Disk City, Incorporated, is a retailer for digital video disks. The projected net income for the current year is $2,130,000 based on a sales volume of 230,000 video disks. Disk City has been selling the disks for $17 each. The variable costs consist of the $4 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $400,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent. (Ignore income taxes.)

Disk City, Incorporated, is a retailer for digital video disks. The projected net income for the current year is $2,130,000 based on a sales volume of 230,000 video disks. Disk City has been selling the disks for $17 each. The variable costs consist of the $4 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $400,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 20 percent. (Ignore income taxes.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10EB: Keleher Industries manufactures pet doors and sells them directly to the consumer via their web...

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Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are S600,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.) Required: 1. Calculate Disk City's break-even point for the current year in number of video disks.
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"Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $600,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.). "Required: 1.Calculate Disk City’s break-even point for the current year in number of video disks. 2.What will be the company’s net income for the current year if there is a 10 percent increase in projected unit sales volume? 3.What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $16? 4.In order to cover a 30 percent increase in…
Disk City, Inc., is a retailer for digital video disks. The projected net income for the current year is $2,340,000 based on a sales volume of 290,000 video disks. Disk City has been selling the disks for $17 each. The variable costs consist of the $5 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $560,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.) Required: 1. Calculate Disk City's break-even point for the current year in number of video disks. (Round your final answer up to nearest whole number.) 2. What will be the company's net income for the current year if there is a 20 percent increase in projected unit sales volume? 3. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $17? (Do not…
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The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b. Average inventory would decline by 80% from the current level of $1,000,000. c. Insurance, space, materials-handling, and setup costs, which currently total $400,000 annually, would decline by 20%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 25%. The Knot currently incurs $160,000 in annual rework costs. e. Improved product quality under JIT production would enable The Knot to raise the price of its product by $2 per unit. The Knot sells 100,000 units each year. The Knot’s required rate of return on inventory investment is 15% per year. Q. Calculate the net benefit or cost to The Knot if it adopts JIT production at the Spartanburg plant.
The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b. Average inventory would decline by 80% from the current level of $1,000,000. c. Insurance, space, materials-handling, and setup costs, which currently total $400,000 annually, would decline by 20%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 25%. The Knot currently incurs $160,000 in annual rework costs. e. Improved product quality under JIT production would enable The Knot to raise the price of its product by $2 per unit. The Knot sells 100,000 units each year. The Knot’s required rate of return on inventory investment is 15% per year. Q. What nonfinancial and qualitative factors should The Knot consider when making the decision to adopt JIT production?
The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b. Average inventory would decline by 80% from the current level of $1,000,000. c. Insurance, space, materials-handling, and setup costs, which currently total $400,000 annually, would decline by 20%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 25%. The Knot currently incurs $160,000 in annual rework costs. e. Improved product quality under JIT production would enable The Knot to raise the price of its product by $2 per unit. The Knot sells 100,000 units each year. The Knot’s required rate of return on inventory investment is 15% per year. Q. Suppose The Knot implements JIT production at its Spartanburg plant. Give examples of performance measures The Knot could use to evaluate and control JIT…
The Bremer Co. manufactures cordless telephones Bremer is planning to implement a JIT production system, which requires annual tooling costs of $150,000. Bremer estimates that the following annual benefits would arise from JIT production. a. Average inventory will decline by $700,000 from $900,000 to $200,00 b. Insurance, space, materials handling, and setup costs, which currently total $200,00 would decline by 30% c. The emphasis on quality inherent in JIT system would reduce rework costs by 20% Bremer currently incurs $350,000 on rework. d. Better quality would eneble Bremer to raise the prices of its products by $3 per unit. Bremer sells $30,000 unit each year. Bremer required rate of return on inventory investment is 12% per year Required: Calculate the net benefit or cost to the Bremer Corporation From implementing a JIT production system.