Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help, im super stuck! also whoever helps in a timely manner will get good ratings and reviews! Problem 6-19 (Algo) Break-Even Analysis; Pricing (L06-1,

please help, im super stuck! also whoever helps in a timely manner will get good ratings and reviews!
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Problem 6-19 (Algo) Break-Even Analysis; Pricing (L06-1, L06-4, L06-5) Last year Minden Company introduced a new product and sold 25,200 units of it at a price of $92 per unit. The product's variable expenses are $62 per unit and its fixed expenses are $833,100 per year, Required: 1. What was this product's net operating income (loss) last year? 2. What is the product's break-even point in unit sales and dollar sales? 3. Assume the company has conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g. $68. $66, etc.). what is the maximum annual profit that it can eam on this product? What sales volume and selling price per unit generate the maximum profit? 4. What would be the break-even point in unit sales and in dollar sales using the selling price that you determined in requirement 3? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What was this product's net operating income (loss) last year? Net operating loss 5 (77.100) Required 2 > Problem 6-22 (Algo) CVP Applications: Contribution Margin Ratio: Break-Even Analysis: Cost Structure [LO6-1, LO6-3, L06-4, LO6-5, LO6-6) Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below. Sales (12.700 units * $38 per unit) $ 381,000 Variable expenses 228.500 Contribution margin 152,400 Fixed expenses 170,400 Net operating loss 5 (18,000) Boo Print erences Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a 56,700 increase in the monthly advertising budget combined with an intensified effort by the sales staff will increase unit sales and the total sales by $83.000 per month. If the president is right, what will be the increase (decrease in the company's monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $34.000 in the monthly advertising budget will double unit sales. If the sales manager is right what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4.900? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $59,000 each month. a Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,400 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20.400 units? Problem 6-25 (Algo) Changes in Fixed and Variable Costs: Break-Even and Target Profit Analysis (LO6-4, LO6-5, L06-6) Neptune Company has developed a small Inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company's plant to produce 25,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $32,000 per month Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $69,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $138,000 per month Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit will Neptune eam assuming a. It produces and sells 25,000 units. b. It does not produce any units and instead outsources the production of 25,000 units to the outside supplier and then sells those units to its customers. 3. Calculate the break-even point in unit sales assuming that Neptune plans to use all of its production capacity to produce the first 25,000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10,000 additional units. 4. Assume that Neptune plans to use all of its production capacity to produce the first 25.000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10,000 additional units. a. What total unit sales would Neptune need to achieve in order to equal the profit eamed in requirement 2a? b. What total unit sales would Neptune need to achieve in order to attain a target profit of $70,500 per month? c. How much profit will Neptune earn if it sells 35,000 units per month? d. How much profit will Neptune earn if it sells 35,000 units per month and agrees to pay its marketing manager a bonus of 10 cents for each unit sold above the break-even point from requirement 3? Miss 35.000 units Bose 3. Calculate the break-even point in unit sales assuming that Neptune plans to use all of its production capacity to produce the test 25.000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10.000 additional units 4. Assume that Neptune plans to use all of its production capacity to produce the first 25,000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10.000 additional units a. What total unit sales would Neptune need to achieve in order to equal the profit earned in requirement 27 b. What total unit sales would Neptune need to achieve in order to attain a target profit of $70,500 per month? How much profit will Neptune eam ifitselis 35.000 units per month d. How much profit will Neptune earn if it sells 35.000 units per month and agrees to pay its marketing manager a bonus of 10 cents for each unit sold above the break-even point from requirement 3? 5. If Neptune outsources all production to the outside supplier, how much profit will the company cam itt sells 35.000 units? 25.000 $ 150.000 $ 31000 3.000 1. Break-even point in unt sales without hiring 2. Profitif produces and 26. Profitif outsources production and sells 3. Break even point in unt sales. hiring 4. Total unit sales 46 Total unit sales to achieve a target Proft of 570,500 4. Net operating income Ad Net operating income bonus to marketing manager 5. Net operating income. My outsourced units Exercise 6-18 (Algo) Break-Even and Target Profit Analysis: Margin of Safety: CM Ratio (LO6-1, L06-3, LO6-5, LO6-6, LO6-7] Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total Per Unit $ 310,000 $20 217.000 14 93,000 5.6 76,200 $ 16,800 Required: 1. What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3-a. How many units would have to be sold each month to attain a target profit of $26.400? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level 4. Refer to the originaldate Compute the ompany's margin of safety in both dollar and percentage terms. 5 What is the company's CM ratio of the company can sell more units thereby increasing sales by $91000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Reg 2 Req 3A Reg 38 Reg 5 Rea 1 Reg 4 Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution margin 5

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting What the Numbers Mean

Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,

9th Edition

978-0-07-76261, 0-07-762611-7, 9780078025297, 978-0073527062

Students also viewed these Accounting questions