Managment Accounting Cosi Ltd produces and sells a single product, a fan called a tutte. Annual productioncapacity is 100,000 machine hours. Annual demand for tuttes is 80,000 fans. The sellingprice is expected to remain at £12 per fan. Cost data for producing and selling tuttes areas follows:Variable costs (per unit)Direct materials, labour andoverheadSelling costsFixed costs (per year)Fixed production costsFixed selling costs£5.101.80Cosi Ltd has 2,000 tuttes in inventory that were incorrectly painted. The company hastwo choices:£69,00040,0001. sell these lower quality fans through the normal distribution channels at a reducedpricePriceor2. scrap them at a net cost of zero.Sales of these lower quality fans are not expected to affect regular sales of tuttes.Required:Determine and justify the minimum price per fan that would have to be received in orderto make it worthwhile selling the lower quality fans rather than scrapping them. (Roundyour answer to 2 decimal places.)per fan

Answered: Cosi Ltd produces and sells a single…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...

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Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows: Their sales mix s reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $25,000 per year. What are total variable costs for Morris with their current product mix? Calculate the number of units of each product that will need to be sold in order for Morris to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Ash Ltd has two divisions, Division A and Division B. Division A manufactures component Beta, of which variable cost is £18 per unit. The annual capacity of Division A is 1,900 units and all are transferred to division B. Division B incurs extra cost of £20 to transform component Beta into component Gama, which is sold to the external market for £66 each. Calculate the profit margin of each division
Northenscold Company sells several products. Information of average revenue and costs are as follows: Selling price per unit $20.00 Variable costs per unit: Direct materials $4.00 Direct manufacturing labor $2.00 ABC cost per unit $0.50 Fixed MOH $0.40 Variable MOH $0.30 Selling costs $2.00 Annual fixed costs $96,000 Calculate the number of units Northenscold's must sell to yield a profit of $144,000. (round to nearest whole unit).
Miller Company produces speakers for home stereo units. The speakers are sold to retail stores for £30. Variable costs per unit are: Direct materials £9.00; Direct labour 4.50; Distribution 1.50 and Variable Factory overhead 3.00. Fixed costs per month are: Factory overhead £120,000 and Selling and admin. 60,000. The variable distribution costs are for transportation to the retail stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year. An Atlanta wholesaler has proposed to place a special one-time order for 7,000 units at a special price of £25.20 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of £6,000. In addition, assume that overtime production is not possible and that allother information remains the same as the original data. The effect on profits if the special order is accepted is Select one: a. cannot be determined b. £30,900 decrease c. £50,100…
Beauty Supplies Company manufactures and sells several ranges of artwork. The average revenue and cost of sales are as follows: Selling price per unit $30.00 Variable costs per unit: Direct materials $7.00 Direct manufacturing labor $2.40 Manufacturing overhead $0.60 Selling costs $3.00 Annual fixed costs $108,000 a) Calculate the contribution margin per unit. Calculate the number of units Beauty Supplies Company must sell each year to break even. Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000. Managers may use Sensitivity analysis in their accounting system. What is sensitivity analysis? How is Sensitivity analysis useful to managers?
Olay Co makes a single product with a total capacity of 400,000 litres per annum. Details relating to the cost and sales of the product are as follows: selling price $1 per litre Variable cost $0.50 per litre Fixed costs $100,000 You are to construct a break even chart showing the break even point and likely profit at 300,000 litres of used capacity.
Success Sdn Bhd sells lorries. During the current year, 100 lorries were sold resulting inRM820,000 of sales revenue, RM250,000 of variable costs, and RM342,000 of fixedcosts. Required: Calculatea. the number of lorries that must be sold to achieve RM300,000 of operatingincome. b. the contribution margin at the breakeven point of 2,000 units, variable coststotal RM4,000 and fixed costs total RM6,000. c. Explain the term breakeven point.
Sweet Sugar is a manufacturer which producing candy in various flavour. The sales price for each flavour is RM 50 per normal pack. Planned production and sales for the next year are as is 80,000 packs. The management has provided the following information: Variable cost: Direct material (ingredients) RM 6.50 Direct labour RM 16.00 Variable production overheads RM 5.00 Fixed cost: Fixed production overheads RM 50,000 per year Required: Calculate the following breakeven analysis: Break Even Point (Unit) Break Even Point (RM) Margin of safety (Unit) Margin of safety (RM) Explain THREE limiting assumptions of cost volume profit. Roose manufactures a product called Wye. The owners of Roose are preparing the budgets for the…
At present the selling price of the Sandals is £5.75 and it incurs the following variable costs: The fixed costs of production are £180,000 and the company currently sells 90,000 units. Direct Labour £1.35 Direct Materials £1.75 Other Direct costs £0.40 Calculate the break-even point (in units and revenues) Calculate the profit made on sales of 90,000 units.

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