Suppose that the ABC Corporation has a production (and sales) capacity of $1,000,000 per month. Its...

Suppose that the ABC Corporation has a production (and sales) capacity of $1,000,000 per month. Its fixed costs – over a considerable range of volume – are $350,000 per month, and the variable costs are $0.50 per dollar of sales.

What is the annual break even chart (D’)? Develop (graph) the break even chart.
What would be the effect on D’ of decreasing the variable cost per unit by 25% if the fixed costs thereby increased by 10%?
What would be the effect on D’ if the fixed costs were decreased by 10% and the variable cost per unit were increased by the same percentage?

Expert Solution

Rahul Sunny answered 4 months ago

ABC Company. has the capacity to produce 15,000 lamps each month. Current regular production and sales...

ABC Company. has the capacity to produce 15,000 lamps each month. Current regular production and sales are 12,000 lamps at a selling price of $16 each. The costs of making each lamp is: direct materials $5.00 direct labor 3.00 variable overhead 1.00 fixed overhead 1.25 variable selling costs 0.20 fixed selling costs 0.75 ABC Company has received a special order who wants to buy 6,000 lamps at a reduced price of $13 per lamp. ABC Company has determined that there...

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are:...

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials $6.00 Direct labor 5.00 Variable overhead 4.00 Fixed overhead 2.00 Marketing—fixed 6.00 Marketing/distribution—variable 4.60 Current monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,500 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Zephram's change in operating profits if the one-time-only special order is accepted?

The Immanuel Company has the capacity to produce 75,000 bins per month. - Fixed production costs...

The Immanuel Company has the capacity to produce 75,000 bins per month. - Fixed production costs are $120,000 per month, and the company currently sells 70,000 bins at $13 each based on the following unit costs: - Variable production cost $5.60 - Fixed production costs 1.60[Based on capacity] - Variable selling expense 1.00 The Immanuel Co has just obtained a request for a special order of 6,000 bins to be shipped at the end of the month at a selling...

The Molis Corporation has the capacity to produce 15,000 haks each month. Current regular production and...

The Molis Corporation has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of $15 each. Based on this level of activity, the following unit costs are incurred: Direct materials $5.00 Direct labor $3.00 Variable manufacturing overhead $0.75 Fixed manufacturing overhead $1.50 Variable selling expense $0.25 Fixed administrative expense $1.00 The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of...

Q.1 The Immanuel Company has the capacity to produce 75,000 bins per month. Fixed production costs...

Q.1 The Immanuel Company has the capacity to produce 75,000 bins per month. Fixed production costs are $120,000 per month, and the company currently sells 70,000 bins at $13 each based on the following unit costs: - Variable production cost $5.60 - Fixed production costs 1.60[Based on capacity] - Variable selling expense 1.00 The Immanuel Co has just obtained a request for a special order of 6,000 bins to be shipped at the end of the month at a selling price of $10 each. The price...

Sesnie Corporation has found that 60% of its sales in any given month are credit sales,...

Sesnie Corporation has found that 60% of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, Sesnie Corporation has experienced the following collection pattern: 25% received in the month of the sale 50% received in the month after the sale 18% received two months after the sale 7% of the credit sales are never received November sales for last year were $ 80,000, while December sales were $ 110,000. Projected...

LaChut Corporation has found that 80% of its sales in any given month are credit sales,...

LaChut Corporation has found that 80% of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, LaChut Corporation has experienced the following collection pattern: 20% received in the month of the sale 40% received in the month after the sale 24% received two months after the sale 16% of the credit sales are never received November sales for last year were $80,000, while December sales were $110,000. Projected sales for...

The Wade Corporation has the capacity to produce 10,000 units per year. Its predicted operations for...

The Wade Corporation has the capacity to produce 10,000 units per year. Its predicted operations for the year are as follows: Sales (8,000 units @ $25 each) $200,000 Manufacturing costs: Variable $8 per unit Fixed $50,000 Marketing and administrative costs: Variable $1 per unit Fixed $15,000 The accounting department has prepared the following projected income statement for the coming year for your use in making decisions. Sales $200,000 Variable costs: Manufacturing ($8 x 8,000) $64,000 Marketing ($1...

The production line produces a product which currently has annual sales of $1,000,000 and has a...

The production line produces a product which currently has annual sales of $1,000,000 and has a contribution to the business beyond ingredients of $500,000. Your line is currently operating at full standard capacity. You are putting in new equipment which will make the line more efficient and last for 10 years. The equipment will increase the capacity of the line by 30%. - so, add capability to produce $300,000 more per year and will eliminate 3 positions of manual labor...

The Weigelt Corporation has three branch plants with excess production capacity. Fortunately, the corporation has a...

The Weigelt Corporation has three branch plants with excess production capacity. Fortunately, the corporation has a new product ready to begin production, and all three plants have this capability, so some of the excess capacity can be used in this way. This product can be made in three sizes--large, medium, and small--that yield a net unit profit of $420, $360, and $300, respectively. Plants 1, 2, and 3 have the excess capacity to produce 750, 900, and 450 units per...

Question