Greatsounds Ltd. manufactures and sells 'Realsound' wireless earphones. The selling price of Realsound is $130.00 per...
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Greatsounds Ltd. manufactures and sells 'Realsound' wireless earphones. The selling price of Realsound is $130.00 per unit. The total annual fixed costs for the year 2020 was $1,989,000. The cost incurred to manufacture the product includes direct materials per unit amounting to $35.00 and direct labour per unit of $29.00. The company also incurs variable manufacturing overhead of $18.80 per unit. The company's variable marketing expenses was $8.20 per unit. The company sold 72,000 units for the year ended 2020. Ignore income tax considerations. Required: (a) How many units must Greatsounds sell in order to breakeven for the year 2020? What is the net profit of Greatsounds for the year 2020? (6 marks) (b) Greatsounds is considering to invest in better manufacturing equipment that would improve efficiency and reduce variable costs. This plan would cause its annual total fixed costs to be $2,530,000 and its total variable cost will be $78 per unit. This would allow the company to reduce its selling price per unit. However, the company wishes to set a selling price that would give it a targeted contribution margin of 35%. (c) The management expects that reducing the selling price would cause an increase in the demand for its product. The company estimates an increase of 5% from the number of units sold in 2020 with the reduction in selling price. (e) What is Greatsounds's new selling price per unit? What is the number of units that Greatsounds would need to sell in order to achieve a net profit equal to the net profit of 2020? Should the company proceed with this plan? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) Refer to the original information (ie. ignore part (b) data). Compute the margin of safety in percentage % ie. MOS(%) for the year 2020. What is the MOS(%) if the number of units sold were 77,000 units, assuming all other information remains the same. (3 marks) (d) Assume that Greatsounds a sound devices manufacturing company decides to sell multiple products, what information, data, assumptions and predictions would the company require to formulate its strategies? (4 marks) Explain the term behavioural congruence' with an appropriate illustration. Explain the importance of a responsibility accounting system in a decentralized organization. Explain your answer with an appropriate illustration. (3 marks) Greatsounds Ltd. manufactures and sells 'Realsound' wireless earphones. The selling price of Realsound is $130.00 per unit. The total annual fixed costs for the year 2020 was $1,989,000. The cost incurred to manufacture the product includes direct materials per unit amounting to $35.00 and direct labour per unit of $29.00. The company also incurs variable manufacturing overhead of $18.80 per unit. The company's variable marketing expenses was $8.20 per unit. The company sold 72,000 units for the year ended 2020. Ignore income tax considerations. Required: (a) How many units must Greatsounds sell in order to breakeven for the year 2020? What is the net profit of Greatsounds for the year 2020? (6 marks) (b) Greatsounds is considering to invest in better manufacturing equipment that would improve efficiency and reduce variable costs. This plan would cause its annual total fixed costs to be $2,530,000 and its total variable cost will be $78 per unit. This would allow the company to reduce its selling price per unit. However, the company wishes to set a selling price that would give it a targeted contribution margin of 35%. (c) The management expects that reducing the selling price would cause an increase in the demand for its product. The company estimates an increase of 5% from the number of units sold in 2020 with the reduction in selling price. (e) What is Greatsounds's new selling price per unit? What is the number of units that Greatsounds would need to sell in order to achieve a net profit equal to the net profit of 2020? Should the company proceed with this plan? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) Refer to the original information (ie. ignore part (b) data). Compute the margin of safety in percentage % ie. MOS(%) for the year 2020. What is the MOS(%) if the number of units sold were 77,000 units, assuming all other information remains the same. (3 marks) (d) Assume that Greatsounds a sound devices manufacturing company decides to sell multiple products, what information, data, assumptions and predictions would the company require to formulate its strategies? (4 marks) Explain the term behavioural congruence' with an appropriate illustration. Explain the importance of a responsibility accounting system in a decentralized organization. Explain your answer with an appropriate illustration. (3 marks)
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Answer a 72000 units b 130 c 6 d The company would need to consider the following factors in order to formulate its strategies The demand for the prod... View the full answer
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