Concept explainers
Lowell Manufacturing Inc. has a normal selling price of $20 per unit and has been selling 125,000 units per month. In November, Lowell Manufacturing decided to lower its price to $19 per unit expecting it can increase the units sold by 16%.
a. Compute the normal revenue with a $20 selling price.
b. Compute the planned revenue with a $19 selling price.
c. Compute the actual revenue for November, assuming 135,000 units were sold in November at $19 per unit.
d. Compute the revenue price variance, assuming 135,000 units were sold in November at $19 per unit.
e. Compute the revenue volume variance, assuming 135,000 units were sold in November at $19 per unit.
f. Analyze and interpret the lowering of the price to $19.
Want to see the full answer?
Check out a sample textbook solutionChapter 23 Solutions
Financial And Managerial Accounting
- Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.arrow_forwardUsing the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.arrow_forwardKerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.arrow_forward
- Halifax Shoes has 30% of its sales in cash and the remainder on credit. Of the credit sales, 65% is collected in the month of sale, 25% is collected the month after the sale, and 5% is collected the second month after the sale. How much cash will be collected in August if sales are estimated as $75,000 in June, $65,000 in July, and $90,000 in August?arrow_forwardEarthies Shoes has 55% of its sales in cash and the remainder on credit. Of the credit sales, 70% is collected in the month of sale, 15% is collected the month after the sale, and 10% is collected the second month after the sale. How much cash will be collected in June if sales are estimated as $75,000 in April, $65,000 in May, and $90,000 in June?arrow_forwardMacom Manufacturing has total contribution margin of $61,250 and net income of $24,500 for the month of June. Marcus expects sales volume to increase by 10% in July. What are the degree of operating leverage and the expected percent change in income for Macom Manufacturing? 0.4 and 10% 2.5 and 10% 2.5 and 25% 5.0 and 50%arrow_forward
- Good Morning Sunshine is a wholesaler of coffee makers. In the current year, actual March sales revenue totaled $200,000. April sales are expected to increase 10% above March sales. May sales are expected to increase 10% above April sales. June sales are expected to decrease 5% below May sales. Prices are set to achieve a 60% gross profit. The company wants to maintain an ending merchandise inventory equal to 15% of the next month’s cost of sales. The ending inventory requirement was met at the end of March. Accounts Payable consist solely of inventory purchases. All invoices from the suppliers are dated as of the end of the month of purchase and carry payment terms 2/10, net 30. Assuming Good Morning Sunshine takes full advantage of purchase discounts offered, what are the company's expected cash disbursements in May to its supplier? A. $87,533.60 B. $94,152.52 C. $131,300.40 D. $86,240.00 E. $89,474.00arrow_forwardA merchandiser plans to sell 12,100 units next month at a selling price of $110 per unit. It also gathered the following cost estimates for next month: Cost Cost of goods sold Advertising expense Depreciation expense Shipping expense Administrative salaries Sales commissions Insurance expense Cost Formula $60 per unit sold. $150,000 per month $70,000 per month. $100,000 per month +$10 per unit sold $50,000 per month. 5% of sales $15,000 per month What is the estimated total contribution margin for next month?arrow_forwardOriole reported the following results from the sale of 5000 units in May: sales $300000, variable costs $240000, fixed costs $50000, and net income $10000. Assume that Oriole increases its selling price by 5% on June 1. How many units will have to be sold in June to maintain the same level of net income?arrow_forward
- Use the following (very simplified) numbers in creating your pro-forma income statement: Sales start at $1000 for January and increase by 10% per month (so, February sales will be $1100, March sales will be $1210, etc.). The venture uses a markup of 100%, so the cost of goods is 50% of the sales amount (so, January cost of goods is $500, February cost of goods is $550, etc.). The venture pays a salary of $500/month for the first 6 months, then hires an additional employee in July and pays $1000/month for the rest of the year. The venture pays a total overhead cost (including rent, utilities, and insurance) of $50/month. Payroll taxes start out at $20/month for January-June, then increase to $40/month for July-December. The venture's assets depreciate by $10/month. Office expenses are $15/month for January-April, increase to $25/month for May-August, and go back down to $15/month for September-Decemberarrow_forwardCaldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Caldwell buys 100,900 units at an average unit cost of $19 and sells them at an average unit price of $29. The firm also has fixed operating costs of $250,900 for the year. Caldwell's customers are demanding a 19% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 14% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 770 and can decrease the cost of shipment by $12 with minor changes in its operations. Any further cost savings must come from reengineering the warehousing processes. What is the maximum cost (i.e., target cost) for warehousing if the firm desires to earn the same amount of profit next year?arrow_forwardThe Norton Company produces a product that has the following sales expectations for 2007: Month Sales ($) May 150,000 June 150,000 July 300,000 August 450,000 September 600,000 October 300,000 November 300,000 December 75,000 January 150,000 February 170,000 March 180,000 Of these sales, 5% are collected during the month, 70% are collected the next month, and 25% are collected in the third month.The company is in the process of developing the cash budget for July through December. The company has the following monthly expenses: Administrative cost $50,000Lease Payment $10,000 The wage rate for labor is $7.50 per hour, and salespeople receive a commission of 8% of sales. It has been determined that each dollar of sales requires 2 minutes of labor. This labor is done for 10% of the sales three months away, for 80% of the sales two months away, and for 10% of sales one month away, and no labor is spent on the…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning