Hansaben Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's MarketingDepartment estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will sellfor $9.00 per unit. Enough capacity exists in the company's plant to produce 25,000 units of the toy each month. Variable expenses tomanufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $30,000 permonth.Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $71,000 permonth for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee wouldincrease to a total of $142,000 per month.Required:1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier.Note: Do not round your intermediate calculations.2. How much profit will Neptune earn assuming:a. It produces and sells 25,000 units.b. It does not produce any units and instead outsources the production of 25,000 units to the outside supplier and then sellsthose units to its customers.3. Calculate the break-even point in unit sales assuming that Neptune plans to use all of its production capacity to produce the first25,000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10,000 additional units.4. Assume that Neptune plans to use all of its production capacity to produce the first 25,000 units that it sells and that it also commitsto hiring the outside supplier to produce up to 10,000 additional units.a. What total unit sales would Neptune need to achieve in order to equal the profit earned in requirement 2a?b. What total unit sales would Neptune need to achieve in order to attain a target profit of $72,500 per month?c. How much profit will Neptune earn if it sells 35,000 units per month?d. How much profit will Neptune earn if it sells 35,000 units per month and agrees to pay its marketing manager a bonus of 20cents for each unit sold above the break-even point from requirement 3?5. If Neptune outsources all production to the outside supplier, how much profit will the company earn if it sells 35,000 units?2a. Profit if produces and sells1. Break-even point in unit sales - without hiring2b. Profit if outsources production and sells3. Break-even point in unit sales - hiring4a. Total unit sales4b. Total unit sales to achieve a target Profit of $72,5004c. Net operating income4d. Net operating income - bonus to marketing manager7,500 units$ 70,000unitsunitsunits

Breakeven point in unit sales is computed as = Fixed expenses / CM per unitNet Profit is computed as…

Answered: Neptune Company has developed a small…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 2PB: Mortech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and...

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Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and requires $1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera further to enhance its functionality, it will require an additional $45 per unit of variable costs, plus an increase in fixed costs of $1,000 per month. The current price of the camera is $160. The marketing manager is positive that they can sell more and charge a higher price for the improved version. At what price level would the upgraded camera begin to improve operational earnings?
Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.
Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in the production of the boxed lunches. The costs to make the cookies are: A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased, 10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?
Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 15,000 units and 35,000 units per month. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to produce 18,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.00, and incremental fixed expenses associated with the toy would total $22,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $1.75 per unit plus a fixed fee of $15,000 per month for any production volume up to 20,000 units. For a production volume between 20,001 and 40,000 units the fixed fee would increase to a total of $30,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit will Neptune earn assuming: a. It…
Saved Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 16,000 units and 36,000 units per month. The new toy will sel for $3.00 per unit. Enough capacity exists in the company's plant to produce 19,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.00, and incremental fixed expenses associated with the toy would total $27,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $1.75 per unit plus a fixed fee of $20,000 per month for any production volume up to 21,000 units. For a production volume between 21,001 and 41,000 units the fixed fee would increase to a total of $40,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit will Neptune earn assuming: a.…
Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 20,000 units and 30,000 units per month. The new toy will sell for $10.00 per unit. Enough capacity exists in the company’s plant to produce 25,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $6.00 , and incremental fixed expenses associated with the toy would total $32,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $5.00 per unit plus a fixed fee of $69,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $138,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit with Neptune earn…

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