Hello, I need help with 2 problems in the spreadsheet provided below. The tabs are P8-2A, P8-4A.

P8-2A

Round all calculations to two decimal places

(a) Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component.

(b) Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component.

P8-4A

Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of thefollowing situations.

(a) Assume that the printing operations is booked solid for the next 2 years, and it would have to cancel an obligation which an outside customer in order to meet the need of the internal division.

(b) Assume that the printing operation has available capacity.

c) the top management of Word Wizard believes that the printing operation should always do the printing for the company's authors. On a number of occasions, it has forced the printing operation to cancel jobs with outside customers in order to meet the needs of its own lines. Discuss the pros and cons of this approach.

d)Calculate the change in contribution margin to each division, and to the company as a whole, if top management forces the printing operation to accept the $0.007 per page transfer when it has no available capacity.

P5-2A Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio and sales for target net income Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2017, management estimates the following revenues and costs. Sales $1,800,000 Selling expenses - variable $70,000 Direct materials 430,000 Selling expenses - fixed 65,000 Direct labor 360,000 Administrative expenses - variable 20,000 Manufacturing overhead- variable 380,000 Administrative expenses - fixed 60,000 Manufacturing overhead -fixed 280,000 Instructions (a) Prepare a CVP income statement for 2017 based on management estimates. (show column for total amounts only.) (b) Compute the break-even point in (1) units and (2) dollars. (c ) Compute the contribution margin ratio and the margin of safety ratio. (Round to the nearest full percent.) (d) Determine the sales dollars required to earn net income of $180,000. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) Prepare a CVP income statement for 2017 based on management estimates. (show column for total amounts only.) JORGE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2017 Sales Variable expenses Cost of goods sold Selling expenses Administrative expenses Total variable expenses Contribution margin Fixed expenses Cost of goods sold Selling expenses Administrative expenses Total fixed expenses Net income (b) $1,800,000 $1,170,000 135,000 80,000 1,385,000 415,000 280,000 65,000 60,000 405,000 $10,000 Compute the break-even point in (1) units and (2) dollars. (b)(1) $0.50 $0.35 $0.15 Fixed costs Unit contribution margin Break-even point in units (b)(2) Break-even point in units Unit selling price Unit variable costs Unit contribution margin $405,000 $0.15 2,700,000 Break-even point in dollars Break-even point in units Unit selling price Break-even point in dollars 2,700,000 $0.50 $1,350,000 (c ) Compute the contribution margin ratio and the margin of safety ratio. (Round to the nearest full percent.) Contribution margin ratio Unit contribution margin Unit selling price Contribution margin ratio Margin of safety ratio Total sales Break-even sales Margin of safety (dollars) Total sales Margin of safety ratio (d) $0.15 $0.50 30% $1,800,000 1,350,000 450,000 1,800,000 25% Determine the sales dollars required to earn net income of $180,000. Sales dollars required to earn target income Fixed costs $405,000 Target income 180,000 Total fixed cost + target income 585,000 Contribution margin ratio 30% Sales dollars required $1,950,000 After you have completed P5-2A, consider the following additional question 1. Assume that the unit selling price per bottle changed to $0.60 each, and fixed manufacturing costs increased to $300,000. Show impact of these changes on calculations. CD5 - EXCEL Tutorial CURRENT DESIGNS Bill Johnson, sales manager, and Diane Buswell, controller at Current Designs are beginning to analyze the cost considerations for one of the composite models of the kayak division. They have provided the following production and operational costs necessary to produce one composite kayak. Kevlar Resin and supplies Finishing kit (seat, rudder, ropes, etc.) Labor Selling and administrative expenses - variable Selling and administrative expenses - fixed Manufacturing overhead - fixed $250 per kayak $100 per kayak $170 per kayak $420 per kayak $400 per kayak $119,000 per year $240,000 per year Bill and Diane have asked you to provide a cost-volume-profit analysis, to help them finalize the budget projections for the upcoming year. Bill has informed you that the selling price of the composite kayak will be $2,000. Instructions (a) Calculate variable cost per unit. (b) Determine the unit contribution margin. (c ) Using the unit contribution margin, determine the break-even point in units for this product line. (d) Assume that Current Designs plans to earn $270,000 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal. (e ) Based on the most recent sales forecast, Current Design plans to sell 1,000 units of this model. Using your results from part (c ), calculate the margin of safety and the margin of safety ratio. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) Calculate variable cost per unit. Kevlar Resin and supplies Finishing kit (seat, rudder, ropes, etc.) Labor Selling and administrative expenses - variable Total variable costs per unit $250 100 170 420 400 $1,340 (b) Determine the unit contribution margin. Unit selling price Unit variable cost Unit contribution margin $2,000 1,340 $660 (c ) Using the unit contribution margin, determine the break-even point in units for this product line. Selling and administrative expenses - fixed Manufacturing overhead - fixed Total fixed costs (a) Unit contribution margin (b) Break-even points (units) (a b) 119000 240000 $359,000 $660 544 (d) Assume that Current Designs plans to earn $270,000 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal. Total fixed costs Target net income Total fixed costs + target net income (a) Unit contribution margin (b) Units need to be sold (a b) 359000 270000 $629,000 $660 953.030303 (e ) Based on the most recent sales forecast, Current Design plans to sell 1,000 units of this model. Using your results from part (c ), calculate the margin of safety and the margin of safety ratio. Margin of safety Actual (expected) sales Break-even sales Margin of safety (dollars) $2,000,000 $1,088,000 $912,000 Margin of safety ratio Margin of safety (dollars) (a) Actual (expected) sales (b) Margin of safety ratio (a b) $912,000 $2,000,000 45.6% After you have completed CD-5, consider the following additional question 1. Assume that the unit selling price per kayak changed to $2,200 each, and fixed manufacturing overhead increased to $360,000. Show impact of these changes on calculations. (a) Calculate variable cost per unit. Kevlar Resin and supplies Finishing kit (seat, rudder, ropes, etc.) Labor Selling and administrative expenses - variable Total variable costs per unit $250 100 170 420 400 $1,340 (b) Determine the unit contribution margin. Unit selling price Unit variable cost Unit contribution margin $2,200 1,340 $860 (c ) Using the unit contribution margin, determine the break-even point in units for this product line. Selling and administrative expenses - fixed Manufacturing overhead - fixed Total fixed costs (a) Unit contribution margin (b) Break-even points (units) (a b) 119000 360000 $479,000 $860 557 (d) Assume that Current Designs plans to earn $270,000 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal. Total fixed costs Target net income Total fixed costs + target net income (a) Unit contribution margin (b) Units need to be sold (a b) 479000 270000 $749,000 $860 870.930233 (e ) Based on the most recent sales forecast, Current Design plans to sell 1,000 units of this model. Using your results from part (c ), calculate the margin of safety and the margin of safety ratio. Margin of safety Actual (expected) sales Break-even sales Margin of safety (dollars) $2,200,000 $1,225,400 $974,600 Margin of safety ratio Margin of safety (dollars) (a) Actual (expected) sales (b) Margin of safety ratio (a b) $974,600 $2,200,000 44.3% E6-3 Compute net income under different alternatives Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs or sales volume. 2. Reduce variable costs to 58% of sales. 3. Reduce fixed costs by $15,000. Instructions Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . 1. Increase selling price by 10% with no change in total variable costs or sales volume. Current selling price New selling price (Round to nearest cent) Total sales Less: variable costs Contribution margin Less: fixed costs Net income $65 $72 $360,000 210,000 150,000 75,000 75000 2. Reduce variable costs to 58% of sales. Total Sales $325,000 Less: variable costs 188,500 Contribution margin 136,500 Less: fixed costs 75,000 Net income 61500 3. Reduce fixed costs by $15,000. Total Sales Less: variable costs Contribution margin Less: fixed costs Net income $325,000 210,000 115,000 60,000 55000 After you have completed E6-3, consider the following additional questions. 1. Assume that unit selling price increased 5% with no change in total variable costs or sales volume. 2. Assume variable costs decreased to 53% of sales. 3. Assume that fixed costs increased by $20,000. Which course of action will produce the highest net income? 1. Increase selling price by 10% with no change in total variable costs or sales volume. Current selling price New selling price (Round to nearest cent) Total sales Less: variable costs Contribution margin Less: fixed costs Net income 2. Reduce variable costs to 58% of sales. Total Sales Less: variable costs Contribution margin Less: fixed costs Net income 3. Reduce fixed costs by $15,000. Total Sales Less: variable costs Contribution margin Less: fixed costs Net income CD6 EXCEL Tutorial CURRENT DESIGNS Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks. The following information is available for each product line. Sales price/unit Variable costs/unit Rotomolded $950 $570 Composite $2,000 $1,340 The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units sold. Instructions (a) Determine the weighted-average unit contribution margin for Current Designs. (b) Determine the break-even points in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.) (c ) Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.) (d) Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line. (e ) Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.) (a) Determine the weighted-average unit contribution margin for Current Designs. Sales price/unit Variable costs/unit Unit Contribution margin (UCM) Product mix Weighted Average UCM Rotomolded Kayaks 950 570 380 0.8 304 + Composite Kayaks 2000 1340 660 0.2 132 436 (b) Determine the break-even points in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.) Fixed costs Weighted Average UCM Breakeven units Breakeven unit distribution 820000 436 1,881 Rotomolded Kayaks 1,505 Composite Kayaks 376 (c ) Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.) Target net income in units: Sales price/unit Variable costs/unit Unit Contribution margin (UCM) Product mix Weighted Average UCM Rotomolded Kayaks 950 570 380 0.7 266 Required sales in units: Total fixed costs Target net income Total required sales (dollars) Weighted Average UCM Required sales in units 820000 2000000 0 266 ? + Composite Kayaks 2000 1340 660 0.3 198 464 820000 2000000 ? 198 ? (d) Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line. Sales Variable Costs Contribution Margin Fixed Costs Net Income Rotomolded Kayaks 2,000,000 1199850 800150 660,000 $140,150 Composite Kayaks 1,000,000 670000 330000 160,000 $170,000 (e ) Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.) Rotomolded Kayaks Contribution Margin (a) 800150 140150 Net Income (b) Degree of Operating Leverage (a b 5.71 Composite Kayaks 330000 170000 1.94 Interpretation of findings: After you have completed CD6, consider the following additional question. 1. Assume that variable cost per unit for the rotomolded kayak and composite kayak changed to $610 and $1,400 respectively. Show impact of these changes on each of the scenarios provided. Determine the weighted-average unit contribution margin for Current Designs. Sales price/unit Variable costs/unit Unit Contribution margin (UCM) Product mix Weighted Average UCM Rotomolded Kayaks 950 610 340 0.8 272 + Composite Kayaks 2000 1340 660 0.2 132 404 Determine the break-even points in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.) Fixed costs Weighted Average UCM Breakeven units Breakeven unit distribution 820000 404 2,030 Rotomolded Kayaks 1,624 Composite Kayaks 406 Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.) Target net income in units: Sales price/unit Variable costs/unit Unit Contribution margin (UCM) Product mix Weighted Average UCM Rotomolded Kayaks 950 610 340 238 266 Required sales in units: Total fixed costs Target net income Total required sales (dollars) Weighted Average UCM Required sales in units 820000 2000000 ? 266 ? + Composite Kayaks 2000 1340 660 0.3 198 820000 2000000 ? 198 ? 464 Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line. Sales Variable Costs Contribution Margin Fixed Costs Net Income Rotomolded Kayaks 2,000,000 1199850 800150 660,000 $140,150 Composite Kayaks 1,000,000 670000 330000 160,000 $170,000 Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.) Rotomolded Kayaks Contribution Margin (a) 800150 140150 Net Income (b) Degree of Operating Leverage (a b 5.71 Interpretation of findings: Composite Kayaks 330000 170000 1.94 P7-3A Determine if product should be sold or processed further. Thompson Industrial Products Inc. (TIPI) is a diversified industrial-cleaner processing company. The company's Dargar plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week 900,000 ounces of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor cleaner and 300,000 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion amount to $240,000. FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $17 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 300,000 ounces of another compound (TCP) to the 300,000 ounces of table cleaner. This joint process will yield 300,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amounts to $100,000. Both table products can be sold for $14 per $25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis. Production in ounces Revenue Costs: CDG costs TCP costs Total costs Weekly gross profit Table Cleaner 300,000 $204,000 70000* 0 70,000 $134,000 Process Further Table Stain Table Remover (TSR) Polish (TP) 300,000 300,000 $168,000 $168,000 52,500 50,000 102,500 $65,500 52,500 50,000 102,500 $65,500 Total $336,000 105,000 ** 100,000 205,000 $131,000 *If table cleaner is not processed further, it is allocated 1/3 of the $210,000 of CDG cost, which is equal to 1/3 of the total physical output. ** If table cleaner is processed further, total physical output is 1,200,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost. Instructions (a) Determine if management made the correct decision to not process the table cleaner further by doing the following. (1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further. (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. (3) Compare the resulting net incomes and comment on management's decision. (b) Compare the resulting net incomes and comment on management's decision. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) Determine if management made the correct decision to not process the table cleaner further by doing the following. (1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further. Table Cleaner Not Processed Further Sales: FloorShine Table cleaner Total Revenue Costs: CDG Additional costs of FloorShine Total costs Gross profit (a) $400,000 204,000 $604,000 70,000 0 70,000 $534,000 Determine if management made the correct decision to not process the table cleaner further by doing the following. (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. Table Cleaner Processed Further Sales: FloorShine Table Stain Remover Table Polish Total Revenue Costs: CDG Additional costs of FloorShine TCP Total costs Gross profit (a) $400,000 168,000 168,000 $736,000 105,000 240,000 100,000 445,000 $291,000 Determine if management made the correct decision to not process the table cleaner further by doing the following. (3) Compare the resulting net incomes and comment on management's decision. Response: From the above calculations, its evident that the management made the correct decision to not process the table cleaner further since the net income resulting when the table cleaner is not processed is much greater than when it would have been processed. The difference in net income = 534000-291000 =$243000 which is substantiallly large. (b) Compare the resulting net incomes and comment on management's decision. Incremental revenue Incremental costs Total Don't Process Table Cleaner Further $400,000 0 $400,000 Process Table Cleaner Further $160,000 205,000 ($45,000) Net Income Increase (Decrease) $560,000 205,000 $355,000 Response:the resulting net income when the table cleaner is not processed further is far much more that the when it would have been processed further. 1. After you have completed P7-3A, consider the following additional question. Assume that the selling price of the two table products after further processing changed to $13 for each 25-ounce bottle and the cost of TCP compound to further process changed to $120,000. How do these changes impact the decision to process or not process further? CD7 EXCEL Tutorial CURRENT DESIGNS Current Designs faces a number of important decisions that require incremental analysis. Consider each of the following situations independently. Situation 1 Recently, Mike Cichanowski, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to inquire about the possibility of Current Designs producing "floating coolers" for a promotion his company was planning. These coolers resemble a kayak but are about one-third the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip. The company would be interest in purchasing 100 coolers for the upcoming summer. It is willing to pay $250 per cooler. The brewing company would pick up the coolers upon completion of the order. Mike met with Diane Buswell, controller, to identify how much it would cost Current Designs to produce the coolers. After careful analysis, the following costs were identified. Direct materials Direct labor $80/unit $60/unit Variable overhead Fixed overhead $20/unit $1,000 Current Designs would be able to modify an existing mold to produce the coolers. The cost of these modifications would be approximately $2,000. Instructions (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers. (b) Discuss additonal factors that Mike and Diane should consider if Current Designs is currently operating at full capacity. Situation 2 Current Designs is always working to identify ways to increase efficiency while becoming more environmentally conscious. During a recent brainstorming session, one employee suggested to Diane Buswell, controller, that the company should consider replacing the current rotomold oven as a way to realize savings from reduced energy consumption. The oven operates on natural gas, using 17,000 therms of natural gas for an entire year. A new, energy-efficient rotomold oven would operate on 15,000 therms of natural gas for an entire year. After seeking out price quotes from a few suppliers, Diane determined that it would cost approximately $250,000 to purchase a new, energy-efficient rotomold oven. She determines that the expected useful life of the new oven would be 10 years, and it would have no salvage value at the end of its useful life. Current Designs would be able to sell the current oven for $10,000 Instructions (a) Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, assuming that the average price for natural gas over the next 10 years will be $0.65 per therm. (b) Diane is concerned that natural gas prices might increase at a faster rate over the next 10 years. If the company projects that the average natural gas price of the next 10 years could be as high as $0.85 per therm, discuss how that might change your conclusion in (a). Situation 3 One of Current Designs' competitive advantages is found in the ingenuity of its owners and CEO, Mike Cichanowski. His involvement in the design of kayak molds and production techniques has led to Current Designs being recognized as an industry leader in the design and production of kayaks. This ingenuity was evident in an improved design of one of the most important component of a kayak, the seat. The "Revolution Seating System" is one-of-a-kind, rotating axis seat that gives unmatched, full contact, under-leg support. It is quickly adjustable with a lever-lock system that allows for a customizable seat position that maximizes comfort for the rider. Having just designed the "Revolution Seating System", Current Designs must now decide whether to produce the seats internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows. Direct materials Variable overhead $20/unit $12/unit Direct labor Fixed overhead $15/unit $20,000 Current Designs will need to produce 3,000 seats this year; 25% of the fixed overhead will be avoided if the seats are purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will cost $50 to purchase a seat from an outside vendor. Instructions (a) Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." (b) Would your answer in (a) change if the productive capacity released by not making the seats could be used to produce income of $20,000? NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . Situation 1 (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers. Net Income Reject Order Accept Order Increase (Decrease) Revenues $0 $25,000 $25,000 Costs 0 118,000 118,000 Net income $0 -$93,000 -$93,000 Response:The order should not be accepted since it would result into a huge lose (b) Discuss additonal factors that Mike and Diane should consider if Current Designs is currently operating at full capacity. Response: some of these factors may include, opportunities embedded in the project e.g. leasing the space for other uses, the technology used by the company since it affects the level of output as well as the cost of production Situation 2 (a) Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, assuming that the average price for natural gas over the next 10 years will be $0.65 per therm. Variable mfg. costs New oven costs Proceed from scrapping old oven Total Retain Oven $11,050 0 Replace Oven $9,750 250,000 Net Income Increase (Decrease) -$1,300 250,000 0 10,000 10,000 $11,050 $249,750 238,700 Response: It would be much expensive to replace the old oven than to retain it as is implied by computations above (b) Diane is concerned that natural gas prices might increase at a faster rate over the next 10 years. If the company projects that the average natural gas price of the next 10 years could be as high as $0.85 per therm, discuss how that might change your conclusion in (a). Variable mfg. costs New oven costs Proceed from scrapping old oven Total Retain Oven $14,450 Replace Oven $12,750 Net Income Increase (Decrease) ($1,700) 0 250,000 250,000 0 10,000 10,000 $14,450 252,750 $238,300 Response: An increase in variable cost to $0.85 per therm would lower the net income to 238,300 Situation 3 (a) Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." Net Income Direct materials Make $60,000 Buy $0 (Decrease) $60,000 Direct labor 45,000 0 45,000 Variable mfg. costs 36,000 0 36,000 Fixed mfg. costs 20,000 15,000 5,000 0 150,000 (150,000) $161,000 $165,000 $4,000 Purchase price Total annual cost Response: the company should make the seats since it costs less to make than to buy (b) Would your answer in (a) change if the productive capacity released by not making the seats could be used to produce income of $20,000? Total annual cost Make $161,000 Buy $165,000 Net Income Increase (Decrease) $4,000 Opportunity cost 20,000 0 20,000 $181,000 $165,000 $24,000 Total cost Response: if the purchase decision is taken, the income generated when the capacity is used for other activities becomes the opportunity cost of making the seats and thus this increases the total cost of making the seats making it a more expensive undertaking rather decision than to purchase from an outside vendor. After you have completed CD7, consider the following additional questions. 1. Assume in situation 1, the unit selling price changed to $195, fixed overhead changed to $1,800 and the cost of modifications changed to $3,000. Show the impact of these changes on decision to accept or reject the special order. 2. Assume in situation 2, the purchase price of the new oven changed to $100,000. Would this change the decision to retain or replace the oven? 3. Assume in situation 3, that the estimated number of seats to be produced changed to 3,500 and the cost to purchase one seat from an outside supplier changed to $55. Should Current Designs make or buy the seats? Glacier Company estimates that variable costs will be 62.5% of sales, and fixed cost will total $600,000. The selling price of the product is $4. Instructions (a) Prepare a CVP graph, assuming maxium sales of $3,200,000. (Note : Use $400,000 increments for sales and costs and 100,000 increments for units) (b) Compute the break-even point in (1) units and (2) dollars. c) Assuming actual sales are $2million, compute the margin of safety in (1) dollars and (2) as a ratio. Tanek Corp's sales slumpted badly in 2017. For the fist time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: sales $2,500,000 , total costs and expenses $2,600,000, and net loss $100,000. Costs and expenses consisted of the amounts shown below: Costs of goods sold Selling expenses Adminstrative expenses Total $2,140,000 250,000 210,000 $2,600,000 Variable $1,590,000 92,000 68,000 $1,750,000 Fixed $550,000 158,000 142,000 850,000 Management is considering the following independent alternatives for 2018 1. Incease selling pricie 20% with no change in costs, expenses, and sales volume . 2. Change the compensation of salesperson from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions (a) Compute the break-even point in dollars for 2017. (b) Compute the break-even point dollars under each of the alternatives courses of action, (Round all ratios to nearest full percent). Which course of action do you recommend? mend? Lowell Computer Parts Inc. is in the process of setting a selling price on a new component in has just designed and developed. The following cost estimates for this new componen Direct materials Direct labor Variable manufacturing overhead Fixed manufacturng overhead Variable selling and adminstrative expense Fixed selling and adminstrative expenses Per Unit $50 $26 $20 Total $600,000 $19 $400,000 Lowell Computer Parts management requests that that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that th Instructions Round all calculations to two decimal places (a) Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component. (b) Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this n component have been provided by the accounting department for a budgeted volume of 50,000 units. cts that the target price be set to provide a 25% return on investment (ROI) on invested assets of $1,000,000, % on this new component. Word Wizard is a publishing company with a number of different book lines. Each lines has contracts with a number of different authors. The company also owns a prining operatio Instructions Determine wheter the printing should be done internally or externally, and the appropriate transfer price, under each of the followng situationss. (a) Assume that the printing operations is booked solid for the next 2 years, and it would have to cancel an obligation which an outside customer in order to meet the need of the (b) Assume that the printng operation has available capacity. c) the top management of Word Wizard believes that the printing operation should always do the printing for the company's authors. On a number of occasions, it has forced the p d) Calcualte the change in contribution margin to each division, and to the company as a whole, if top management forces the printing operation to accept the $0.007 per page tra ation called Quick Press. The book lines and printing operation each operates as a separae profit center. The printing opeation earns revenue by printing books by authors under co he internal division. he printing operation to cancel jobs with outside customers in order to meet the needs of its own lines. Discuss the pros and cons of this approach. transfer when it has no available capacity. contract with the book lines owned by Work Wizard, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book ok requires 500 pages of print. A manage from Business Books, one of the Word Wizard's book lines, has approached the manager of the printing operation offering to pay $0.007 07 per page for 1,500 copies of a 500-page book. The book line pays outside printers $0.0009 per page. The printing operation's variable cost per page is $0.004