Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 8, Problem 8.10SE
1.
To determine
To compute: How much bins of each size should the company SS will produce.
2.
To determine
To compute: Operating income of the company
3.
To determine
To explain: Why the operating income is less as compared to when the company is producing its optimal mix.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Required information
Learning Objective 05-P2: Compute the break-even point for a single-product company.
A company's break-even point for a period is the sales volume at which total revenues equal total costs. To compute a
break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a
break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio.
Cost-Volume-Profit Chart
Dollars
Maximum productive capacity = 1,800 units Sales = $180,000
$1800,000
$160,000
$140,000
$120,000
$100,000
Largest Income = $30,000
$80,000
Maximum productive capacity = 1,800 units
Break-Even Point (sales
of 800 units or $80,000)
Total Sales
Total Costs
Learning Tasks
A. Discussion Questions:
1. Explain why a contribution margin per unit becomes profit per unit above the breakeven
point.
2. Suppose a firm with a contribution margin percentage of 30% increased its advertising
expenses by P10,000 and found that sales increased by P 30,000. Was it a good
decision to increase advertising expenses? Suppose that the contribution margin ratio is
now 40%. Would it be a good decision to increase advertising expense?
B. Fill in the blanks for each of the following independent cases.
Case
Revenues
Variable Cost
Fixed Cost
Total Costs
Operating
Contribution
Income
Margin
Percentage
A
P500
P-
P800
P1,200
2,000
1,000
В
300
200
C
700
1,000
---- ----
1,500
300
40%
Assessment Task
Your manager would like you to conduct sensitivity analysis to see
how changing both the price and unit cost of a product affect
profits.
The following data is provided to you. Which of the following
actions needs to be completed before building a data table?
26
27 Price
28 Demand
29 Unit cost
30 Fixed cost
31 Revenue
32 Variable cost
33 Profit
B
с
50.00
28,000.0
12.00
D
E
Copied Cells
50.0
62,000.0
1,400,000.0=C28 C27
336,000.0=C28 C29
1,798,000.0 SUM(C31,C32.C30)
Select one:
The incorrect cells have been 'copied' and this will result in a
12.0
Chapter 8 Solutions
Managerial Accounting (5th Edition)
Ch. 8 - Prob. 1QCCh. 8 - (Learning Objective 1) Keys to making short-term...Ch. 8 - (Learning Objective 2) Which is true of...Ch. 8 - (Learning Objective 3) Which of the following...Ch. 8 - Prob. 5QCCh. 8 - Prob. 6QCCh. 8 - (Learning Objective 4) A segment margin is the a....Ch. 8 - (Learning Objective 5) When resources are...Ch. 8 - (Learning Objective 6) Which of the following is...Ch. 8 - Prob. 10QC
Ch. 8 - Determine relevance of information (Learning...Ch. 8 - Prob. 8.2SECh. 8 - Prob. 8.3SECh. 8 - Prob. 8.4SECh. 8 - Prob. 8.5SECh. 8 - Prob. 8.6SECh. 8 - Prob. 8.7SECh. 8 - Prob. 8.8SECh. 8 - Product mix decision: Unlimited demand (Learning...Ch. 8 - Prob. 8.10SECh. 8 - Outsourcing production decision (Learning...Ch. 8 - Relevant information for outsourcing delivery...Ch. 8 - Prob. 8.13SECh. 8 - Prob. 8.14SECh. 8 - Prob. 8.15SECh. 8 - Determine relevant and irrelevant information...Ch. 8 - SUSTAINABILITY ES-17A Sustainability and...Ch. 8 - Prob. 8.18AECh. 8 - Prob. 8.19AECh. 8 - Analyze special order decision (Learning Objective...Ch. 8 - Prob. 8.21AECh. 8 - Prob. 8.22AECh. 8 - Prob. 8.23AECh. 8 - Discontinuing a product line (Learning Objective...Ch. 8 - Prob. 8.25AECh. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.27AECh. 8 - Make-or-buy product component (Learning Objective...Ch. 8 - Prob. 8.29AECh. 8 - Prob. 8.30AECh. 8 - Prob. 8.31AECh. 8 - Prob. 8.32BECh. 8 - Prob. 8.33BECh. 8 - Prob. 8.34BECh. 8 - Prob. 8.35BECh. 8 - Prob. 8.36BECh. 8 - Prob. 8.37BECh. 8 - Prob. 8.38BECh. 8 - Prob. 8.39BECh. 8 - Prob. 8.40BECh. 8 - Identify constraint, then determine product mix...Ch. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.43BECh. 8 - Prob. 8.44BECh. 8 - Prob. 8.45BECh. 8 - Determine maximum outsourcing price (Learning...Ch. 8 - Prob. 8.47BECh. 8 - Prob. 8.48APCh. 8 - Special order decision and considerations...Ch. 8 - Prepare and use contribution margin statements for...Ch. 8 - Product mix decision under constraint (Learning...Ch. 8 - Outsourcing decision given alternative use of...Ch. 8 - Prob. 8.53APCh. 8 - Prob. 8.54BPCh. 8 - Prob. 8.55BPCh. 8 - Prepare and use contribution margin statements for...Ch. 8 - Prob. 8.57BPCh. 8 - Prob. 8.58BPCh. 8 - Prob. 8.59BPCh. 8 - Decide whether to discontinue a department...Ch. 8 - Prob. 8.61ACTCh. 8 - Outsourcing Decision at a Real Company Go to the...Ch. 8 - Prob. 8.63ACTCh. 8 - Prob. 8.64ACT
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Learning curve, cumulative average-time learning model. Northern Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow: Calculate the total variable costs of producing 2, 4, and 8 units.arrow_forwardProblem 4 (Target Costing, Strategy) Benchmark Industries manufactures large workbenches for industrial use. Wally Garcia, the vice president for marketing at Benchmark, has concluded from his market analysis that sales are dwindling for Benchmark's standard table because of aggressive pricing by competitors. Benchmark's table sells for P875 whereas the competition's comparable table is selling in the P80Q range. Garcia has determined that dropping price to P800 is necessary to regain the firm's annual market share of 10,000 tables. Cost data based on sales of 10,000 tables are: Budgeted Amount 400,000 sq. ft. 85,000 hrs. 30,000 hrs 320,000 hrs. Actual Amount Actual Cost 425,000 sq. ft. 100,000 hrs. 30,000 hrs. 320,000 hrs. Direct materials P2,700,000 1,000,000 300,000 4,000,000 Direct labor Machine setups Mechanical assemblyarrow_forwardCVP Analysis using a chart: The cost-volume-profit chart for Byron Manufacturing is shown. Use the graph to complete the sentences given below. SALES AND COSTS (Dollars) 20000 Sales 15000 Total Costs 10000 5000 100 200 300 400 500 600 700 800 900 1000 UNITS OF SALES Byron Manufacturing reaches its break-even level of activity when it sells 500 -v units and generates $12,000 v in revenue, because at this level of activity the firm's revenue equals -v its total cost. In addition, you can determine from the chart that Byron Manufacturing's fixed costs are $6,000 -v and its price per unit is $24.00 V and variable cost per unit is $12.00 If fixed costs increase, what will happen to the break-even point? The break-even point will increase. If the price per unit decreases, what will happen to the break-even point? The break-even point will increase.arrow_forward
- 6. A business has decided to develop and market a new laptop. Management has calculated the average cost for each laptop would be $1000 and has added a 70% margin to set the final price. Which type of pricing method is this business using? (a) Cost pricing (b) Market pricing (c) Penetration pricing (d) Competition pricing 7. Which of the following strategies uses a sales approach to marketing? (a) A business that focuses on producing products (b) A business that decides to increase its advertising budget (c) A business that decides to implement loyalty cards for their customers (d) A business that focuses on customer satisfaction in order to increase their salesarrow_forwardRefer to Cornerstone Exercise 3.4 for data on Dohini Manufacturing Companys purchasing cost and number of purchase orders. The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are: Required: 1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate. 2. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) 3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be? (Round your answer to the nearest dollar.) What is the total fixed purchasing cost? Why doesnt it equal the fixed cost calculated in Requirement 1?arrow_forwardProfit Planning and Control This case is a manufacturer and could make specialty bikes, ski or outdoor equipment, computers, food like chocolates, saltwater taffy, cookies, or donuts, etc. Create the balance sheet, income statement, and statement of the cash flow from the following information. Use the following information for the learning experiences Sales volume units = 11,000 Sales price/unit = $100 Variable manufacturing costs/unit = $60 Fixed manufacturing costs = $210,000 Fixed sales & administration costs = $190,000 Business income tax rate = 25% Current assets = $250,000 (Cash $50,000, Accounts Receivables $100,000, Inventory $100,000) Fixed assets = $750,000 Current liabilities = $200,000 (Accounts Payable $100,000, Short Term Debt $100,000) Long Term Debt = $300,000 Owners' Equity = $500,000arrow_forward
- Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has…arrow_forwardBased the LTV example in the marketing math spreadsheet, what is false? a. Life time value for the Home Theater example is 950 dollars. b. Can affect how managers work with customers. c. NPV adjusts profits from different years because 1 dollar earned in year one has a different worth than 1 dollar earned in the 5th year. d. Is a long-term evaluation of customers. e. Fixed costs really hurt positive LTV numbers.arrow_forward1.Use the table below to answer the following questions. Resource Prices A B C Labor $5 5 4 3 Capital 10 2 3 5 Entrepreneur 20 1 1 1 Assume that a firm finds its profits will be maximized when it produces 50 units of product W (i.e., “widgets”). Three techniques shown in the table above will produce exactly 50 widgets. Which technique is the least expensive way of producing a widget? Suppose the firm chooses the least-cost method of production. If widgets sell for $2 each, what is the total economic profit of the firm?arrow_forward
- Download and fill out the Section 5 Comprehensive Problem Template attached below to complete the problems (ignore question 5-2 as this applies to the "combined accounting and finance" course). Problem 5-1 Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. Required: a. Compute the breakeven point in units. b. Compute the number of units and sales revenue needed to achieve a $20 profit. (Ignore income taxes.) c. Assume that the income tax rate for Redlands is 40%. Compute the number of units and sales revenue needed to achieve an $18 net profit. d. Compute the number of units and sales revenue needed to achieve an 8% profit margin. (Ignore income taxes.) e. Compute the number of units and sales revenue needed to achieve a 12% net profit margin. (Assume a 40% income tax rate.) f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by…arrow_forwardQuestion 3) Textbook Exercise 13-29: Cost-plus operating income/return on investment pricing. 13-29 Cost-plus, target return on investment pricing. Zoom-o-licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Zoom-o-licious makes a variety of candy, the cost differences are insignificant, and the cases all sell for the same price. Zoom-o-licious has a total capital investment of $15,000,000. It expects to produce and sell 300,000 cases of candy next year. Zoom-o-licious requires a 10% target return on investment. Expected costs for next year are: Variable production costs $4.00 per case Variable marketing and distribution costs $1.00 per case Fixed production costs $300,000 Fixed marketing and distribution costs $400,000 Other fixed costs $200,000 Zoom-o-licious prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital.…arrow_forwardQuestion 2 (input refer to picture attached) a) Based on Return of Investment (ROI) evaluation, which unit will you recommend to your management to be purchased and why? b) From Life Cycle Cost (LCC) Analysis, would you Brand X or Brand Y crane? What is your recommendation and why? c) Based on the Minimum Acceptable Rate of Return (MARR), if the company hurdle rate is 20 %, would you choose Brand X or Brand Y and why? – include the cashflow diagramarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license