A new line of athletic clothing is being introduced at Ned's a regional sporting goods store....
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A new line of athletic clothing is being introduced at Ned's a regional sporting goods store. A lightweight, warm, weather-proof hoodie in this line is its key introductory item, expected to bring attention to the entire line and to the sporting goods store itself. The problem is that after Ned, the owner, agreed to bring this new product into the store, the staff lost some of the cost information that was used to estimate the profitability of the hoodies. All they could find in their records was the following information. Budgeted operating income Total sales Variable cost per unit Related fixed costs $67,000 per month $112,000 per month $25 per unit $10,000 per month Required a. Determine the following missing information: sales volume used in the estimate, selling price per unit, and contribution margin per unit. to pay b. It turns out that Ned will 40% more per unit for the hoodies than originally planned. What effect does this change have on Ned's anticipated operating income from the hoodies? Specify the dollar amount and direction of the change. c. Even though the cost per unit of the hoodie is higher than anticipated (per part (b)), the quality of the hoodie has come into question. After the hoodies had been on the shelves for only three days, five customers had returned theirs, complaining that fabric under the arms had ripped after just one use. If you were Ned, would you do anything about this issue? Explain a few options that Ned has in responding to this situation. Further explain how each of these options might affect Ned's sales projections. A new line of athletic clothing is being introduced at Ned's a regional sporting goods store. A lightweight, warm, weather-proof hoodie in this line is its key introductory item, expected to bring attention to the entire line and to the sporting goods store itself. The problem is that after Ned, the owner, agreed to bring this new product into the store, the staff lost some of the cost information that was used to estimate the profitability of the hoodies. All they could find in their records was the following information. Budgeted operating income Total sales Variable cost per unit Related fixed costs $67,000 per month $112,000 per month $25 per unit $10,000 per month Required a. Determine the following missing information: sales volume used in the estimate, selling price per unit, and contribution margin per unit. to pay b. It turns out that Ned will 40% more per unit for the hoodies than originally planned. What effect does this change have on Ned's anticipated operating income from the hoodies? Specify the dollar amount and direction of the change. c. Even though the cost per unit of the hoodie is higher than anticipated (per part (b)), the quality of the hoodie has come into question. After the hoodies had been on the shelves for only three days, five customers had returned theirs, complaining that fabric under the arms had ripped after just one use. If you were Ned, would you do anything about this issue? Explain a few options that Ned has in responding to this situation. Further explain how each of these options might affect Ned's sales projections.
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a To determine the missing information we can use the contribution ... View the full answer
Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
Posted Date:
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