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Posted on Aug 26, 2024

6 e and f 6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing

6 e and f

6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing by 20%. unit. a) What will the new profit formula be? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increase? Note -- Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per Total Salese 5 16 > 1000 - SI6.000 Variable (ost. 33,000+ 3(asx 1000 units) = $58,000 CM ratio. 516,000 58,000 2=0.8875 stbrooo Break Fren Point 415,000/ (516-5): c) If they produce and sell the same number of units for Year 4. what will their new Net Operating 906) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units e) Assume TrueBeat Company need to make a minimum profit of $1,000,000 to keep its creditors and investors happy. What minimum sales price will they need to charge if they produce and sell 6,000 units? Hint: Remember that CM = Sales price - Variable expenses. f) Conclusion: Use your calculation above, should TrueBeat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. b) Using absorption costing, prepare an absorption costing income statements for TrueBeat for Years 2, 3 and 4. Sales revenue Cost of Goods Sold Gross Margin S&A expenses Nct Onerating Income TrueBeat Income Statement Absorption Costing) For Y cars ending December 31 Year 2 Year 3 1.54 RDD 2.520. DINO 7151600 1192.600 932.60 1.387.5 DD 312.500 337,500 520.000 1,050.000 Year 4 3.196.DDD 1.322.000 1.764. 250.000 c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your answer. The net operating income in year is more than double, than your the decision tatem sem to be good de vision the wendy manufactured drum sett promils celotion to 4) TrueBeat expects production and sales levels to remain constant from year 4 onward at 6,000 drum Company finally sets. Write a Profit Formula for TrueBeat's operations using variable costing. NOI = Q x CM unit dem Shorela FC, where Q represents the number of units produced and sold, CM unit is the contribution margin pweding gore per unit and FC is the total fixed expenses. Tacame poche a) Profit formula Contribution maryn: Total Soles - Total variable expenses, Profita Contribution margin - Total b) Complete chart assuming the same number of units will be produced and sold. fred expenses Units Sales Variable Fixed produced/sold Revenue Expenses Expenses Profit/NOI 4.0002.06 676. DOD 204. DO 5.000 250.000 304,000 1.BLO 6,000 3,096ADD 4. DOD 304.100 1.778. 7.000 EX512 ILIRBODA 304. DOD 2.225.00 c) Prepare a Cost-Volume-Profit graph for TrueBeat Company (you can use the graph at the end of the assignment or create your own) i) Label both the x and y axis using appropriate increments. Dollar values should be used for they axis and number of units for the x axis. ii) Plot the Fixed Expense line. Label it. iii) Plot the Sales Revenue line and label it. iv) Plot the Total Expense line and label it. v) Indicate the Break-even Point on the graph and label it. vi) Shade and label the portion of the graph that indicates the company's positive profit. 5) Base scenario calculations: Using the Profit Formula calculated in 5) above, calculate the following assuming TrueBeat produces and sells 6,000 units as their "base" scenario Sales Revenue 6.000 514 3.045,000 Net Operating Income 1,778.000 Contribution Margin 2002, Contribution Margin Contribution Margin percent 2.012,000/1,041,000 = 61.251 Break-even in units 304,000/(2012.-o/) 304,00) 347 976 units Break-even in dollars 3040/67.2552,05 Margin of safety in units 6.400- 176 5,124 mois Margin of safety percent (8.bo - 451,00 33/3916.00 = 25.40% Margin of safety in dollars 7.04h,000 -452,045 2,643,955 Degree of Operating Leverage 2,022,6/1,778,00 1.17 Looking at changes: TrueBeat is not confident their expenses will hold in ycar 4. Management wants to examine the potential impact of the following situations. Assume cach situation independent of one another. The Profit Formula and 6,000 units produced and sold for Year 4 as your "base" scenario. 6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing by 20%. a) What will the new profit formula be? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increasc? Note - Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per unit. Total Salse 5 16 1000516,000 Variable (osta 33,000+ (25x 1000 units) = $58,000 CM ratio. 516,000 - 58,000 - 0.987 I DOO Break then Point 415,000/ (516-58)= c) If they produce and sell the same number of units for Year 4, what will their new Net Operating 90.) