Question

In: Accounting

Minden Company manufactures a high-quality wooden birdhouse that sells for $25 per unit. Variable costs are...

Minden Company manufactures a high-quality wooden birdhouse that sells for $25
per unit. Variable costs are $12 per unit, and fixed costs total $210,000. The
company sold 30,000 birdhouses to customers during 2020. The president of
Minden Company believes the following changes should be made in 2021:

1. the selling price of the birdhouse should be reduced by 20%

2. increase advertising by $33,000

Assume these changes are made. Calculate the number of units Minden Company
must sell in 2021 in order to earn a net income that is 40% larger than the
net income earned in 2020.


I'm sorry for posting this, I just wanted to make sure I got the right answer before I posted this homework. Kind of tricked me up a little.

Solutions

Expert Solution

Thank you for your patience. Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
Minden
Income Statement- 2020 Amount $
Sell price                25.00
Less: Variable expenses                12.00
Contribution per unit                13.00
Number of units        30,000.00
Total Contribution      390,000.00
Fixed expense      210,000.00
Net Income
     180,000.00
Workings for 2021
Current Sell price                25.00
Reduction by 20%                  5.00
Sell price in 2021
               20.00
Sell price                20.00
Less: Variable expenses                12.00
Revised Contribution per unit in 2021                  8.00
Net Income      180,000.00
Increase by 40%        72,000.00
Revised Net Income for 2021      252,000.00
Target Contribution in 2021
Fixed expense      210,000.00
Advertising        33,000.00
Revised Net Income for 2021      252,000.00
Target Contribution in 2021      495,000.00
Revised Contribution per unit in 2021                  8.00
Units to be sold in 2021        61,875.00

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Minden Company manufactures a high-quality wooden birdhouse that sells for $25 per unit. Variable costs are...
Minden Company manufactures a high-quality wooden birdhouse that sells for $25 per unit. Variable costs are $12 per unit, and fixed costs total $210,000. The company sold 30,000 birdhouses to customers during 2020. The president of Minden Company believes the following changes should be made in 2021: 1. the selling price of the birdhouse should be reduced by 20% 2. increase advertising by $33,000 Assume these changes are made. Calculate the number of units Minden Company must sell in 2021...
Minden Company manufactures a high-quality wooden birdhouse that sells for $30 per unit. Variable costs are...
Minden Company manufactures a high-quality wooden birdhouse that sells for $30 per unit. Variable costs are $6 per unit and fixed costs total $180,000. During 2018, Minden Company sold 50,000 birdhouses to customers. The president of Minden Company believes the following changes should be made in 2019: 1. the selling price of the birdhouse should be increased by 20% 2. increase advertising by $30,000 A.)Assume these changes are made. Calculate the number of units Minden Company must sell in 2019...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 1,920,000 Variable expenses 960,000 Contribution margin 960,000 Fixed expenses 180,000 Net operating income $ 780,000 4-b. Assume the president expects this year's sales to increase by 19%. Using the degree of operating leverage from last year, what percentage increase in net operating...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,080,000 Variable expenses 1,040,000 Contribution margin 1,040,000 Fixed expenses 180,000 Net operating income $ 860,000 5. The sales manager is convinced that a 13% reduction in the selling price, combined with a $69,000 increase in advertising, would increase this year's unit sales...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 2,080,000 Variable expenses 1,040,000 Contribution margin 1,040,000 Fixed expenses 180,000 Net operating income $ 860,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: 5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $79,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 2,240,000 Variable expenses 1,120,000 Contribution margin 1,120,000 Fixed expenses 200,000 Net operating income $ 920,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales $ 400,000 Variable expenses 160,000 Contribution margin 240,000 Fixed expenses 180,000 Net operating income $ 60,000 5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising, would increase this year's unit sales...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:Sales$2,000,000Variable expenses1,000,000Contribution margin1,000,000Fixed expenses180,000Net operating income$820,000Required:Answer each question independently based on the original data:1. What is the product's CM ratio?2. Use the CM ratio to determine the break-even point in dollar sales.3. If this year's sales increase by $55,000 and fixed expenses do not change,...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses...
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:Sales$2,160,000Variable expenses1,080,000Contribution margin1,080,000Fixed expenses160,000Net operating income$920,000Required:1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $46,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT