too risky. The accountant asked Brian for his best estimates of the impact of the new business on revenues and costs. He had been thinking about this for some time and estimated that revenues would grow by about 25 percent. Food costs would increase by about 40 percent and labor costs by about 25 percent. Rent on the bistro would not change, but utilities would increase by about 20 percent. Other costs would increase…
Required information Problem 5-26 (Algo) CVP Applications; Break-Even Analysis; Graphing [LO5-1, LO5-2, LO5-4, LO5-5] [The following information applies to the questions displayed below.] The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price Variable expenses: Invoice cost Sales commission Total variable expenses Per Pair of Shoes $ 40.00 $ 16.00 4.00 $ 20.00 Fixed expenses: Advertising Rent Salaries Total fixed expenses Annual $ 45,000 31,000 155,000 $ 231,000 Problem 5-26 (Algo) Part 5 5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents commission on each pair of shoes sold in excess of the break-even point. If this change…
Ethics in Action Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielles first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis and determined a present value index of 0.75. The plant manager, Jerrod Moore, is very intent on purchasing the warehouse because he believes that more storage space is needed. Jerrod asks Danielle into his office and the following conversation takes place: Jerrod: Danielle, youre new here, arent you? Danielle: Yes, I am. Jerrod: Well, Danielle, Im not at all pleased with the capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I dont get it, where am I going to place our output? Danielle: Well, we need to get product into our customers hands. Jerrod: I agree, and we need a warehouse to do that. Danielle: My analysis does not support constructing a new warehouse. The numbers dont lie; the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse does not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse. Jerrod: The headquarters people will not allow me to build the warehouse if the numbers dont add up. You know as well as I that many assumptions go into your net present value analysis. Why dont you relax some of your assumptions so that the financial savings will offset the cost? Danielle: Im willing to discuss my assumptions with you. Maybe I overlooked something. Jerrod: Good. Heres what I want you to do. I see in your analysis that you dont project greater sales as a result of the warehouse. It seems to me that if we can store more goods, then we will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think youll see that the numbers will work out. Why dont you work it through and come back with a new analysis. Im really counting on you on this one. Lets get off to a good start together and see if we can get this project accepted. What is your advice to Danielle?
Your Question: Question 1 – Case Study Alpha Homes is a private limited company involved in specialist home improvements, with two (2) main products. These are: Garage Conversions (GC) and Extension to Properties (EX). Alpha Homes currently implements the full-costing absorption method in providing price quotes to customers. The company seeks to remain competitive and has an existing policy to price all jobs at budgeted total costs plus 50%. You are the new management accountant, and currently reviewing the cost records, for materials, labour and overheads. Table 1 indicates the expected costs of jobs in both product areas: Cost subheads Garage Conversion (GC) Extension to property (EX) Prices quotes (£) Units 10,000 25,000 Construction Materials (£) 3,500 8,000 Labour 5,500 6,500 Fixed overheads (£) 1,000 2,000 Variable overheads (£) 1,000 4,000 Table 2 below indicates the expected annual overhead cost for the overall business. overhead category (cost Pools)…
Required information Problem 5-68 (Static) Cost Estimation: Simple and Multiple Regression Using a Spreadsheet (Appendix A) (LO 5-4, 5, 6, 9) [The following information applies to the questions displayed below.] Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last year's operations (revenues and costs in thousands of dollars): Costs Employees 101$ 4,214 102 2,894 103 5, 181 104 3,998 105 3,676 106 107 108 109 110 2,959 111 4,179 112 113 Store 114 115 3, 319 5, 029 2,374 4, 688 3, 200 2,556 4, 655 2,986 39$ 29 47 38 33…