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units e) Assume TrueBeat Company need to make a minimum profit of $1,000,000 to keep its creditors and investors happy. What minimum sales price will they need to charge if they produce and sell 6,000 units? Hint: Remember that CM=Sales price - Variable expenses. 1) Conclusion: Use your calculation above, should TrucBcat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. All other costs are considered consistent and within relevant range for production of 4,000 to 8,000 units. Use the information provided above to adjust amounts from the table in 1). Include the adjusted amounts in the table below. TrueBeat adjusted summarized data for production 4,000 to 8,000 units Adjust summarized data Average Cost Total per Unit Dollars Direct materials 19 Direct labor 103 Variable manufacturing overhead sl GOL Fixed manufacturing overhead $ 190.000 7000 + 3000+ 63,07 +110,000 Fixed selling & administrative expense 275.000 170,000 33,00 72,00 Variable selling & administrative expense $13.5 Sales price per unit $ $ Note: The table above may be submitted early for verification. Upload it to the "submission" drop box on D2L, email or text a photo or PDF to Teri and she will look at it before you continue with the project. 3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income TrueBeat Income Statement Variable Costing) For Years ending December 31 Year 2 Year 3 1548.000 2,580.000 56700D 945. DOO 27.500 62.500 94.500 1.5 72.500 198.000 198. DDO 275.D 275.000 470.500 1.099.500 Year 4 3.091.000 1. 134.000 75.000 1887.000 198.ODD 275.000 1) Summarize the information for TrueBeat from 09 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ Fixed selling & administrative expense Variable selling & administrative expenses 25 SA 239,000 7000+ 16000 + 42,000 33,000+ 36,000+ 170,000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. . With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. [The following information applies to the questions displayed below.] Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $516 each. Costs 1. Plastic for casing-$19,000 2. Wages of assembly workers--$90,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$33,000 5. Drum stands (1,000 stands purchased)-$35,000 6. Rent cost of equipment for sales staff-$36,000 7. Upper management salaries--$170,000 8. Annual flat fee for factory maintenance service-$16,000 9. Sales commissions--$25 per unit 10. Machinery depreciation, straight-line--$42,000 6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing by 20%. unit. a) What will the new profit formula be? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increase? Note -- Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per Total Salese 5 16 > 1000 - SI6.000 Variable (ost. 33,000+ 3(asx 1000 units) = $58,000 CM ratio. 516,000 58,000 2=0.8875 stbrooo Break Fren Point 415,000/ (516-5): c) If they produce and sell the same number of units for Year 4. what will their new Net Operating 906) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units e) Assume TrueBeat Company need to make a minimum profit of $1,000,000 to keep its creditors and investors happy. What minimum sales price will they need to charge if they produce and sell 6,000 units? Hint: Remember that CM = Sales price - Variable expenses. f) Conclusion: Use your calculation above, should TrueBeat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. b) Using absorption costing, prepare an absorption costing income statements for TrueBeat for Years 2, 3 and 4. Sales revenue Cost of Goods Sold Gross Margin S&A expenses Nct Onerating Income TrueBeat Income Statement Absorption Costing) For Y cars ending December 31 Year 2 Year 3 1.54 RDD 2.520. DINO 7151600 1192.600 932.60 1.387.5 DD 312.500 337,500 520.000 1,050.000 Year 4 3.196.DDD 1.322.000 1.764. 250.000 c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your answer. The net operating income in year is more than double, than your the decision tatem sem to be good de vision the wendy manufactured drum sett promils celotion to 4) TrueBeat expects production and sales levels to remain constant from year 4 onward at 6,000 drum Company finally sets. Write a Profit Formula for TrueBeat's operations using variable costing. NOI = Q x CM unit dem Shorela FC, where Q represents the number of units produced and sold, CM unit is the contribution margin pweding gore per unit and FC is the total fixed expenses. Tacame poche a) Profit formula Contribution maryn: Total Soles - Total variable expenses, Profita Contribution margin - Total b) Complete chart assuming the same number of units will be produced and sold. fred expenses Units Sales Variable Fixed produced/sold Revenue Expenses Expenses Profit/NOI 4.0002.06 676. DOD 204. DO 5.000 250.000 304,000 1.BLO 6,000 3,096ADD 4. DOD 304.100 1.778. 7.000 EX512 ILIRBODA 304. DOD 2.225.00 c) Prepare a Cost-Volume-Profit graph for TrueBeat Company (you can use the graph at the end of the assignment or create your own) i) Label both the x and y axis using appropriate increments. Dollar values should be used for they axis and number of units for the x axis. ii) Plot the Fixed Expense line. Label it. iii) Plot the Sales Revenue line and label it. iv) Plot the Total Expense line and label it. v) Indicate the Break-even Point on the graph and label it. vi) Shade and label the portion of the graph that indicates the company's positive profit. 5) Base scenario calculations: Using the Profit Formula calculated in 5) above, calculate the following assuming TrueBeat produces and sells 6,000 units as their "base" scenario Sales Revenue 6.000 514 3.045,000 Net Operating Income 1,778.000 Contribution Margin 2002, Contribution Margin Contribution Margin percent 2.012,000/1,041,000 = 61.251 Break-even in units 304,000/(2012.-o/) 304,00) 347 976 units Break-even in dollars 3040/67.2552,05 Margin of safety in units 6.400- 176 5,124 mois Margin of safety percent (8.bo - 451,00 33/3916.00 = 25.40% Margin of safety in dollars 7.04h,000 -452,045 2,643,955 Degree of Operating Leverage 2,022,6/1,778,00 1.17 Looking at changes: TrueBeat is not confident their expenses will hold in ycar 4. Management wants to examine the potential impact of the following situations. Assume cach situation independent of one another. The Profit Formula and 6,000 units produced and sold for Year 4 as your "base" scenario. 6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing by 20%. a) What will the new profit formula be? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increasc? Note - Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per unit. Total Salse 5 16 1000516,000 Variable (osta 33,000+ (25x 1000 units) = $58,000 CM ratio. 516,000 - 58,000 - 0.987 I DOO Break then Point 415,000/ (516-58)= c) If they produce and sell the same number of units for Year 4, what will their new Net Operating 90.) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units e) Assume TrueBeat Company need to make a minimum profit of $1,000,000 to keep its creditors and investors happy. What minimum sales price will they need to charge if they produce and sell 6,000 units? Hint: Remember that CM=Sales price - Variable expenses. 1) Conclusion: Use your calculation above, should TrucBcat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. All other costs are considered consistent and within relevant range for production of 4,000 to 8,000 units. Use the information provided above to adjust amounts from the table in 1). Include the adjusted amounts in the table below. TrueBeat adjusted summarized data for production 4,000 to 8,000 units Adjust summarized data Average Cost Total per Unit Dollars Direct materials 19 Direct labor 103 Variable manufacturing overhead sl GOL Fixed manufacturing overhead $ 190.000 7000 + 3000+ 63,07 +110,000 Fixed selling & administrative expense 275.000 170,000 33,00 72,00 Variable selling & administrative expense $13.5 Sales price per unit $ $ Note: The table above may be submitted early for verification. Upload it to the "submission" drop box on D2L, email or text a photo or PDF to Teri and she will look at it before you continue with the project. 3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income TrueBeat Income Statement Variable Costing) For Years ending December 31 Year 2 Year 3 1548.000 2,580.000 56700D 945. DOO 27.500 62.500 94.500 1.5 72.500 198.000 198. DDO 275.D 275.000 470.500 1.099.500 Year 4 3.091.000 1. 134.000 75.000 1887.000 198.ODD 275.000 1) Summarize the information for TrueBeat from 09 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ Fixed selling & administrative expense Variable selling & administrative expenses 25 SA 239,000 7000+ 16000 + 42,000 33,000+ 36,000+ 170,000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. . With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. [The following information applies to the questions displayed below.] Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $516 each. Costs 1. Plastic for casing-$19,000 2. Wages of assembly workers--$90,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$33,000 5. Drum stands (1,000 stands purchased)-$35,000 6. Rent cost of equipment for sales staff-$36,000 7. Upper management salaries--$170,000 8. Annual flat fee for factory maintenance service-$16,000 9. Sales commissions--$25 per unit 10. Machinery depreciation, straight-line--$42,000