Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sales were $30,000,000, consisting of 5,000,000 sticks. Total variable costs were $18,000,000. Total fixed costs were $10,000,000. Net income was $2,000,000. The general economic conditions

image text in transcribedimage text in transcribed
Sales were $30,000,000, consisting of 5,000,000 sticks. Total variable costs were $18,000,000. Total fixed costs were $10,000,000. Net income was $2,000,000. The general economic conditions appear to be deteriorating heading into 2021, and there is some concern about a reduction in sales volume. The following questions should each be answered Madam of one another. DO NOT ANSWER THE QUESTIONS ON THIS SHEET. USE THE WORKSHEET TAB TO ANSWER THE QUESTIONS. An income statement must be presented for each scenario to receive credit! (a) What is the company's break-even point in "sticks?" (b) 1) What would be their net income or net loss if 191m is reduced by 25%? 2) Can the company sustain a 25% reduction in total volume, and remain profitable? (c) The company's sole shareholder, Doug Anderson, generally lives off of dividends paid by the business. The business typically declares and pays a dividend equal to $150,000 for Doug's normal living expenses. Doug is demanding a $96,000 increase in dividends for 2021. What total sales volume must Anderson Metals produce in 2021 to accomodate the increase in dividends andmaintain the same net income? (d) If total volume is expected to decrease by 20%, and the company wishes to continue to produce a $2,000,000 net income by raising the per unit selling price, 1) what revised per stick price must be imposed? 2) \"ll this strategy necessarily work? (e) If the company expects a drop in raw material prices to reduce total variable costs to $2.75 per stick, but all other revenue and cost factors to be unaffected, what will be the revised break- even point in sales and units? Hint: All questions are weighted equally. There are two questions in part B and part D. Make sure you answer all questions to maximize points. Hint: Question #2 in part D is a marketing question. The accountants in part D will say "raise the price", but how would you react if you were the marketing expert on the management team? There is a video in the course cafe that may help with this assignment. Anderson Metals manufactures and sells #3 steel rebar that is used in the construction of slabs and driveways. The steel bar not only strengthens the finished concrete product, but it also has unique properties such that its temperature related expansion and contraction matches that of concrete. The product is manufactured and sold in 20' long "sticks." The product is generally produced and sold to match customer demand, and there is not a significant amount of finished goods inventory at any point in time. Summary information for 2020 is as follows: Sales were $30,000,000, consisting of 5,000,000 sticks. Total variable costs were $18,000,000. Total fixed costs were $10,000,000. Net income was $2,000,000. deteriorating heading into 2021 and there is some

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Horngrens Financial & Managerial Accounting The Financial Chapters

Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura

4th Edition

0133255573, 978-0133255577

More Books

Students also viewed these Accounting questions