Lakeside Inc. produces a product that currently sells for $52.00 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $52.00 per unit. Current production costs per unit include direct materials, $14; direct labor, $16; variable overhead, $7.00; and fixed overhead, $7.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 8,400 units at $38.40 per unit. Lakeside currently has unused production capacity.

Required:
a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization.

ANSWER:

Increase in operating income by: ___________________

Expert Solution

	Existing	Proposed
SP	52
Direct Material	14	16.8	(20% increase)
Direct Labor	16	19.2	(20% increase)
Variable Overhead	7	7
Fixed Overhead	7	7
Income	8	-50

New order	8400	units
Selling Price	38.4	per unit


Prouction capacity is underutilized

Therefore, fixed cost will not be relevant

So net operating income from new order from not profit organization will be:-

SP	38.4
Direct Material	14
Direct Labor	16
Variable Overhead	7
Profit per unit	1.4
Units	8400

Increase in operating income	11760

ie $11760

Hi mate,

I would be grateful to you if you can provide a thumbs up and write one beautiful comment. It will improve my rating and let me continue my journey here.

In case of doubt, please comment. I will consider myself fortunate if I can help you.

All the best for your bright future.

ekkarill92 answered 1 year ago

Lakeside Inc. produces a product that currently sells for $68.40 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $68.40 per unit. Current production costs per unit include direct materials, $28; direct labor, $30; variable overhead, $14.00; and fixed overhead, $14.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product...

Lakeside Inc. produces a product that currently sells for $78.00 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $78.00 per unit. Current production costs per unit include direct materials, $30; direct labor, $32; variable overhead, $15.00; and fixed overhead, $15.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 10,000 units at $78.00 per unit. Lakeside currently has...

Lindon Company is the exclusive distributor for an automotive product that sells for $52.00 per unit...

Lindon Company is the exclusive distributor for an automotive product that sells for $52.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $366,600 per year. The company plans to sell 27,900 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales...

A manufacturer produces a product that sells for $10 per unit. Variable costs per unit are...

A manufacturer produces a product that sells for $10 per unit. Variable costs per unit are $6 and total fixed costs are $12,000. At this selling price, the company earns a profit equal to 10% of total dollar sales. By reducing its selling price to $9 per unit, the manufacturer can increase its unit sales volume by 25%. Assume that there are no taxes and that total fixed costs and variable costs per unit remain unchanged. If the selling price...

Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs...

Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs are $62.00 per unit and fixed costs are $12,000,000 a. calculate the break even point (number of units) b. calculate the EBIT for sales of 166,667units c. calculate the EBIT for sales of 500,000 units. d. create a break even chart for Pork Soda Inc. Please show work and explain each step please.

Kent Co. manufactures a product that sells for $52.00. Fixed costs are $270,000 and variable costs...

Kent Co. manufactures a product that sells for $52.00. Fixed costs are $270,000 and variable costs are $25.00 per unit. Kent can buy a new production machine that will increase fixed costs by $12,000 per year, but will decrease variable costs by $3.00 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units? 600 unit decrease 5,678 unit increase No effect on the break-even point in units 6,442 unit decrease 600 unit...

Concord, Inc. currently manufactures a wicket as its main product. The costs per unit are as...

Concord, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $12 Variable overhead 5 Fixed overhead 8 Total $25 Saran Company has contacted Concord with an offer to sell it 5700 of the wickets for $19 each. If Concord makes the wickets, variable costs are $17 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Concord make or buy the wickets? Buy;...

XYZ, Inc. produces a product that will sell this year for $200 per unit. Fixed costs...

XYZ, Inc. produces a product that will sell this year for $200 per unit. Fixed costs are expected to total $10,000 this year and remain constant for the following four years. Variable costs are expected to be $75 per unit this year and increase at a rate of 5% in each of the following four years. XYZ, Inc. expects to sell 2,000 units this year and in each of the following four years. To earn an equivalent uniform annual gross...

Cantor Products sells a product for $75. DM costs per unit and DL costs per unit...

Cantor Products sells a product for $75. DM costs per unit and DL costs per unit are $45. Depreciation Expenses costs and Production supervisor’s salary are $75,000. Answer the following questions: a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $200,000? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? d. If sales decrease by 30% from that...

9. Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal...

9. Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 units. Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented: A) operating income will decrease by $9,500 B) operating income will increase by...

Question