a. Assuming there are no alternative uses for Hazlett & Family's present capacity, would you recommend dropping the Southern market? b. Prepare the forecasted annual income statement showing contribution margins by products. Do not allocate fixed costs to products. c. It is believed that a new model can be ready for sale next year if Hazlett decides to go ahead with continued research. The new product would replace H-LX and can be produced by simply converting equipment presently used in producing the H-LX model. This conversion will increase fixed costs by $456,000 annually. What must be the minimum annual contribution margin for the new model to make the changeover financially feasible?
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- Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold. Gross margin Marketing costs. Administrative costs Total marketing and administrative. Operating profits H-L H-LX H-LXS Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change in the low returns over time. The financial staff has…Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Total Northern Southern Sales revenue $ 58,500 $ 45,000 $ 13,500 Cost of goods sold 45,450 34,875 10,575 Gross margin $ 13,050 $ 10,125 $ 2,925 Marketing costs 4,725 2,700 2,025 Administrative costs 2,340 1,800 540 Total marketing and administrative $ 7,065 $ 4,500 $ 2,565 Operating profits $ 5,985 $ 5,625 $ 360 Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for…Grand Chocolate Inc. is a producer of premium chocolate based in Palo Alto. (Click the icon to view additional information.) Grand Chocolate Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round-trip. (Click the icon to view the cost information for 2020.) For 2020, the trucking fleet had a practical capacity of 45 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: Read the requirements. (Click the icon to view the budget and actual data.) Requirement 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? X Dark chocolate Milk chocolate Data table Variable costs Fixed costs A…
- Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in. The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021. The company plans to sell each bottle of Kev-Power at Shs.198. The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below. Variable Costs Per Bottle Produced Direct Material Cost Shs 6 per Bottle Direct Labour Cost Shs 3 per Bottle Variable Production overhead cost Shs 3.8 per Bottle Variable Administration overhead cost Shs 2.5 per Bottle Variable Selling & Distribution overhead cost Shs 1.5 per Bottle 4.The Fixed costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the…You are required show ALL supportingworkings where necessary and state any assumption(s) made. _C-V-P AnalysisGreek Manufacturing Company produces and sells a line of product that are sold usually all year round. Thecompany has a maximum production capacity of 100,000 units per year. Operating at normal capacity, thebusiness earned Operating Income of $600,000 in 2020. The following cost data has been prepared for theyear ended December 31, 2020.Selling price per unit……………………………………… $50.00Production Costs:Direct Materials …………………………………. $10.00Direct Labour ……………………………………. $8.00Variable Manufacturing Overhead ……………. $7.00Fixed Manufacturing Overhead…………....................... $450,000Fixed Selling & Administrative Expenses……………… $300,000Variable selling expense per unit ………………………. $10.00Required: a. Using the equation method calculate the normal capacity of the business b.Assuming sales equal to the normal capacity calculated in (a) above, prepare a contribution margin income…You are required show ALL supporting workings where necessary and state any assumption(s) made. Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. Thecompany has a maximum production capacity of 100,000 units per year. Operating at normal capacity, thebusiness earned Operating Income of $600,000 in 2020. The following cost data has been prepared for theyear ended December 31, 2020.Selling price per unit……………………………………… $50.00Production Costs:Direct Materials …………………………………. $10.00Direct Labour ……………………………………. $8.00Variable Manufacturing Overhead ……………. $7.00Fixed Manufacturing Overhead…………....................... $450,000Fixed Selling & Administrative Expenses……………… $300,000Variable selling expense per unit ………………………. $10.00Required:g) Greek’s management team is concerned about the selling expenses associated with the product and wants to reduce the variable selling expense per unit by 30%, which will see a simultaneous reduction in…
- Activity-Based Supplier CostingLevy Inc. manufactures tractors for agricultural usage. Levy purchases the engines neededfor its tractors from two sources: Johnson Engines and Watson Company. The Johnsonengine has a price of $1,000. The Watson engine is $900 per unit. Levy produces andsells 22,000 tractors. Of the 22,000 engines needed for the tractors, 4,000 are purchasedfrom Johnson Engines, and 18,000 are purchased from Watson Company. The production manager, Jamie Murray, prefers the Johnson engine. However, Jan Booth, purchasingmanager, maintains that the price difference is too great to buy more than the 4,000units currently purchased. Booth also wants to maintain a significant connection withthe Johnson source just in case the less expensive source cannot supply the needed quantities. Jamie, however, is convinced that the quality of the Johnson engine is worth theprice difference.Frank Wallace, the controller, has decided to use activity costing to resolve the issue. Thefollowing…Consider the info provided below as well as the financial statements and answer the questions that follow.Pearson & Litt is a manufacturing company in the Eastern Cape. Their factory manufactures glass wine bottles for the Blue Valley Beer Co. For 2019 and 2020 respectively :Sales price per unit R15 and R19Variable cost per unit R6 and R7Fixed cost (FC) per annum R650 000 and R 855 500Fixed cost per unit R3 and R4Current assets R450 600 and R560 700Current liabilities R510 000 and R780 000Retained profit R21 809 and R17 600Net Sales R2 900 320 and R 3 100 100Cost of sales R390 000 and R475 000 The current ratio reflects the relationship between the value of the current assets and the extent of the current liabilities of a business.Q.1 Calculate the current ratio for Pearson & Litt for 2019. Q.2 Explain the results of the current‐test ratio.HINT: Include the minimum ratio recommended for the ratio in youranswer.Guppy Inc. is a small distributor of mechanical pencils. Guppy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019: (Click the icon to view the activity and cost pool details.) Revenues Costs: Begin by calculating the operating income. Then, calculate the per unit amounts. (Round the per unit amounts to the nearest cent.) Purchase cost of pencil packs Ordering costs Receiving and storage Shipping Total costs Operating income Total C Per Unit For 2019, Guppy buys 250,000 pencil packs at an average cost of $3 per pack and sells them to retailers at an average price of $7 per pack. Assume Guppy has no fixed costs and no inventories. Calculate Guppy's operating income for 2019.
- Wildhorse Enterprises is a portable hot tub manufacturer. The company produces both 2-person and 4-person hot tubs. Chris Anderson, the company's sales manager, prepared the following sales forecast for 2021. The forecasted sales prices include a 5 percent increase in the 2-person spa price and a 10 percent increase in the 4-person spa price, to cover anticipated increases in raw materials prices. 2-person spa 4-person spa (a) on spas: Your answer is partially correct. geted sales price Prepare Wildhorse's sales budget for 2021. geted sales price ✓ il revenue on spas: Sales Price geted sales price geted sales price geted sales price v frevenue V $1,400 $2,700 V 1st Quarter 650 350 LA 1A 1st Quarter 2nd Quarter 910000 490000 1400000 DE 650 Units 250 3rd Quarter 550 250 2nd Quarter 4th Quarter 910000 350000 1260000 750 350 SA 3rd Quarter 1050000 490000 1540000 SA SA SA SA FA 1You are required to show ALL supporting workings where necessary and state any assumption(s) made.Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. Thecompany has a maximum production capacity of 100,000 units per year. Operating at normal capacity, thebusiness earned Operating Income of $600,000 in 2020. The following cost data has been prepared for theyear ended December 31, 2020.Selling price per unit……………………………………… $50.00Production Costs:Direct Materials …………………………………. $10.00Direct Labour ……………………………………. $8.00Variable Manufacturing Overhead ……………. $7.00Fixed Manufacturing Overhead…………....................... $450,000Fixed Selling & Administrative Expenses……………… $300,000Variable selling expense per unit ………………………. $10.00Required:d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable…You are asked to recommend whether a firm should make or purchase product A. The following are data conceming the two options For the purchase option, the firm can buy product A at $19 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $19,000 for the production facility With the use of this facility, the firm also has to hire five operators to help make product A Each operator works eight hours per day, five days per week at the rate of $10 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $14 per unit of product A a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 5,600 units per week, should it make or purchase product A? a.…