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In: Accounting
Shelly's Boutiques and Crafts had revenue of $5,700,000 this year on sales of 575,000 units. Variable...
Shelly's Boutiques and Crafts had revenue of $5,700,000 this year on sales of 575,000 units. Variable costs were 35% and fixed costs totaled $3,150,000. Although the first five years were relatively profitable, increases in competition have led to a negative trend in profitability that has led them to the point where they have to make some changes to stay afloat. The company is evaluating two options to stay afloat.
Option 1:Purchase machinery to automate their operations. This machinery costs $625,000, but will decrease variable costs by 9%.
Option 2:Outsource the production of one of their main components that requires a substantial amount of machinery and skilled labor. This will reduce fixed costs by $425,000, but increases variable costs from their current 35% of sales to 40% of sales.
d.) Calculate the break even point in units after applying Option 1: What is the new fixed cost in total? What is the new contribution margin per unit? What is the new break even point in units?
Solutions
ekkarill92 answered 1 hour agoRelated Solutions
Shelly's Boutiques and Crafts had revenue of $5,700,000 this year on sales of 575,000 units. Variable...
Shelly's Boutiques and Crafts had revenue of $5,700,000 this
year on sales of 575,000 units. Variable costs were 35% and fixed
costs totaled $3,150,000. Although the first five years were
relatively profitable, increases in competition have led to a
negative trend in profitability that has led them to the point
where they have to make some changes to stay afloat. The company is
evaluating two options to stay afloat.
Option 1: Purchase machinery to automate their operations. this
machinery cost...
Shelly's Boutiques and Crafts had revenue of $5,700,000 this year on sales of 575,000 units. Variable...
Shelly's Boutiques and Crafts had revenue of $5,700,000 this
year on sales of 575,000 units. Variable costs were 35% and fixed
costs totaled $3,150,000. Although the first five years were
relatively profitable, increases in competition have led to a
negative trend in profitability that has led them to the point
where they have to make some changes to stay afloat. The company is
evaluating two options to stay afloat.
Option 1:Purchase machinery to automate their operations. This
machinery costs $625,000,...
Dayton company had sales revenue of $900,000 for the year. Inaddition, the following information is...
Dayton company had sales revenue of $900,000 for the year. In
addition, the following information is available related to the
cost of the units sold:Beginning Inventory$ 480,000Purchases 233,000Freight-in 8,300Purchase Discounts25,000Purchases Allowances5,300Operating expenses177,000Ending inventory243,000At what amount would the company report gross profit?A. $439,700B. $452,000C. $460,300D. $430,000
Polzin Company had sales in 2010 of $1,800,000 on 60,000 units. Variable costs totalled $860,000, and...
Polzin Company had sales in 2010 of $1,800,000 on 60,000 units.
Variable costs totalled $860,000, and fixed costs totaled
$550,000.
A new raw material is available that will decrease the variable
costs per unit by 20% (or $2.80). However, to process the new raw
material, fixed operating costs will increase by $65,000.
Management feels that one-half of the decline in the variable costs
per unit should be passed on to customers in the form of a sales
price reduction. The...
Volmar Company had sales in 2020 of $1,602,000 on 53,400 units. Variable costs totalled $534,000, and...
Volmar Company had sales in 2020 of $1,602,000 on 53,400 units.
Variable costs totalled $534,000, and fixed costs totalled
$911,400.
A new raw material is available that will decrease the variable
costs per unit by 20% (or $2.00). However, to process the new raw
material, fixed operating costs will increase by $43,500.
Management feel that one half of the decline in the variable costs
per unit should be passed on to customers in the form of a sales
price reduction....
The following information is available for year 1 for Pepper Products: Sales revenue (180,000 units)...
The following
information is available for year 1 for Pepper Products:
Sales revenue
(180,000 units)
$
3,240,000
Manufacturing
costs
Materials
$
191,000
Variable cash
costs
162,000
Fixed cash
costs
373,000
Depreciation
(fixed)
1,138,000
Marketing and
administrative costs
Marketing
(variable, cash)
481,000
Marketing
depreciation
171,000
Administrative
(fixed, cash)
582,000
Administrative
depreciation
85,000
Total costs
$
3,183,000
Operating
profits
$
57,000
All depreciation charges are fixed and are expected to remain the
same for year 2. Sales volume is expected...
The following information is available for year 1 for Pepper Products: Sales revenue (250,000 units)...
The following information is available for year 1 for Pepper
Products:
Sales revenue (250,000 units)
$
5,750,000
Manufacturing costs
Materials
$
338,000
Variable cash costs
287,000
Fixed cash costs
661,000
Depreciation (fixed)
2,016,000
Marketing and administrative costs
Marketing (variable, cash)
852,000
Marketing depreciation
302,000
Administrative (fixed, cash)
1,027,000
Administrative depreciation
151,000
Total costs
$
5,634,000
Operating profits
$
116,000
All depreciation charges are fixed and are expected to remain the
same for year 2. Sales volume is expected...
The following information is available for year 1 for Pepper Products: Sales revenue (210,000 units) $...
The following information is available for year 1 for Pepper
Products: Sales revenue (210,000 units) $ 3,150,000 Manufacturing
costs Materials $ 168,000 Variable cash costs 142,400 Fixed cash
costs 337,600 Depreciation (fixed) 989,000 Marketing and
administrative costs Marketing (variable, cash) 422,400 Marketing
depreciation 149,600 Administrative (fixed, cash) 509,200
Administrative depreciation 64,800 Total costs $ 2,783,000
Operating profits $ 367,000 All depreciation charges are fixed and
are expected to remain the same for year 2. Sales volume is
expected to fall...
The following information is available for year 1 for Pepper Products: Sales revenue (300,000 units) $...
The following information is available for year 1 for Pepper
Products: Sales revenue (300,000 units) $ 8,100,000 Manufacturing
costs Materials $ 478,000 Variable cash costs 406,000 Fixed cash
costs 935,000 Depreciation (fixed) 2,851,000 Marketing and
administrative costs Marketing (variable, cash) 1,205,000 Marketing
depreciation 428,000 Administrative (fixed, cash) 1,456,000
Administrative depreciation 213,000 Total costs $ 7,972,000
Operating profits $ 128,000 All depreciation charges are fixed and
are expected to remain the same for year 2. Sales volume is
expected to fall...
In the current year, the Best Corporation had sales revenue of $380,000, operating expenses of $390,000,...
In the current year, the Best Corporation had sales revenue of
$380,000, operating expenses of $390,000, and charitable
contributions totaling $9,000. In addition, the company received a
$50,000 cash dividend from another domestic corporation, a company
in which it held a 15 percent ownership interest. What is Best
Corporation’s taxable income?
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