Lowwater Sailmakers manufactures sails for sailboats. The company has thecapacity to produce 25,000 sails per year, but is currently producing andselling 20,.000 sails per year, The following information relates to currentproduction. If a special sales order is accepted for 2,000 sails at a price of$87 per unit, and fixed costs increase by $20,000, how would operatingincome be affected? (NOTE: Assume regular sales are not affected by thespecial order.)Sale price per unit$150Variable costs unit:perManufacturingMarketing and administrative$60$20Total fixed costs:ManufacturingMarketing and administrativeS600,000$200 000Increase by S14,000Decrease by S4,000 )Decrease by S14,000 )Decrease by S6,000 ()Increase by S6,000 ()

Operating income is the amount of revenue realized from the operations of the business, after…

Answered: income be affected

Business

Accounting

income be affected

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

4 Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,000 sails per year. The following information relates to current production. If a special sales order is accepted for 4,500 sails at a price of $120 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs per unit: Manufacturing Marketing and administratrve $60 $20 Total fixed costs: Manufacturing Marketing and administrative $600,000 S200,000 Increase by $160,000 ) Increase by $150,000 ) Increase by $140,000 Increase by S170,000 ) Increase by S180,000 ()
Metalex Roofing Ltd manufactures roofing sheets whose normal selling price is GH¢20 per sheet. The variable cost of producing the product is GH¢8. A foreign distributor has offered to purchase 3,000 sheets for GH¢10 per sheet. This is a one-time order that would not affect the company's regular business. The annual capacity is 10,000 sheets, but Metalex is currently producing and selling only 5,000 sheets. Fixed costs are unaffected by the order. a. Should Metalex accept the offer? b. Assuming Metalex has no spare capacity and the order will result in a loss of production of 300 sheets. Should the order be accepted?
Markson had the following results of operations for the past year (shown in picture). A foreign company whose sales will not affect Markson's market offers to buy 2000 units at $14 per unit. In addition to existing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. Markson's annual productive capacity is 12,000 units. If Markson accepts this additional business, it's profits will?
Peru Company, which manufactures sneakers, has enough capacity available to accept a special order of 20,000 pairs of sneakers at Ph 6.00 a pair. The normal selling price is Ph 10.00 a pair. Variable manufacturing costs are Ph 4.50 a pair, and fixed manufacturing costs are Ph 1.50 a pair. Peru will not incur any selling expenses as a result of the special order. What could be the effect on operating income if the special order could be accepted without affecting normal sales? O Ph 0 Ph 30,000 increase Ph 90,000 increase O Ph 120,000 increase
Assume again that Andretti Company has sufficient capacity to produce 123,200 Daks each year. A customer in a foreign market wants to purchase 35,200 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $28,160 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit shipping cost. What is the break-even price per unit on this order? (Round your answers to 2 decimal places.)
Muscat Inc. has been manufacturing its own Camera for its Mobile Phone. The company is currently operating at 100% of capacity. Variable manufacturing overhead cost is OMR 3 per unit. The direct materials and direct labor cost per unit to make the camera are OMR 4 and OMR 6, respectively, fixed cost is OMR 50,000. Normal production is 50,000 Mobile Phone per year.
Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $200 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $270,000, up to a maximum capacity of 700,000 yards of rope. Forecasted variable costs are $140 per 100 yards of XT rope. Required 1. Estimate Product XT’s break-even point in terms of (a) sales units and (b) sales dollars. 2. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.
The Cozy Company manufactures slippers and sells them at $10 a pair. Variable manufacturing cost is $5.75 a pair, and allocated fixed manufacturing cost is $1.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 25,000 pairs of slippers at $7.50 a pair. Cozy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $43,750 increase (c) $143,750 increase, or (d) $187,500 increase? Show your calculations.
A. Island View Company operates tour boats. Its predicted operations for the year are as follows: Sales (1,000 tours per year) P 400,000 Costs: Variable P 250 per tour Fixed P 100,000 per year The company has received a request to offer 100 tours for P 300 each. Island View has plenty of capacity to do these tours in addition to its regular business. Doing these tours would not affect the company’s regular sales or its fixed costs. Required: (Support your answers by showing your computations.) 1. Should the company do the special tours for P 300 per tour? 2. What is the effect of the decision on the company’s operating profit?
Sundial Company manufactures and sells watches for $44 each. Tick−Tock Company has offered Sundial $25 per watch for a one−time order of 5,700 watches. The total manufacturing cost per watch is $29 per unit and consists of variable costs of $21 per watch and fixed overhead costs of $8 per watch. Assume that Sundial has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order? A. decrease of $22,800 B. increase of $22,800 C. increase of $142,500 D. decrease of $142,500
B. Smash Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of P7.00.The new customer is geographically separated from Smash’s other customers, and existing sales will not be affected. Smash normally produces 82,000 units but plans to produce and sell only 65,000 units in the coming year. The normal sales price is P12.00 per unit. Unit cost information is as follows: Direct materials P 3.10 Direct labor 2.25 Variable overhead 1.15 Fixed overhead 1.80 Total P` 8.30 If Smash accepts the order, no fixed manufacturing activities will be affected because there…
Lucid Images Ltd manufactures premium high definition televisions. The firm’s fixed costs are $4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. The company sold 5,000 TVs during the previous year. (In the following requirements, ignore income taxes) Required: Treat each of the requirements as independent situations: a) What will the new break-even point be if fixed costs increase by 10 per cent? b) What was the company’s net profit for the previous year? d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed?