Felter Company produced and sold 50 000 units of product and is operating at 70% of plant capacity
Unit information aboutits product is as follows
Variable manufacturing cost
Fixed manufacturing cost ($500,000 50,000)
Profit per unit
The company received a proposal from foreign company to buy 10,000 units of Felter Company's
product for $50 per unit. This is one-time only order and acceptance of this proposal will not affect
company's regular sales. The president of Felter Company is reluctant to accept the proposal because
he is concerned that the company will lose money on the specia order
Prepare schedule reflecting an incremental analysis of this proposal and indicate the effect the
acceptance of this order might have on the company's income.
Henderson Farms reports the following results for the month of November
Sales (10,000 units)
Management is considering the following independen courses of action to increase net income
1. Increase selling price by 5% with no change in total variable costs.
2. Reduce variable costs to 66% of sales
3. Reduce fixed costs by $10,000.
If maximizing net income is the objective, which is the best course of action?
Taveras Industries developed the following information for the product sells
$50 per unit
Variable cost of goods sold
$28 per unit
Fixed cost of goods sold
Variable selling expense
10% sales price
Variable administrative expense
$2 per unit
Fixed selling expense
Fixed administrative expense
For the year ended December 31 2013, Taveras produced and sold 100,000 units of product.
(a) Prepare CVP income statement using the contribution margin format for Taveras Industries for
(b) What was the company's break-even point in units in 2013? Use the contribution margin technique.
(c) What was the company's margin of safety in dollars in 2013?
Oscar Corporation produces and sells three products Unit dataconcerning each productis shown below.
Direct labor costs
Other variable costs
The company has 2,000 hours of labor available to build inventory in anticipation of the company's
peak season Management is trying to decide which product should be produced. The direct labor
hourly rate $15.
(a) Determine the number of direct labor hours per unit.
Determine the contribution margin per direct labor hour
(c) Determine which product should be produced and the total contribution margin for that product.
A comparative balance sheet for Rocker Company appears below:
Comparative Balance Sheet
Liabilities and Stockholders' Equity
Total liabilities and stockholders' equity
Net income for the year ending December 31, 2013 was $33,000
Cash dividends of 15,000 were declared and paid during the year
3. Long- term investments that had cost of$18,000 were sold for$14,000
4. Sales for 2013 were $120,000.
Prepare statement of cash flows for the year ended December 31, 2013, using the indirect method
Total direct labor hours available
Contribution margin per direct labor hour
Total contribution margin
Kuhn Bicycle Company has been manufacturing its own seats for its bicycles The company is currently
operating at 100% capacity and var riable manufacturing overhead is charged to production at the rate of
60% of direct labor cost. The direct materials and direct labor cost per unit to make the bicycle seats are
$8.00 and $9.00, respectively Normal production is 50,000 bicycles per year.
A supplier offers to make the bicycle seats at price of $21 each If the bicycle company accepts this
offer all var liable manufacturing costs will be eliminated. but the $30 000 of fixed manufacturing overhead
currently being charged to the bicycle seats will have to be absorbed by other products
(a) Prepare the incremental analysis for the decision to make or buy the bicycle seats.
(b) Should Kuhn Bicycle Company buy the seats from the outside supplier? Justify your answer
Speedy Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an
unassembled bikeis as follows.
ariable overhead (70% of direct labor)
Fixed overhead (30% of direct labor)
Manufacturing cost per unit
The unassembled bikes are sold to retailers at $450 each
Speedy currently has unused productive capacity that is expected to continue indefinitely
management has concluded that some of this capacity car be used to assemble the bikes and
them at $495 each Assembling the bikes will increase direct materials by $5 per bike, and direct labor
by $10 per bike. Additional variable overhead will be incurred at the normal rates. but there will be no
additional fixed overhead as a result of assembling the bikes
(a) Prepare an incremental analysis for the -process further decision
(b) Should Speedy sell or process further? Why or why not?
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