Operational information Part 3 The owners continued their review of operations, focusing next on the Calgary...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6656c582ecc47_6906656c58263136.jpg)
Transcribed Image Text:
Operational information Part 3 The owners continued their review of operations, focusing next on the Calgary Region which was organized similarly to the Penticton Region and produced and sold the same product line as the Penticton Region. The revenues and expenses for the last four months for this product line in the Calgary Region are presented below. Dynamadics-Calgary Region Comparative Monthly Income Statements March April May June Sales in units Sales Revenue 5,900 5,400 6,600 7,800 $743,400 $680,400 $831,600 $982,800 Less: Cost of Goods sold 394,850 367,416 432,432 501,228 Gross Margin 348,550 312,984 399,168 481,572 Less: Operating Expenses Shipping 63,300 54,200 66,800 66,500 Advertising 83,500 83,500 83,500 83,500 Salaries/Commissions 163,500 138,500. 166,000 176,000 Insurance 13,500 13,500 13,500 13,500 Depreciation 46,500 46,500 46,500 46,500 Total operating expenses 370,300 336,200 376,300 386,000 Net income $(21,750) $(23,216) $22,868 $95,572 The manager of operations at the Calgary region provided the following cost information for each of the mixed costs: Cost of goods sold Shipping Salaries/Commissions Acct225 Fixed Costs Variable Costs $66,300 $55.76 $26,486 $5.13 $54,086 $15.63 Integrative Case #1 Requirement #3 (17 marks) The owners are grateful for the information provided by the Calgary region respecting the cost behaviours for this product line. Their focus now is on understanding the impact of a change in any of the factors that impact profits. They would like you to complete some cost-volume-profit (CVP) analysis. Note: Use 2 decimal places for contribution margin (CM) and CM ratios. 1. What is the annual total fixed cost based on the information provided? (1 mark) 2. What is the annual break-even sales in units (assume that fixed costs are incurred uniformly throughout the year). (2 marks) 3. What Sales Revenues are required annually to break-even? (2 marks) 4. How many units need to be sold to achieve a target monthly profit of $85,000? (1 mark) 5. What profit will be realized if 75,000 units are sold during the year? (2 marks) 6. Create a CM income statement at 75,000 units annually including both total and per unit data. (3 marks) 7. The owners asked the Calgary Region to consider options to improve profitability based on the calculations from #5 above (at 75,000 units annually). Two proposals were submitted to the owner. They would like you to analyze each option and provide a recommendation with an explanation on which (if any) option should be implemented to improve profitability. Based on your calculations in #5 above, prepare a comparative CM income statement to demonstrate the change and impact to profits for both of the options. a) The operations manager has proposed that a reduction of $8.50 in the selling price per unit would increase sales by 6,800 units. (3 marks) b) The sales manager has also considered options to improve profitability. She has proposed that an increase in advertising of $109,000 annually would increase sales by 6,800 units. (3 marks) Operational information Part 3 The owners continued their review of operations, focusing next on the Calgary Region which was organized similarly to the Penticton Region and produced and sold the same product line as the Penticton Region. The revenues and expenses for the last four months for this product line in the Calgary Region are presented below. Dynamadics-Calgary Region Comparative Monthly Income Statements March April May June Sales in units Sales Revenue 5,900 5,400 6,600 7,800 $743,400 $680,400 $831,600 $982,800 Less: Cost of Goods sold 394,850 367,416 432,432 501,228 Gross Margin 348,550 312,984 399,168 481,572 Less: Operating Expenses Shipping 63,300 54,200 66,800 66,500 Advertising 83,500 83,500 83,500 83,500 Salaries/Commissions 163,500 138,500. 166,000 176,000 Insurance 13,500 13,500 13,500 13,500 Depreciation 46,500 46,500 46,500 46,500 Total operating expenses 370,300 336,200 376,300 386,000 Net income $(21,750) $(23,216) $22,868 $95,572 The manager of operations at the Calgary region provided the following cost information for each of the mixed costs: Cost of goods sold Shipping Salaries/Commissions Acct225 Fixed Costs Variable Costs $66,300 $55.76 $26,486 $5.13 $54,086 $15.63 Integrative Case #1 Requirement #3 (17 marks) The owners are grateful for the information provided by the Calgary region respecting the cost behaviours for this product line. Their focus now is on understanding the impact of a change in any of the factors that impact profits. They would like you to complete some cost-volume-profit (CVP) analysis. Note: Use 2 decimal places for contribution margin (CM) and CM ratios. 1. What is the annual total fixed cost based on the information provided? (1 mark) 2. What is the annual break-even sales in units (assume that fixed costs are incurred uniformly throughout the year). (2 marks) 3. What Sales Revenues are required annually to break-even? (2 marks) 4. How many units need to be sold to achieve a target monthly profit of $85,000? (1 mark) 5. What profit will be realized if 75,000 units are sold during the year? (2 marks) 6. Create a CM income statement at 75,000 units annually including both total and per unit data. (3 marks) 7. The owners asked the Calgary Region to consider options to improve profitability based on the calculations from #5 above (at 75,000 units annually). Two proposals were submitted to the owner. They would like you to analyze each option and provide a recommendation with an explanation on which (if any) option should be implemented to improve profitability. Based on your calculations in #5 above, prepare a comparative CM income statement to demonstrate the change and impact to profits for both of the options. a) The operations manager has proposed that a reduction of $8.50 in the selling price per unit would increase sales by 6,800 units. (3 marks) b) The sales manager has also considered options to improve profitability. She has proposed that an increase in advertising of $109,000 annually would increase sales by 6,800 units. (3 marks)
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
The following partial work sheet is taken from the books of Carmen's Collies, a local pet kennel, for the year ended December 31, 20--. Journalize the adjustments in a generaljournal. Carmen's...
-
Each of the following items must be considered in preparing a statement of cash flows for Rudy Boesch Co. for the year ended December 31, 2002. For each item, state how it should be shown in the...
-
Allen Paper Co. produces the paper used by wallpaper manufacturers. Allens four-stage process includes mixing, cooking, rolling, and cutting. During March, the Mixing Department started and completed...
-
Earnings per share On January 1, 2021, ABC Inc. had 300 million shares of common stock and 13 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 31,...
-
Write a couple of paragraphs about Reforestation amortization and what you learned? Why it's interesting to you and explain?
-
In vibration analysis, can damping always be disregarded?
-
Describe the U.S. role in the world economy.
-
Can a nonlinear vibration problem be identified by looking at its governing differential equation?
-
Analyze the role of Eastern Europe and Central Asia in the world economy.
-
What can African countries do to encourage more foreign investment in their economies?
-
Under which of the following circumstances will a partner recognize a gain from an operating distribution? Multiple Choice A partner will never recognize a gain from an operating distribution A...
-
Flesch Corporation manufactures a single product. The standard cost per unit of product is as follows. The master manufacturing overhead budget for the year based on normal productive ca- pacity of 1...
-
True-Value Clothiers manufactures women's business suits. The company uses a standard cost accounting system. In March 2002, 12,000 suits were made. The following standard and actual cost data...
-
Onasis Manufacturing Company uses a standard cost accounting system. In July 2002, it accumulates the following data relative to jobs started and finished. Manufacturing overhead was applied on the...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App