FUNDAMENTALS OF COST ACCOUNTING
6th Edition
ISBN: 9781264192236
Author: LANEN, ANDERSO
Publisher: McGraw Hil
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 66P
To determine
Calculate the number of basic desks and adjustable desks that are required to be sold in order to reach the break-even level.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Dellcom Inc. sells two products: a regular and a deluxe version. The owner would like
to better understand the impact of the sales mix on the company's sales.
The following information is available:
Regular Deluxe
Sales price per unit
Variable cost per unit
$38
$61
$15
$34
The company has total fixed costs of $384,615 for the year and they sell 9 Regular
products for every 4 Deluxe product.
The owner would like to know, given the sales mix, how many units of each product
the company must sell per year to break even.
The company must sell
units of the Regular product.
Enter the number of units given the current sales mix.
The company must sell
units of the Deluxe product.
Enter the number of units given the current sales mix.
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?
Pierson Pet Products produces two models of dog beds: Basic and Custom. Price, cost and expected sales volume data for the two
models are as follows:
Basic
$ 19.00
$ 12.00
36,000
Custom
$ 54.00
$ 33.00
24,000
Selling price per bed
Variable cost per bed
Expected sales (beds)
The total fixed costs for the company are $396,900.
Required:
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the expected product mix applies regardless of total sales, compute the break-even volume.
Note: Do not round Intermediate calculations.
c. If the product sales mix were to change to three Basic beds for each Custom bed, what would be the new break-even volume?
Note: Do not round intermediate calculations.
Chapter 3 Solutions
FUNDAMENTALS OF COST ACCOUNTING
Ch. 3 - Write out the profit equation and describe each...Ch. 3 - What are the components of total costs in the...Ch. 3 - How does the total contribution margin differ from...Ch. 3 - Compare cost-volume-profit (CVP) analysis with...Ch. 3 - Fixed costs are often defined as fixed over the...Ch. 3 - Prob. 6RQCh. 3 - What is the margin of safety? Why is this...Ch. 3 - Prob. 8RQCh. 3 - Write out the equation for the target volume (in...Ch. 3 - How do income taxes affect the break-even...
Ch. 3 - Why is it common to assume a fixed sales mix...Ch. 3 - What are some important assumptions commonly made...Ch. 3 - Prob. 13CADQCh. 3 - Prob. 14CADQCh. 3 - The typical cost-volume-profit graph assumes that...Ch. 3 - The assumptions of CVP analysis are so simplistic...Ch. 3 - Prob. 17CADQCh. 3 - Consider a class in a business school where volume...Ch. 3 - Prob. 19CADQCh. 3 - Prob. 20CADQCh. 3 - Consider the Business Application,...Ch. 3 - Consider the Business Application,...Ch. 3 - Prob. 23CADQCh. 3 - Profit Equation Components Identify each of the...Ch. 3 - Profit Equation Components Identify the letter of...Ch. 3 - Basic Decision Analysis Using CVP Anus Amusement...Ch. 3 - Basic CVP Analysis The manager of Dukeys Shoe...Ch. 3 - CVP AnalysisEthical Issues Mark Ting desperately...Ch. 3 - Basic Decision Analysis Using CVP Derby Phones is...Ch. 3 - Prob. 30ECh. 3 - Basic Decision Analysis Using CVP Warner Clothing...Ch. 3 - Basic Decision Analysis Using CVP Refer to the...Ch. 3 - Prob. 33ECh. 3 - Prob. 34ECh. 3 - Analysis of Cost Structure Spring Companys cost...Ch. 3 - CVP and Margin of Safety Bristol Car Service...Ch. 3 - CVP and Margin of Safety Caseys Cases sells cell...Ch. 3 - Prob. 38ECh. 3 - Prob. 39ECh. 3 - Refer to the data for Derby Phones in Exercise...Ch. 3 - Refer to the data for Warner Clothing in Exercise...Ch. 3 - CVP with Income Taxes Hunter Sons sells a single...Ch. 3 - CVP with Income Taxes Hammerhead Charters runs...Ch. 3 - Prob. 44ECh. 3 - Prob. 45ECh. 3 - Prob. 46ECh. 3 - Prob. 47ECh. 3 - CVP Analysis and Price Changes Argentina Partners...Ch. 3 - Prob. 49PCh. 3 - CVP AnalysisMissing Data Breed Products has...Ch. 3 - Prob. 51PCh. 3 - Prob. 52PCh. 3 - CVP AnalysisSensitivity Analysis (spreadsheet...Ch. 3 - Prob. 54PCh. 3 - Prob. 55PCh. 3 - Extensions of the CVP ModelSemifixed (Step) Costs...Ch. 3 - Prob. 57PCh. 3 - Extensions of the CVP ModelTaxes Odd Wallow Drinks...Ch. 3 - Prob. 59PCh. 3 - Prob. 60PCh. 3 - Extensions of the CVP ModelTaxes Toys 4 Us sells...Ch. 3 - Extensions of the CVP AnalysisTaxes Eagle Company...Ch. 3 - Extensions of the CVP ModelMultiple Products...Ch. 3 - Extensions of the CVP ModelMultiple Products...Ch. 3 - Prob. 65PCh. 3 - Prob. 66PCh. 3 - Prob. 67PCh. 3 - Prob. 68PCh. 3 - Extensions of the CVP ModelMultiple Products and...Ch. 3 - Extensions of the CVP ModelTaxes With Graduated...Ch. 3 - Prob. 71PCh. 3 - Financial Modeling Three entrepreneurs were...
Knowledge Booster
Similar questions
- Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.arrow_forwardDimitri 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?arrow_forwardPolaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.arrow_forward
- Make or Buy - Home Grocery (HG) provides home delivery of groceries. Customers submit orders to the HG website by selecting the needed items from a menu. Currently, HG has employees who deliver the groceries, but the company is considering the option of contracting out deliveries. The fixed cost of the grocery delivery operation is $500,000 per year, of which, $200,000 is avoidable if grocery deliveries are contracted out. A statistical study suggests delivery costs vary with both the number of customers and the number of items purchased. On average, the fixed annual delivery cost per customer is $250 and the average variable delivery cost of each grocery item delivered is $0.50. On average, each customer purchases 1,000 grocery items per year. Therefore, if there are 2,000 customers budgeted, the number of grocery item deliveries will be 2 million. Custom delivery (CD) has offered to deliver groceries for HG as a flat rate of $850 per customer per year irrespective of the number of…arrow_forward(The following information applies to the questions displayed below.] Charlevoix Cases makes mobile phone cases. The company has collected the following price and cost characteristics: Sales price Variable costs Fixed costs $ 12.00 per case 5.50 per case 397,800 per year Exercise 3-34 (Algo) Basic Decision Analysis Using CVP (LO 3-1) Assume that the company plans to sell 76,200 units annually. Consider requirements (b), (d). and (d) independently of each other. Required: a. What will be the operating profit? b. What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? Note: Do not round intermediate calculations. c. What is the impact on operating profit if variable costs per unit decrease by 20 percent? Increase by 10 percent? Note: Do not round intermediate calculations. d. Suppose that fixed costs for the year are 20 percent lower than projected and variable costs per unit are 20 percent higher than projected. What impact will these…arrow_forwardResearch on a new laptop case indicates that the product can be sold for $40 per unit. Cost analysis provides the following information. Fixed cost per period = $5500 Variable cost per unit = $25 Production capacity per period = 956 units What is the revenue function?arrow_forward
- Snow Company pays a production company to produce phones for them at a cost of $200 each. Variable costs total $120 per phone, and fixed expenses are $1,998,000. Snow Company currently sells the phones for $500. 1. Snow Company found a new company to produce phones at a lower cost of $185. Calculate breakeven point in units. 2. Predicted demand for its phones is 12,000 units. What is the lowest price that can be charged in order to earn a $198,000 profit? 3. Snow Company can sell 14,000 units, but has to increase advertising costs in order to stimulate the extra demand. Snow Company still wants to earn a $198,000 profit, by how much can Snow Co. increase advertising costs to help achieve its goal?arrow_forwardRequired: Laguna Print makes advertising hangers that are placed on doorknobs. It charges $0.18 and estimates its variable cost to be $0.16 per hanger. Laguna's total fixed cost is $2,260 per month, which consists primarily of printer depreciation and rent. Calculate the number of advertising hangers that Laguna must sell in order to break even. Note: Round your intermediate calculation to 2 decimal places and final answer to the nearest whole number. Break-even Hangersarrow_forwardGladstorm Enterprises sells a product for $45 per unit. The variable cost is $31 per unit, while fixed costs are $12,992. Determine the following: Round your answers to the nearest whole number. a. Break-even point in sales units fill in the blank 1 units b. Break-even point in sales units if the selling price increased to $60 per unit fill in the blank 2 unitsarrow_forward
- Answer the following question Required Dowling Computers makes 5,100 units of a circuit board, CB76, at a cost of $290 each. Variable cost per unit is $190 and fixed cost per unit is $100. HT Electronics offers to supply 5,100 units of CB76 for $270. If Dowling buys from HT it will be able to save $20 per unit of fixed costs but continue to incur the remaining $80 per unit. Should Dowling accept HT's offer? Explain. Dowling Computers makes 5.100 units of a circuit board, CB76, at a cost of $290 each. Variable cost per unit is $190 and fixed cost per unit is $100, HT Electronics offers to supply 5.100 units of CB76 for $270, If Dowling buys from HT it will be able to save $20 per unit of fixed costs but continue to incur the remaining Ş80 per unit. Should Dowling accept HT's offer? Explain. Begin by calculating the relevant cost per unit. (Only complete the necessary answer boxes.) Make Buy Relevant costs: Unit relevant cost Dowling Computers should V HT's offer. When comparing relevant…arrow_forwardDexter Company has been approached by a new customer with an offer to purchase 1,400 units of Dexter's product at a price of P3 each. The new customer is graphically separated from Dexter's other customers, and there would be no effect on existing sales. Dexter normally produces 10,000 units but only plans to produce and sell 8,000 in the coming year. The normal sales price is P5 per unit. Unit cost information is as follows: Direct materials P0.75 Direct labor 0.80 Variable overhead 0.40 Fixed Overhead 2.00 Total 3.95 If Dexter accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. However, the distribution center at the warehouse is operating at full capacity and would need to add capacity costing P1,000 for every 5,000 units to be packed and shipped. BY HOW MUCH WILL PROFIT INCREASE/ DECREASE IF THE ORDER IS ACCEPTED?arrow_forwardOutback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $140 per unit. Variable expenses are $98 per stove, and fixed expenses associated with the stove total $205,800 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 10,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $71,000 per month?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning