Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Help with these 2 questions please. Question 1. Houstonbased Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just
Help with these 2 questions please.
Question 1.
Houstonbased Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 43,000 speaker sets: Sales $3,526,609 Variable costs 831,569 Fixed costs 2,318,006 Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $16.00 per set; annual fixed costs are anticipated to be $1,988,000. {In the following requirements, ignore income taxes.) Required: 1. Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. 1 Determine the breakeven point in speaker sets if operations are shifted to Mexico. 3. Assume that management desires to achieve the Mexican breakeven point; however, operations will remain in the United States. a. If variable costs remain constant, by how much must xed costs change? b. lfflxed costs remain constant, by how much must unit variable cost change? 4. Determine the impact (increase, decrease, or no effect} ofthe following operating changes. Required 1 Required 2 Required 3 Required 4 Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. (Do not round intermediate calculations and round your final answers to nearest whole dollar.) Current income Required dollar salesDetermine the break-even point in speaker sets if operations are shifted to Mexico. (Round your final answer up to nearest whole number.) Break-even point unitsAssume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States. a. If variable costs remain constant, by how much must fixed costs change? (Round your intermediate unit calculations to the nearest whole number and round your final answer to the nearest whole dollar.) b. If fixed costs remain constant, by how much must unit variable cost change? (Round your intermediate unit calculations to the nearest whole number and round your final answer to 2 decimal places.) Show lessA a. Fixed costs by b. Variable costs by per unitTerry Smith and two of his colleagues are considering opening a law ofce in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford services. The intent is to provide easy access for their clients by having the ofce open 360 days per year, 16 hours each day from 7:00 am. to 11:00 pm. The office would be staffed by a lawyer, paralegal, legal secretary, and clerkreceptionist for each of the two eighthour shifts. In order to determine the feasibility of the project, Smith hired a marketing consultant to assist with market projections. The results of this study show that if the firm spends $1,0?'0,000 on advertising the rst year, the number of new clients expected each day will be 68. Smith and his associates believe this number is reasonable and are prepared to spend the $1,07'0,000 on advertising. Other pertinent information about the operation of the office follows: - The only charge to each new client would be $78 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements orjudgments. Smith estimates that 20 percent of new client consultations will result in favorable settlements orjudgments averaging $5,800 each. It is not expected that there will be repeat clients during the rst year of operations. - The hourly wages ofthe staff are projected to be $68 for the lawyer, $58 for the paralegal, $48 for the legal secretary, and $38 for the clerkreceptionist. Fringe benet expense will be 40 percent of the wages paid. A total of 760 hours of overtime is expected for the year; this will be divided equally between the legal secretary and the clerkreceptionist positions. Overtime will be paid at one and onehalftimes the regular wage, and the fringe benefit expense will apply to the full wage. - Smith has located l3,000 square feet of suitable ofce space that rents for $74 per square foot annually. Associated expenses will be $63,000 for property insurance and $88,400 for utilities. - It will be necessary for the group to purchase malpractice insurance, which is expected to cost $378,000 annually. - The initial investment in the ofce equipment will be $138,000. This equipment has an estimated useful life of four years. - The cost of office supplies has been estimated to be $12 per expected new client consultation. Required: 1. Determine how many new clients must visit the law office being considered by Terry Smith and his colleagues in order for the venture to break even during its first year of operations. (Round your final answer up to the next whole number.) 2. Compute the law firm's safety margin. 1. Number of new clients to break even 2. Safety marginStep 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