d. Assuming sales of 5,000 units, calculate Buggs-Off break-even point and margin of safety in units and sales dollars.e) Recompute the break-even point in units, assuming that variable costs increased by 20% and fixed costs are reduced by $50,625. How will this impact the margin of safety ratio?f) The President of Buggs-Off is under pressure from shareholders to increase operating income by 20% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal? Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lowerlimits of activity for the year ended December 31, 2020.Lower Limit Upper Limit4,000Production (# of boxes)Production Costs:Direct MaterialsDirect Labour6,000$60,000$90,000120,00080,000Overhead:Indirect Materials.25,00037,500Indirect LabourDepreciation40,00050,00020,00020,000Selling & Administrative Expenses:65,00030,000Sales Salaries50,000Office Salaries30,000Advertising45,00045,000Other15,00020.000Total$365.000$477,500

The break-even point is the level of sales where the fixed cost is completely recovered and yields…

Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit 4,000 Production (# of boxes) Production Costs: Direct Materials . Direct Labour 6,000 $60,000 $90,000 80,000 120,000 Overhead: Indirect Materials.. Indirect Labour . Depreciation .. Selling & Administrative Expenses: Sales Salaries Office Salaries 25,000 37,500 40,000 50,000 20,000 20,000 50,000 65,000 30,000 30,000 Advertising . 45,000 45,000

Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit 4,000 Production (# of boxes) Production Costs: Direct Materials . Direct Labour 6,000 $60,000 $90,000 80,000 120,000 Overhead: Indirect Materials.. Indirect Labour . Depreciation .. Selling & Administrative Expenses: Sales Salaries Office Salaries 25,000 37,500 40,000 50,000 20,000 20,000 50,000 65,000 30,000 30,000 Advertising . 45,000 45,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....

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Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Self-Construction Olson Machine Company manufactures small and large milling machines. Selling prices of these machines range from 35,000 to 200,000. During the 5-month period from August 1, 2019, through December 31, 2019, Olson manufactured a milling machine for its own use. This machine was built as part of the regular production activities. The project required a large amount of time front planning and supervisory personnel, as well as that of some of the companys officers, because it was a more sophisticated type of machine than the regular production models. Throughout the 5-month period, Olson charged all costs directly associated with the construction of the machine to a special account entitled Asset Construction Account. An analysis of the charges to this account as of December 31, 2019, follows: Olson allocates factory overhead to normal production as a percent of direct labor dollars as follows: Olson uses a flat rate of 40% of direct labor dollars to allocate general and administrative overhead. During the machine testing period, a cutter head malfunctioned and did extensive damage to the machine table and one cutter housing. This damage was not anticipated and was the result of an error in the assembly operation. Although no additional raw materials were needed to make the machine operational after the accident, the following labor for rework was required: Olson has included all these labor charges in the asset construction account. In addition, it included in the account the repairs and maintenance charges of 1,340 that it incurred as a result of the malfunction. Required: 1. Compute, consistent with GAAP and common practice, the amount that Olson should capitalize for the milling machine as of December 31, 2019, when it declares the machine operational. 2. Next Level Identify the costs you included in Requirement 1 for which there are acceptable alternative procedures. Describe the alternative procedure(s) in each case.
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) Production Costs: 4,000 6,000 Direct Materials. $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials.. 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries . Office Salaries 50,000 65,000 30,000 30,000 Advertising 45,000 45,000 Other 15,000 20.000 Total $365.000 $477.500
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries 30,000 30,000 Advertising 45,000 45,000 Other 15,000 20,000 Total $365,000 $477,500 Required: a) Classify each cost element as either fixed, variable, or mixed b) Calculate: i) the variable production cost per unit and the total fixed production overhead. ii) The total variable cost per unit and the total fixed costs Hint: Use the high-low method to separate mixed costs into their fixed and variable…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials 25,000 37,500 Indirect Labour ............. 40,000 50,000 Depreciation . 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries ....... 30,000 30,000 .. . Advertising 45,000 45,000 Other 15,000 20,000 Total $365,000 $477.500 Required: d) Assuming sales of 5,000 units, calculate Buggs-Off break-even point and margin of safetv in units and sales dollars. e) Recompute the break-even point in units, assuming that variable costs increased by 20% and fixed costs are reduced by $50,625. How will this impact the…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit 6,000 Production (# af boxes) Production Costs: 4,000 Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials.. 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries 30,000 30,000 Advertising 45,000 45,000 Other 15.000 20,000 Total $365.000 S477.500 Required: a) Classify each cost element as either fixed, variable, or mixed b) Calculate: ) the variable production cost per unit and the total fixed production overhead. ii) The total variable cost per unit and the total fixed costs Hint: Use the high-low method to separate mixed costs into their fixed and variable…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production OCosts: Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials... 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries 30,000 30,000 Advertising 45,000 45,000 Other 15,000 20,000 Total $365.000 $477,500 Required: a) Classify each cost element as either fixed, variable, or mixed b) Calculate: i) the variable production cost per unit and the total fixed production overhead. ii) The total variable cost per unit and the total fixed costs Hint: Use the high-low method to separate mixed costs into their fixed and…
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. Selling price per unit.. $50.00 Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead $7.00 Fixed Manufacturing Overhead.... $450,000 .. .. Fixed Selling & Administrative Expenses.... $300,000 Variable selling expense per unit $10.00 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 costs and total fixed costs, and clearly showing contribution and net income. e) The recession in the economy in 2021 is expected to result in a reduction of the number of units sold.…
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. Selling price per unit. Production Costs: $50.00 Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead Fixed Manufacturing Overhead. Fixed Selling & Administrative Expenses.. Variable selling expense per unit $7.00 $450,000 $300,000 $10.00 Required: a) Using the equation method, calculate the normal capacity of the business. b) Calculate: i) the variable production cost per unit ii) the total production cost per unit i) The total variable cost per unit iv) Total Fixed Costs c) Calculate Greek's break-even point in units and in sales dollars. d) Assuming sales equal to the normal capacity calculated in a) above, prepare a…
Greek Manufacturing Company produces and sells a line of product that are sold usually company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year year round. The ended December 31, 2020. Selling price per unit. $50.00 Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead $7.00 Fixed Manufacturing Overhead.. . $450,000 Fixed Selling & Administrative Expenses... $300,000 Variable selling expense per unit $10.00 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 the total fixed selling expenses by $30,000. If they are able to accomplish this feat, it is expected that sales volume for the year will fall by 16%% below normal capacity. What must the…
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. $50.00 Selling price per unit.. Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead Fixed Manufacturing Overhead.. $7.00 $450,000 $300,000 Fixed Selling & Administrative Expenses.. Variable selling expense per unit . $10.00 Required: