Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.49P
Deciding where to produce. (CMA, adapted) Portal Corporation produces the same power generator in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available for the two plants:
All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days. When the number of working days exceeds 240, overtime charges raise the variable
Portal Corporation is expected to produce and sell 192,000 power generators during the coming year.
Wanting to take advantage of the higher operating income per unit at Moline, the company’s production manager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline operates at maximum capacity (320 units per day × 300 days) and Peoria operates at its normal volume (400 units per day × 240 days).
- 1. Calculate the breakeven point in units for the Peoria plant and for the Moline plant. Required
- 2. Calculate the operating income that would result from the production manager’s plan to produce 96.000 units at each plant.
- 3. Determine how the production of 192,000 units should be allocated between the Peoria and Moline plants to maximize operating income for Portal Corporation. Show your calculations.
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Deciding where to produce. (CMA, adapted) Portal Corporation produces the same power generatorin two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are availablefor the two plants:All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days.When the number of working days exceeds 240, overtime charges raise the variable manufacturing costs ofadditional units by $3.00 per unit in Peoria and $8.00 per unit in Moline.Portal Corporation is expected to produce and sell 192,000 power generators during the coming year.Wanting to take advantage of the higher operating income per unit at Moline, the company’s productionmanager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline operatesat maximum capacity (320 units per day * 300 days) and Peoria operates at its normal volume(400 units per day * 240 days).1. Calculate the breakeven point in units for the Peoria plant and…
The Pennsylvania Engine Company manufactures the identical small engine at two Pennsylvania plants, an older plant in Pottsville and a new plant in Harrisburg. Information for each of the plants for the current year is summarized below: Pottsville Harrisburg Selling price per engine $155.00 $155.00 Variable manufacturing cost per engine 91.00 75.00 Fixed manufacturing cost per engine 15.00 30.00 Variable marketing & distribution cost per engine 16.00 15.00 Fixed marketing & distribution cost per engine 13.00 16.00 Normal annual capacity (in engines) 76,800 96,000 Annual capacity with Overtime (in engines) 99,200 124,000 The above fixed and variable costs per engine are calculated based upon each plant operating at the normal annual capacity. Annual fixed costs at each plant remain constant as activity levels change and can only be eliminated through the complete shutdown of the plant. When the Pottsville plant operates above normal annual capacity, overtime costs increases the…
Chapter 3 Solutions
Cost Accounting (15th Edition)
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - Prob. 3.21ECh. 3 - Prob. 3.22ECh. 3 - Prob. 3.23ECh. 3 - Prob. 3.24ECh. 3 - Prob. 3.25ECh. 3 - Prob. 3.26ECh. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.28ECh. 3 - Prob. 3.29ECh. 3 - Prob. 3.30ECh. 3 - Prob. 3.31ECh. 3 - Prob. 3.32ECh. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - Prob. 3.34PCh. 3 - Prob. 3.35PCh. 3 - Prob. 3.36PCh. 3 - Prob. 3.37PCh. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - Prob. 3.39PCh. 3 - Prob. 3.40PCh. 3 - Prob. 3.41PCh. 3 - Prob. 3.42PCh. 3 - Prob. 3.43PCh. 3 - Prob. 3.44PCh. 3 - Prob. 3.45PCh. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.47PCh. 3 - Prob. 3.48PCh. 3 - Deciding where to produce. (CMA, adapted) Portal...
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