Question
Prepare the budgeted 2007 income statement for Premium Grade Ovenware that the production, quality, and product managers considered when they discussed the first option available
Prepare the budgeted 2007 income statement for Premium Grade Ovenware that the production, quality, and product managers considered when they discussed the first option available to them.
a. Under that option, shipment would be delayed and about one third of the years sales of 6,000,000 units would be lost.
b. Product would be sold at the 10% price reduction but produced under the old cost structure for six months (variable production costs of $5.55 per unit). After the six months the variable cost savings of 35% would be achieved.
c. Assume that recycling the current production would add $500,000 to the fixed production costs originally budgeted for 2007. In addition, the product line will incur an additional $2,000,000 in design engineering to solve the problem within a 6-month period (this will involve the use of overtime and consultants).
d. Other cost items would stay as originally budgeted for 2007. What would the product lines profit be under this alternative? What would the return on sales for the product line be?
EXHIBIT ONE Chef Marco's Choice, Inc. Premium Grade Ovenware Product Income Statement For the years ended December 31, 2002-2006 2006 $ 78,599,808 5,239,987 2005 $ 81,874,800 5,458,320 2004 $ 86,184,000 5 ,745,600 2003 $ 75,600,000 5,040,000 2002 $67,500,000 4,5*00,000 29,081,929 27,865,240 $ 21,652,639 31,112,424 23,221,033 $ 27,541,343 31,026,240 21,701,900 $ 33,455,860 27,972,000 19,729,000 $ 27,899,000 24,975,000 18,100,000 $ 24,425,000 Sales Sales in units Cost of Goods Sold Variable Fixed Gross Profit Attributable costs Marketing Other (primarily fixed) Product line profit before G&A allocation Return on Sales 5,894,986 2,517,537 6,140,610 2,502,522 5,774,328 2,317,150 5,140,800 2,106,500 4,758,750 1,915,000 $ 13,240,117 16.84% $ 18,898,211 23.08% $ 25,364,382 29.43% $ 20,651,700 27.32% $ 17,751,250 26.30%Step 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