Question
In: Accounting
A company produces a product that currently costs $8 in variable costs and $2 in fixed...
A company produces a product that currently costs $8 in variable
costs and $2 in fixed costs. It sells the product for $14. If
processed further, the company will spend an additional $6 in
variable costs and $2 in fixed costs. Each unit would then be sold
for $24.
Why would the company choose to process further?
Solutions
Expert Solution
Answer-------------Yes
The company should chose to process further
Working
| Sell as it is | Process further | Net income Increase (decrease) | |
| Sales price per unit | $ 14.00 | $ 24.00 | $ 10.00 |
| Cost per unit | |||
| Variable | $ 8.00 | $ 14.00 | $ (6.00) |
| Fixed | $ 2.00 | $ 4.00 | $ (2.00) |
| Total | $ 10.00 | $ 18.00 | $ (8.00) |
| Net income per unit | $ 4.00 | $ 6.00 | $ 2.00 |
ekkarill92 answered 1 year agoRelated Solutions
A company produces a product that currently costs $8 in variable costs and $2 in fixed...
A company produces a product that currently costs $8 in variable
costs and $2 in fixed costs. It sells the product for $14. If
processed further, the company will spend an additional $6 in
variable costs and $2 in fixed costs. Each unit would then be sold
for $24.
Why would the company choose to process further?
Cascade Company estimated the following variable and fixed cost for the only product it produces: Variable...
Cascade Company estimated the following variable and fixed cost
for the only product it produces:
Variable Cost Per Unit
Fixed Cost
Direct Materials
$132.30
$ 0
Direct Labor
$115.30
$ 0
Factory Overhead
$24.50
$264,000
Sales Salaries and Commissions
$12.70
$245,000
Advertising
$0
$75,000
Travel
$0
$39,500
Misc. Selling Expenses
$6.70
$24,500
Office and Officer Salaries
$0
$220,000
Supplies
$6.30
$15,000
Misc. Administrative Expenses
$2.20
$17,000
1) Prepare an estimated Contribution Margin Income Statement for
the year ended December...
Cascade Company estimated the following variable and fixed cost for the only product it produces: Variable...
Cascade Company estimated the following variable and fixed cost
for the only product it produces:
Variable Cost Per Unit
Fixed Cost
Direct Materials
$132.30
$ 0
Direct Labor
$115.30
$ 0
Factory Overhead
$24.50
$264,000
Sales Salaries and Commissions
$12.70
$245,000
Advertising
$0
$75,000
Travel
$0
$39,500
Misc. Selling Expenses
$6.70
$24,500
Office and Officer Salaries
$0
$220,000
Supplies
$6.30
$15,000
Misc. Administrative Expenses
$2.20
$17,000
1. Prepare an estimated Contribution Margin Income
Statement for the year ended December...
Cohen Company produces and sells socks. Variable costs are $5.40 per pair, and fixed costs for...
Cohen Company produces and sells socks. Variable costs are $5.40
per pair, and fixed costs for the year total $76,500. The selling
price is $9 per pair.
Required:
1.
Calculate the breakeven
point in units.
2.
Calculate the breakeven
point in sales dollars.
3.
Calculate the units required to make a before-tax profit of
$45,000.
4.
Calculate the sales in dollars required to make a before-tax
profit of $38,700. (Do not round intermediate
calculations.)
5.
Calculate the sales, in units...
Select a product and identify the fixed and variable costs of producing the product. If you...
Select a product and identify the fixed and variable costs of
producing the product. If you were responsible for managing the
costs, how would you reduce them in order to increase
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Please give 1 or two examples
Exercise 1-8 Product Costs and Period Costs; Variable and Fixed Costs [LO1-3, LO1-4] Kubin Company’s relevant...
Exercise 1-8 Product Costs and Period Costs; Variable and Fixed
Costs [LO1-3, LO1-4]
Kubin Company’s
relevant range of production is 30,000 to 35,000 units. When it
produces and sells 32,500 units, its average costs per unit are as
follows:
Average Cost per Unit
Direct
materials
$
9.00
Direct
labor
$
6.00
Variable
manufacturing overhead
$
3.50
Fixed
manufacturing overhead
$
7.00
Fixed selling
expense
$
5.50
Fixed
administrative expense
$
4.50
Sales
commissions
$
3.00
Variable
administrative expense
$...
Exercise 1-8 Product Costs and Period Costs; Variable and Fixed Costs [LO1-3, LO1-4] Kubin Company’s relevant...
Exercise 1-8 Product Costs and Period Costs; Variable and Fixed
Costs [LO1-3, LO1-4]
Kubin Company’s relevant range of production is 21,000 to 25,000
units. When it produces and sells 23,000 units, its average costs
per unit are as follows:
Average Cost per Unit
Direct materials
$
8.10
Direct labor
$
5.10
Variable manufacturing overhead
$
2.60
Fixed manufacturing overhead
$
6.10
Fixed selling expense
$
4.60
Fixed administrative expense
$
3.60
Sales commissions
$
2.10
Variable administrative expense
$...
Kanada Inc. currently produces a product with the following cost characteristics: Selling price $85 Variable costs...
Kanada Inc. currently produces a product with the following cost
characteristics:
Selling price
$85
Variable costs – production
31
Variable costs – selling and administrative
10
Total fixed costs
$957458
Plant capacity
40542
Current product/sales volume
36429
Kanada Inc. can purchase additional capacity at a cost of $31426 in
increments of 2730 units. A customer approaches AB Inc. for a
special one-time order to purchase 9573 units. 62% of current
variable selling and administrative costs would be incurred with
this...
Vernon Company incurs annual fixed costs of $113,710. Variable costs for Vernon’s product are $25.20 per...
Vernon Company incurs annual fixed costs of $113,710. Variable
costs for Vernon’s product are $25.20 per unit, and the sales price
is $40.00 per unit. Vernon desires to earn an annual profit of
$65,000.
Required
Use the contribution margin ratio approach to determine the sales
volume in dollars and units required to earn the desired profit.
(Do not round intermediate calculations. Round your final
answers to the nearest whole number.)
Currently, the unit selling price of a product is $310, the unit variable cost is $250, and the total fixed costs are $918,000.
Currently, the unit selling price of a product is $310, the unit variable cost is $250, and the total fixed costs are $918,000. A proposal is being evaluated to increase the unit selling price to $340.
a. Compute the current break-even sales (units).units
b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.units
Break-Even Sales and Sales to Realize Income from Operations
For the current year ended October 31,...
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