Chapter 20 Cost-Volume-Profit Analysis gardless of which type of fish is Percula can sell clownfish for of fish is being ish for SA Heating and lighting costs equal $400 per week of rearing, regardless of raised. Fixed overhead costs for the year amount to $80,000. Percula ca and angelfish for $10 each. erating income for the year? seem to have the greatest influence each of which will cost an ne can be implemented. ficantly improve water conditions in vival rates to 12 percent for Instructions a. Which species should Percula raise to earn the highest operating income for b. Other than fixed costs, which factors or categories of costs seem to have on operating income? c. Percula's manager is considering the following improvements, each of additional $8,000 for the year. Due to resource limitations, only one can be im 1. Purchasing a higher quality filter material that will significantly improve the rearing tanks. The higher water quality will increase the survival rates to 10 clownfish and 6 percent for angelfish. The need for water changes will also be redima each week for angelfish. Due to the higher yields, feeding costs will increase to $100 a 2. Installing newer, more efficient equipment that will reduce heating and lich to $300 per week of rearing. The new equipment will promote more stable conditions increasing the survival rates of clownfish to 10.5 percent and of angelfish to 55 peran The slight change in survival rates is not expected to increase feeding costs. Using your answers to part b (with no calculations), which option do you think will be more beneficial? d. Perform the necessary calculations to check if your answer to part c was correct. Should either of the investments be undertaken, and if so, which fish species should be raised? 115 running Shoes allu S.. these two products. TONIOWIng OICO Porum Shoes Shorts Sales price.. Variable costs and expenses... Contribution margin .... $50 Internet 35 $ 15 1 Fixed costs and LO20-6. SA rects of rated the semivariable costs into their tired ant variable segments son ries remain at a level of 1.0 unit Current plant s The following are the current car data assembled for you 5100 Sales price per unit Variable costs per unit: Direct materials Direct labor... Manufacturing overhead and selling and administra ad and selling and administrative expenses Contribution margin per unit (40%)...... Fixed costs ............. $10 20 30 $40 $390.000 Instructions a. What increase in the selling price is necessary to cover the cost and still maintain the current contribution margin ratio 010 b. How many units must be sold to maintain the curre sales price remains at $100 and the 15 percent wage inch compute the unit contribution margin.) c. Wilson believes that an additional $700.000 of m that an additional $700,000 of machinery to be depreciated at 20 percent annually) will increase present capacity (20,000 units) by 25 percent. be sold at the present price of $100 per unit an the estimated operating income before capacity is ating income after canvis increased? Prepare sary to cover the 15 percent increase in direct labor bution margin ratio of 40 percent? Old to maintain the current operating income of $350.000 il the and the 15 percent wage increase goes into effect? (Hint: First capacity (20,000 units) by 25 percent. If all units produced can w price of $100 per unit and the wage increase goes into effect, how would raung income before capacity is increased compare with the estimated oper Percula Farms raises marine fish for sale in the aquarium trade. Each marine fish for sale in the aquarium trade. Each year, Percula obtains a batch or approximately one million eggs from a local supplier. Percula's manager is yms whether to use the farm's facilities to raise Maroon Clownfish or Queen Angelfish. Clownfish eyes COST 3.500 per batch, while angelfish esos cost $9.500 per batch. Due to differences in needs, only one species may be raised at a time and only one batch of fish can be raised in any 52-week period. With current facilities, approximately 10 percent of clownfish eggs and 5 percent of angelfish eggs can be successfully raised to maturity. Clownfish take approximately 35 weeks to grow to a salable size, while angelfish take 50 weeks. Angelfish also require more care than clownfish. Each week, angelfish need two complete water changes and 20 feedings, while clownfish need only one water change and 15 feedings. Each feeding costs $150 and each water change costs $1.000