Question: 4. Vanguard Office Supplies Is A Nationwide Retail Chain That Offers Office Supplies And Office Furniture. Company Management Has Decided That, From Both A Competitive And A Cost-cutting Standpoint, Vanguard Should Offer Its Own Private-label Brands For Products Like Student Notebooks, Fillers, Ledgers And Journals, Bond And Linen Paper, And Other Products. ... This problem has been solved! See the answer 4. Vanguard Office Supplies is a nationwide retail chain that offers office supplies and office furniture. Company management has decided that, from both a competitive and a cost-cutting standpoint, Vanguard should offer its own private-label brands for products like student notebooks, fillers, ledgers and journals, bond and linen paper, and other products. To accomplish this objective, Vanguard is considering the purchase of Omega Paper, a manufacturer of paper products and notebooks. A five-year income forecast for Omega is given, along with other pertinent information.…
Q: If you were at Alice's place, what would you opt and why? Alicia WongAlicia Wong, Corporate Supply Manager, Thain Foods Limited, wanted to prepare a proposal to manufacture mustardin-house. Mustard, an important ingredient in many of thecompany’s products, was currently purchased from an outside supplier. She hoped a comprehensive proposal could beprepared in one-month’s time for the CEO’s approval. GENERAL COMPANY BACKGROUNDThain Foods Limited (TFL) had been in business for morethan 30 years. Its products included a wide range of syrups,fudges, cone dips, sauces, mayonnaise, and salad dressings. Its customers were major food chains, hotels, andrestaurants in North America and Europe.TFL believed in continuous improvement to itsoperations. Over the last two years, it invested more than$2 million in plant facilities, the bulk of it new, state-ofthe-art process equipment and process control. All production and process control functions were computerized formaximum efficiency.TFL…
Question 1: Service Costing & ABC Part AAfrican Adventure Ltd offers a series of holiday packages aimed at families, seniors, and corporate groups. The financial controller is preparing for the annual board meeting and is concerned about the loss the business sustained in the past year. He has examined the profits for each of the three departments of the business and it seems that the corporate department is the source of the problem.The financial controller looked at the three packages offered by the corporate department to establish which are profitable or not profitable. The sales and direct cost of each package for the last year are as follows:South Africa Egypt NamibiaNumber of packages sold 10 20 10Number of people per package 5 6 8Revenue per person $18,000 $12,000 $14,000Direct cost per package: Tour leader $5,000 $12,000 $9,000 Tour assistant $2,000 $3,000 $6,000 Air travel $28,000 $30,000 $32,00 Accommodation $15,000 $26,000 $24,000 Equipment hires $4,000 0 $9,000 Meals…
Please help me thouroughly answer part 3 and 4 of this question. Refer to the template pictures below for answers and ignore numbers already entered. Please include calculaions and how you got to the answer. Thank you! Case 7-65. Cost-Volume-Profit with Multiple Products, Sales Mix Changes, Changes in Fixed and Variable CostsObjective 1, 4 Artistic Woodcrafting Inc. began several years ago as a one-person, cabinet-making operation. Employees were added as the business expanded. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for the entire year. Unfortunately, the cabinet business in the region where Artistic is located is highly competitive. More than 200 cabinet shops are all competing for the same business. Artistic currently offers two different quality grades of cabinets: Grade I and Grade II, with Grade I being the higher quality. The average unit selling prices, unit…
Problem 10-59 (Algo) Customer Profitability (LO 10-4) Carmel Company has a frequent buyer program for its customers, where the customers can attain an “elite” level based on the number of orders and the total revenue of the orders. There are two elite levels: Platinum and Titanium. The benefits of elite membership include discounts and access to special customer service representatives who can resolve problems. The company has one full-time customer representative per 200 Titanium customers and one full-time customer representative per 2,000 Platinum customers. Customer representatives receive salaries plus bonuses of 1 percent of customer gross margin. Carmel spends 90 percent of its promotion costs on Titanium customers to encourage their loyalty. Customer Costs Total Titanium Platinum Number of customers 34,000 8,000 26,000 Average customer representative salary $ 71,000 $ 71,000 Promotion costs $ 3,150,000 Average gross margin per…