Question
Altac Manufacturing is a company that produces and sells a single product, the TechThing. The TechThing is manufactured using a combination of labor and materials
Altac Manufacturing is a company that produces and sells a single product, the "TechThing." The TechThing is manufactured using a combination of labor and materials and is sold to wholesalers and retailers. Altac Manufacturing operates in a highly competitive market, and management is constantly seeking opportunities to improve profitability.
Data Provided:
- Sales Data:
- Sales Price per TechThing: $50
- Units Sold: 10,000 TechThings
- Manufacturing Data:
- Direct Materials Cost per TechThing: $10
- Direct Labor Cost per TechThing: $8
- Fixed Manufacturing Overhead Costs: $40,000
- Operating Expenses:
- Selling Expenses: $10,000
- Administrative Expenses: $15,000
- Calculate direct materials cost per TechThing.
2. Calculate the total manufacturing cost overhead per TechThing (Fixed manufacturing overhead / Number of TechThings produced).
3. Calculate the cost of goods sold (COGC) per TechThing.
4. Calculate the total sales revenue.
5. Calculate the total COGS.
6. Calculate the gross profit.
7. What are the total selling expenses?
8. What are the total administrative expenses?
9. Calculate the operating income.
10. Calculate the net income by deducting income taxes from the operating income. Assume an income tax rate of 30%.
11. Altac Manufacturing is considering two options to improve profitability: Option 1: Invest in new manufacturing equipment that reduces direct labor costs by 20% OR Option 2: Increase the selling price by 10% to capture a larger market share.
Analyze each option separately and recommend the option that would yield the highest increase in net income. Present calculations and reasoning to support your recommendation. You may also attach a document (not required) to support your response.
PLEASE ANSWER 1-5
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started