Question

In: Accounting

Albright Manufacturing, which maintains the same level of inventory at the end of each year, provided...

Albright Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year:

Fixed Expenses Variable Expenses per unit sold Production Costs: $2.30 Direct Materials $4.70 Direct Labor $3.00 Factory Overhead $225,000 Selling Expenses: Sales salaries and commissions $97,000 $0.75 Advertising $47,500 Miscellaneous selling expense $16,200 General Expenses: Office salaries $92,000 Supplies $12,300 $0.25 Miscellaneous general expenses $15,000 Total $505,000 $11.00

The selling price of single product is $16. In recent years, profits have fallen and management is now considering a number of alternatives. Albright wants to have a net income next year of $250,000, but expects to sell only 120,000 units unless some changes are made.

Requirement:

? Compute the breakeven point.

? The president of Albright has asked you to calculate the company’s projected net income (assuming 120,000 units are sold) and the sales needed to achieve the company’s net income objective for next year. Also, compute Albright’s contribution margin per unit, contribution margin ratio, and breakeven point for next year.

? Based on Albright’s current situation, will it earn its target net income? If not, how many units need to be sold to achieve the target?

Solutions

Expert Solution

Rreq 1:
Total Variable cost per unit:
Production cost 2.3
Direct Material 4.7
Direct Labor 3
Sales commission 0.75
Supplies 0.25
Total Variable cost per unit: 11
Selling price per unit 16
Contribution Margin per unit 5
CM ratio: 5/16 *100 = 31.25%
Break even point in units: Total Fixed cost / CM per unit
505000 /5 = 101000
Break even in $: Total Fixed cost/ CM ratio
505000 /31.25% = $ 1616,000
Req 2:
Projected net income:
Sales revnue (120000*16) 1920000
Less: Variable cost (120000*11) 1320000
Contribution margin 600000
Less: Fixed cost 505000
Net income 95000
Req c:
So, the management will not be able to earn taget income in the current situation next year.
Number of units to be sold next year under current situation is as under:
Number of units: Target contribution / CM per unit
(505000+250000) / 5 = 153000 units

Related Solutions

The Foxboro Manufacturing Company provided you with the following information for the fiscal year end December...
The Foxboro Manufacturing Company provided you with the following information for the fiscal year end December 31 Work-in-process inventory, 12/31 57,900 Finished goods inventory, 1/1 307,400 Direct labor costs incurred 1,004,300 Manufacturing overhead costs 2,693,400 Direct materials inventory, 1/1 250,800 Finished goods inventory, 12/31 511,000 Direct materials purchased 1,750,200 Work-in-process inventory, 1/1 101,000 Direct materials inventory, 12/31 169,400 A) Compute the total manufacturing costs incurred during the year. B) Compute the total work-in-process during the year. C) Compute cost of...
A $1000 loan is being repaid with level payments at the end of each year for...
A $1000 loan is being repaid with level payments at the end of each year for 4 years using a sinking fund method. The loan has 10% effective interest per year and the sinking fund has 8% interest per year. Create a sinking fund table for this payment plan. Include a column for the period, interest paid that period, sinking fund deposit that period, interest earned in the sinking fund that period and the balance in the sinking fund at...
A 18 year loan is being repaid with level payments at the end of each month....
A 18 year loan is being repaid with level payments at the end of each month. The loan rate of interest is 15.6% compounded monthly. In which month is the interest portion approximately equal to 5 times principal the portion? Give an integer answer.
A five-year loan is being repaid with level monthly installments, one at the end of each...
A five-year loan is being repaid with level monthly installments, one at the end of each month beginning on 1/1/2018 and ending on 12/31/2022. A 12% nominal annual interest rate compounded monthly was used to determine the amount of each monthly installment. In which of the following periods does the outstanding loan balance first fall below one-half of the original amount of the loan? a) January 2018 through March 2020 b) April 2020 through June 2020 c) July 2020 through...
a $30000 5-year payment loan with level payment payable at the end of each month. (i)...
a $30000 5-year payment loan with level payment payable at the end of each month. (i) Calculate the level payment of each month with loan interest of 8% effective monthly. (ii) Calculate the loan balance at the end of month 3 after the third loan payment is made by using retrospective method. (iii) Calculate the loan balance at the end of month 3 after the third loan payment is made by using prospective method. (iv) what is total interest paid...
Question 3 Consider each of the following independent situations: A. Inventory on hand at year-end has...
Question 3 Consider each of the following independent situations: A. Inventory on hand at year-end has been valued at cost in the financial report of your client. However, net realisable value is 10% below cost according to the audit findings. The difference is a material amount. B. In the previous financial year your client purchased property and entered into a contract to develop a shopping complex and then sell the developed real estate to an unrelated third party for a...
The data provided below is the same for each item in a set of interrelated items...
The data provided below is the same for each item in a set of interrelated items about the FIFO approach to processes costing. Only the question asked tends to differ from item to item. Together this set of items addresses the same problem. Students are encouraged to work the ENTIRE problem out on scratch paper before responding to any items that relate to this problem. Knuckle makes t-shirts. It uses the FIFO approach to process costing and has a single-stage...
Manufacturing Company reported the following year-end information: Beginning work in process inventory $1,080,000 Beginning raw materials...
Manufacturing Company reported the following year-end information: Beginning work in process inventory $1,080,000 Beginning raw materials inventory 300,000 Ending work in process inventory 900,000 Ending raw materials inventory 480,000 Raw materials purchased 960,000 Direct labor 900,000 Manufacturing overhead 720,000 Laflin Manufacturing Company's cost of goods manufactured for the year is $2,400,000 $2,580,000 $2,220,000 $2,760,000. Please, I need a help? Thanks.
Explain the need for taking a physical inventory at the end of the year.
Explain the need for taking a physical inventory at the end of the year.
a) The will of Warren’s grandfather provided that, starting at the end of year 1, Warren...
a) The will of Warren’s grandfather provided that, starting at the end of year 1, Warren is to receive £14,000 a year forever. If Warren wants to sell the right to receive such stream of payments and the annual interest rate is 7 per cent, how much should he ask for? Now determine the value of this stream of payments if the first payment would occur starting at the end of the year 4? Explain your calculations in each case....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT