Required information Problem 5-5A (Algo) Contribution margin; income effects of alternative strategies LO C2, A1, P2 (The following information applies to the questions displayed below.] Burchard Company sold 25,000 units of its only product for $20.00 per unit this year. Manufacturing and selling the product required $280,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $ 3.00 2.00 0.30 0.10 For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $1.00 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $24.00 per unit, which would decrease unit sales volume to 23,750 units. Problem 5-5A (Algo) Part 1 Required: 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. (Round your answers to 2 decimal places.) With new material With new material and price increase Sales price per unit Variable costs per unit Direct materials Direct labor Variable overhead Variable selling & administrative expenses Variable costs per unit Contribution margin per unit 0.00 $ 0.00 ! Required information Problem 5-5A (Algo) Contribution margin; income effects of alternative strategies LO C2, A1, P2 (The following information applies to the questions displayed below.) Burchard Company sold 25,000 units of its only product for $20.00 per unit this year. Manufacturing and selling the product required $280,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $ 3.00 2.00 0.30 0.10 For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $1.00 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $24.00 per unit, which would decrease unit sales volume to 23,750 units. Problem 5-5A (Algo) Part 2 2. Prepare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new material and (b) using the new material and increasing the selling price. BURCHARD COMPANY Contribution Margin Income Statement With new material With new material and price increase 23,750 Number of units: 25,000 Requirea information Problem 8-3A (Algo) Flexible overhead budget; materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4 [The following information applies to the questions displayed below.) Antuan Company set the following standard costs per unit for its product. Direct materials (3.2 pounds @ $4.ee per pound) Direct labor (1.7 hours @ $13.ee per hour) Overhead (1.7 hours @ $18.50 per hour) Standard cost per unit $ 12.00 22.10 31.45 $ 65.55 The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) ) Variable overhead costs Indirect materials Indirect labor Power Maintenance Total variable overhead costs Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervisory salaries Total fixed overhead costs $ 15,000 75,000 15,80 30, eee 135,000 25,eee 71,080 17,eee 223,750 336,750 $ 471,750 Total overhead costs The company Incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (46,000 pounds @ $4.19 per pound) $ 188,600 Direct labor (20,eee hours @ $13.20 per hour) 264, eee Overhead costs Indirect materials $ 41, 100 Indirect labor 176,250 Power 17,250 Maintenance 34,500 Depreciation-Building 25, eee Depreciation-Machinery 95,850 Taxes and insurance 15,300 Supervisory salaries 223,750 629, eee Total costs $ 1,281,600 Problem 8-3A (Algo) Part 1 Required: 1. Prepare flexible overhead budgets for October showing amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels. ANTUAN COMPANY Flexible Overhead Budgets Flexible Budget at Capacity Level of For Month Ended October 31 31 Variable Amount Total Fixed Cost 65% 75% 85% per Unit Production (in units) Variable overhead costs Fixed overhead costs Total overhead costs Required Information Problem 8-3A (Algo) Flexible overhead budget; materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4 [The following information applies to the questions displayed below.] Antuan Company set the following standard costs per unit for its product. Direct materials (3.2 pounds @ $4.00 per pound) Direct labor (1.7 hours @ $13.80 per hour) Overhead (1.7 hours @ $18.58 per hour) Standard cost per unit $ 12.89 22.10 31.45 $ 65.55 The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials Indirect labor Power Maintenance Total variable overhead costs Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervisory salaries Total fixed overhead costs $ 15,eee 75, eee 15,000 30, eee 135,eee 25,000 71,00 17, eee 223,750 336,750 $ 471,750 Total overhead costs The company incurred the following actual costs when it operated at 75% of capacity in October $ 188,600 264, eee Direct materials (46,eee pounds @ $4.19 per pound) Direct labor (20,000 hours @ $13.20 per hour) Overhead costs Indirect materials Indirect labor Power Maintenance Depreciation-Building Depreciation Machinery Taxes and insurance Supervisory salaries Total costs $ 41, 100 176,250 17,250 34,50e 25,800 95,850 15,300 223,750 629, eee $ 1,081,680 Problem 8-3A (Algo) Part 2 2. Compute the direct materials varlance, including its price and quantity variances. (Indicate the effect of each varlance by selecting favorable, unfavorable, or no varlance.) Actual Cost Standard Cost Required Information Problem 8-3A (Algo) Flexible overhead budget; materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4 [The following information applies to the questions displayed below.] Antuan Company set the following standard costs per unit for its product. Direct materials (3.2 pounds @ $4.ee per pound) Direct labor (1.7 hours @ $13.ee per hour) Overhead (1.7 hours @ $18.58 per hour) Standard cost per unit $ 12.00 22.10 31.45 $ 65.55 The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. $ 15,000 75, eee 15,000 30,eee 135, eee Overhead Budget (75% Capacity) % Variable overhead costs Indirect materials Indirect labor Power Maintenance Total variable overhead costs Fixed overhead costs Depreciation-Building Depreciation-Machinery - Taxes and insurance Supervisory salaries Total fixed overhead costs Total overhead costs 25,000 71, eee 17, eee 223,750 336,750 $ 471,750 The company Incurred the following actual costs when it operated at 75% of capacity in October $ 188,600 264, eee Direct materials (46,00 pounds @ $4.19 per pound) Direct labor (20,eee hours @ $13.20 per hour) Overhead costs Indirect materials Indirect labor Power Maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervisory salaries Total costs $ 41, 100 176,250 17,25e 34,500 25,000 95,85e 15,300 223,750 629, eee $ 1,281,600 Problem 8-3A (Algo) Part 3 3. Compute the direct labor variance, including Its rate and efficiency variances. (Indicate the effect of each varlance by selecting favorable, unfavorable, or no varlance. Round "Rate per hour" answers to two decimal places.) Actual Cost Standard Cost Required Information Problem 8-3A (Algo) Flexible overhead budget; materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4 [The following information applies to the questions displayed below.] Antuan Company set the following standard costs per unit for its product. Direct materials (3.2 pounds @ $4.ee per pound) Direct labor (1.7 hours @ $13.80 per hour) Overhead (1.7 hours @ $18.58 per hour) Standard cost per unit $ 12.ee 22.10 31.45 $ 65.55 The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. $ 15,00 75,600 15,800 30,eee 135, eee Overhead Budget (75% Capacity) ) Variable overhead costs Indirect materials Indirect labor Power Maintenance Total variable overhead costs Fixed overhead costs Depreciation-Building Depreciation Machinery Taxes and insurance Supervisory salaries Total fixed overhead costs Total overhead costs 25, eee 71,eee 17,00 223,75e 336,750 $ 471,75e The company incurred the following actual costs when it operated at 75% of capacity in October. $ 188,600 264, eee Direct materials (46,eee pounds @ $4.10 per pound) Direct labor (20,000 hours @ $13.20 per hour) Overhead costs Indirect materials Indirect labor Power Maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervisory salaries Total costs $ 41,100 176,250 17,250 34,500 25,800 95,85 15,300 223,750 629, eee $ 1,981,600 Problem 8-3A (Algo) Part 4 4. Prepare a detailed overhead variance report that shows the variances for individual items of overhead. (Indicate the effect of each varlance by selecting favorable, unfavorable, or no variance.) ANTUAN COMPANY Overhead Variance Report For Month Ended October 31 Expected production volume Production level achieved Volume Variance Flexible Budget Actual Results Variances Favorable/Unfavorable Variable overhead costs Fixed overhead costs Total overhead costs Volume Variance Volume variance Total overhead variance Problem 11-5A (Algo) Payback perlod, break-even time, and net present value LO A1, P1, P3 Salsa Company is considering an investment in technology to improve its operations. The investment costs $255.000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1. FV of $1. PVA of $1, and FVA of $ 1) (Use approprlate factor(s) from the tables provided.) UN Year 1 2 3 4 5 Net cash Flow $ 47,280 52,800 76,980 94,100 126,480 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback period answer to 1 decimal place.) Year Cash inflow (outflow) Cumulative Net Cash Inflow (outflow) Initial investment $ (255,000) Year 1 Year 2 Year 3 Year 4 Year 5 Payback period = Required 1 Required 2 Required 3 Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your break-even time answer to 1 decimal place.) Year Cash inflow (outflow) Table factor Present Value of Cash Flows Cumulative Present Value of Cash Flows Initial investment S (255,000) Year 1 Year 2 Year 3 Year 4 Year 5 Break-even time Determine the net present value for this investment. Net present value