Princeton Manufacturing Company summarizes the following total cost data for the month of March. Princeton has...
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Princeton Manufacturing Company summarizes the following total cost data for the month of March. Princeton has a normal capacity per month of 25,000 units of product that sell for $40 each. For the foreseeable future, sales volume should equal normal capacity of production. Direct material $295.000 Direct labor 165,000 Variable overhead 85,000 Fixed overhead (Note 1) 140,000 Selling expense (Note 2) 80,000 Administrative expense (fixed) 56,000 $821,000 Notes: 1. Beyond normal capacity, fixed overhead cost increases $6,350 for each 1,000 units or fraction thereof until a maximum capacity of 30,000 units is reached. 2. Selling expenses are a 5% sales commission plus shipping costs of $1.20 per unit. a. Using the information available, prepare a formula to estimate Princeton's total cost at various production volumes up to normal capacity. Total cost = $ 0 + $ 0 X # of units. b. Prove your answer in requirement (a) relative to the total cost figure for 25,000 units. Total cost Fixed cost Variable cost %3D + $ c. Calculate the planned total cost at 20,000 units. $ 0 d. If Princeton were operating at normal capacity and accepted an order for 500 more units, what would it have to charge for the order to earn a net income before income tax of $8 per unit on the new sale? Required selling price $ 0 per unit Princeton Manufacturing Company summarizes the following total cost data for the month of March. Princeton has a normal capacity per month of 25,000 units of product that sell for $40 each. For the foreseeable future, sales volume should equal normal capacity of production. Direct material $295.000 Direct labor 165,000 Variable overhead 85,000 Fixed overhead (Note 1) 140,000 Selling expense (Note 2) 80,000 Administrative expense (fixed) 56,000 $821,000 Notes: 1. Beyond normal capacity, fixed overhead cost increases $6,350 for each 1,000 units or fraction thereof until a maximum capacity of 30,000 units is reached. 2. Selling expenses are a 5% sales commission plus shipping costs of $1.20 per unit. a. Using the information available, prepare a formula to estimate Princeton's total cost at various production volumes up to normal capacity. Total cost = $ 0 + $ 0 X # of units. b. Prove your answer in requirement (a) relative to the total cost figure for 25,000 units. Total cost Fixed cost Variable cost %3D + $ c. Calculate the planned total cost at 20,000 units. $ 0 d. If Princeton were operating at normal capacity and accepted an order for 500 more units, what would it have to charge for the order to earn a net income before income tax of $8 per unit on the new sale? Required selling price $ 0 per unit
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Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
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