Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs Variable expenses per unit: $40 $32 $18 Fixed expenses: $190,000 $115,000 $135,000

Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Direct Material Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs Variable expenses per unit: $40 $32 $18 Fixed expenses: $190,000 $115,000 $135,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...

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SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
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Valencia Manufacturing Company manufactures and sells musical gadgets. The business earnedOperating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valenciais under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costswere as follows:Variable expenses per unit: Direct Material $40Direct Labour $32Variable Manufacturing Overhead $18Fixed expenses: Fixed Manufacturing Overhead $190,000Fixed Selling Costs $115,000Fixed Administrative Costs $135,000Required:(a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for theyear ended December 31, 2018, detailing the composition of total fixed costs and clearly showingcontribution and net income. (c) Calculate Valencia’s break-even point in units and in sales dollars. (d) Calculate the margin of safety in units and in sales dollars.
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earnedOperating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valenciais under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costswere as follows:Variable expenses per unit: Direct Material $40Direct Labour $32Variable Manufacturing Overhead $18Fixed expenses: Fixed Manufacturing Overhead $190,000Fixed Selling Costs $115,000Fixed Administrative Costs $135,000Required:(e) The management of Valencia Manufacturing Company is desirous of increasing operating income by 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018. Determine the number of units that must be sold to earn this target operating profit. Is this a realisticgoal?
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earnedOperating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valenciais under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costswere as follows:Variable expenses per unit: Direct Material $40Direct Labour $32Variable Manufacturing Overhead $18Fixed expenses: Fixed Manufacturing Overhead $190,000Fixed Selling Costs $115,000Fixed Administrative Costs $135,000Required:(f) Assume that as a result of reorganizing the production process, Valencia Manufacturing Companywas able to reduce direct material cost per unit by $5 due to a change in the quality of raw materialused in the production process but the expected sales of 6,000 units would decrease by 5% andtotal fixed costs are expected to increase by $94,000. What must the new selling price per unit be ifthe company wishes to meet the target operating profit for…
pany manufactures and sels musical gadgets The businesss earned Income of $220.000 in 2018, when seling price per unit was $200, and the president of Valencia s under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as folows Vanable expenses per unit Direct Material Direct Labour Variable Manufacturing Overhead $40 $32 Fored expenses $18 0 Faed Manufacturing Overhead Faed Seing Costs Fixed Administrative Costs $190.000 $115.000 $135.000440c Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (e) Calculate Valencia's break-even point in units and in sales dollars Calculate the margin of safety in units and in sales dollars (d) The management of Valencia Manufacturing…
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 $32 $18 Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs Fixed expenses: $190,000 $115,000 $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (c) Calculate Valencia's break-even point in units and in sales dollars. (d) Calculate the margin of safety in units and in sales dollars.…
Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The businessearned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president ofDarius is under pressure to increase operating income in 2019 and is therefore considering the implementationof strategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were asfollows:Variable expenses per unit: Direct Material $20Direct Labour $50Variable Manufacturing Overhead $10Fixed expenses: Fixed Manufacturing Overhead $125,000Fixed Selling Costs $75,000Fixed Administrative Costs $100,000You have just begun your internship at the company. The financial controller, Dave Miller, has indicated thatthe business is considering paying a commission to its sales team as part of the sales expansion effort, whichshould result in an increase in sales revenue. The head of the marketing department has indicated that theeffort of the sales team should…
Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The businessearned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president ofDarius is under pressure to increase operating income in 2019 and is therefore considering the implementationof strategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were asfollows:Variable expenses per unit: Direct Material $20Direct Labour $50Variable Manufacturing Overhead $10Fixed expenses: Fixed Manufacturing Overhead $125,000Fixed Selling Costs $75,000Fixed Administrative Costs $100,000You have just begun your internship at the company. The financial controller, Dave Miller, has indicated thatthe business is considering paying a commission to its sales team as part of the sales expansion effort, whichshould result in an increase in sales revenue. The head of the marketing department has indicated that theeffort of the sales team should…