Toasty Cup Corporation manufactures and sells battery powered, insulated mugs that can maintain hot temperatures for...
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Toasty Cup Corporation manufactures and sells battery powered, insulated mugs that can maintain hot temperatures for coffee and tea. Last month, the company produced and sold 12,000 units at a price of $50 each. Related information appears below: Item Utilities for factory Advertising (rent on billboard) Insurance for administrative office Salary for factory manager Wages for factory assembly staff Rent on factory and equipment Product delivery costs Metal, circuits and plastic Salaries for office staff Wages for factory cleaning crew Total Cost $28,000 8,000 11,500 9,400 141,000 64,000 36,000 122,000 42,000 24,600 Required: a. Identify all costs above as either a product cost (specifically DM, DL or OH) or a period cost (PC). b. The company uses the cost-plus approach to pricing and wants to achieve an approximate profit of 25 percent. Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you recommend to improve its profitability? c. If the company had only sold 9,000 units last month, what dollar amount would it report for cost of goods sold as well as ending inventory in its financial statements? Round your final answer to the nearest dollar. d. Identify all costs as either a variable cost (VC) or a fixed cost (FC) then calculate the variable cost per unit (rounded to the nearest penny) assuming 12,000 units were produced and sold as well as the total fixed costs. What is the break-even point (rounded to the nearest whole unit)? Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $50 per unit. e. For next month, the company is considering renting new automated equipment that would reduce the need for factory labor. If so, the rent on factory and equipment would increase by $15,000, but the wages for the factory assembly staff would decrease by $3 per unit. What is the projected net income under this scenario? f. For next month, the company is considering using longer lasting batteries for its mugs; if so, the cost for materials would increase by $5 per unit. Management projects that its sales (and production) volume would increase by 4,000 units. What is the projected net income under this scenario? g. Would you recommend either course of action in part e or part f? Briefly explain. Toasty Cup Corporation manufactures and sells battery powered, insulated mugs that can maintain hot temperatures for coffee and tea. Last month, the company produced and sold 12,000 units at a price of $50 each. Related information appears below: Item Utilities for factory Advertising (rent on billboard) Insurance for administrative office Salary for factory manager Wages for factory assembly staff Rent on factory and equipment Product delivery costs Metal, circuits and plastic Salaries for office staff Wages for factory cleaning crew Total Cost $28,000 8,000 11,500 9,400 141,000 64,000 36,000 122,000 42,000 24,600 Required: a. Identify all costs above as either a product cost (specifically DM, DL or OH) or a period cost (PC). b. The company uses the cost-plus approach to pricing and wants to achieve an approximate profit of 25 percent. Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you recommend to improve its profitability? c. If the company had only sold 9,000 units last month, what dollar amount would it report for cost of goods sold as well as ending inventory in its financial statements? Round your final answer to the nearest dollar. d. Identify all costs as either a variable cost (VC) or a fixed cost (FC) then calculate the variable cost per unit (rounded to the nearest penny) assuming 12,000 units were produced and sold as well as the total fixed costs. What is the break-even point (rounded to the nearest whole unit)? Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $50 per unit. e. For next month, the company is considering renting new automated equipment that would reduce the need for factory labor. If so, the rent on factory and equipment would increase by $15,000, but the wages for the factory assembly staff would decrease by $3 per unit. What is the projected net income under this scenario? f. For next month, the company is considering using longer lasting batteries for its mugs; if so, the cost for materials would increase by $5 per unit. Management projects that its sales (and production) volume would increase by 4,000 units. What is the projected net income under this scenario? g. Would you recommend either course of action in part e or part f? Briefly explain.
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a Utilities for Factory Advertising rent of billboards I... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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