Barker Company has a single product called a Zet. The companynormally produces and sells 86,000 Zets each year at a sellingprice of $46 per unit. The companyâs unit costs at this level ofactivity are given below:
Directmaterials $ 9.50 Direct labor 9.00 Variablemanufacturing overhead 2.80 Fixed manufacturingoverhead 6.00 ($516,000 total) Variable sellingexpenses 3.70 Fixed sellingexpenses 5.50 ($473,000 total) Total cost perunit $ 36.50
A number of questions relatingto the production and sale of Zets are given below. Each questionis
independent.
Required: 1. Assume that Barker Company has sufficient capacity to produce120,400 Zets each year without any increase in fixed manufacturingoverhead costs. The company could increase sales by 40% above thepresent 86,000 units each year if it were willing to increase thefixed selling expenses by $140,000.
a. Calculate the incremental netoperating income (Negative amount should beindicated with a minus sign. Do not roundintermediate calculations. Omit the "$" sign inyour response.)
Incremental netoperating income $
b. Would the increased fixedselling expenses be justified? Yes No
2. Assume again that Barker Company has sufficient capacity toproduce 120,400 Zets each year. The company has an opportunity tosell 34,400 units in an overseas market. Import duties, foreignpermits, and other special costs associated with the order wouldtotal $27,520. The only selling costs that would be associated withthe order would be $1.30 per unit shipping cost. Compute the perunit break-even price on this order. (Do not roundintermediate calculations. Round your answer to 2 decimal places.Omit the "$" sign in your response.)
Break-even price perunit $
3. One of the materials used in the production of Zets is obtainedfrom a foreign supplier. Civil unrest in the supplierâs country hascaused a cutoff in material shipments that is expected to last forthree months. Barker Company has enough material on hand to operateat 25% of normal levels for the three-month period. As analternative, the company could close the plant down entirely forthe three months. Closing the plant would reduce fixedmanufacturing overhead costs by 30% during the three-month periodand the fixed selling expenses would continue at two-thirds oftheir normal level. What would be the impact on profits of closingthe plant for the three-month period?(Input the amount as a positive value.Round your intermediate calculations of units produced and sold tothe nearest whole number. Do not round your other intermediatecalculations. Omit the "$" sign in your response.)
Net (Click toselect)disadvantageadvantage of closing the plant $
4. The company has 500 Zets on hand that were produced last monthand have small blemishes. Due to the blemishes, it will beimpossible to sell these units at the normal price. If the companywishes to sell them through regular distribution channels, whatunit cost figure is relevant for setting a minimum selling price?(Round your answer to 2 decimal places. Omit the "$" signin your response.)
Relevant unitcost $
5. An outside manufacturer has offered to produce Zets and shipthem directly to Barkerâs customers. If Barker Company accepts thisoffer, the facilities that it uses to produce Zets would be idle;however, fixed manufacturing overhead costs would continue at 30%.Because the outside manufacturer would pay for all shipping costs,the variable selling expenses would be reduced by 60%. Compute theunit cost that is relevant for comparison to the price quoted bythe outside manufacturer. (Do not roundintermediate calculations. Round your answer to 2decimal places. Omit the "$" sign in your response.)
Total avoidable unitcost $
Barker Company has a single product called a Zet. The companynormally produces and sells 86,000 Zets each year at a sellingprice of $46 per unit. The companyâs unit costs at this level ofactivity are given below: |
| Directmaterials | $ | 9.50 | |
| Direct labor | 9.00 | ||
| Variablemanufacturing overhead | 2.80 | ||
| Fixed manufacturingoverhead | 6.00 | ($516,000 total) | |
| Variable sellingexpenses | 3.70 | ||
| Fixed sellingexpenses | 5.50 | ($473,000 total) | |
| Total cost perunit | $ | 36.50 | |
| A number of questions relatingto the production and sale of Zets are given below. Each questionis independent. |
| Required: | |
| 1. | Assume that Barker Company has sufficient capacity to produce120,400 Zets each year without any increase in fixed manufacturingoverhead costs. The company could increase sales by 40% above thepresent 86,000 units each year if it were willing to increase thefixed selling expenses by $140,000. |
| a. | Calculate the incremental netoperating income (Negative amount should beindicated with a minus sign. Do not roundintermediate calculations. Omit the "$" sign inyour response.) |
| Incremental netoperating income | $ |
| b. | Would the increased fixedselling expenses be justified? | ||||
|
| 2. | Assume again that Barker Company has sufficient capacity toproduce 120,400 Zets each year. The company has an opportunity tosell 34,400 units in an overseas market. Import duties, foreignpermits, and other special costs associated with the order wouldtotal $27,520. The only selling costs that would be associated withthe order would be $1.30 per unit shipping cost. Compute the perunit break-even price on this order. (Do not roundintermediate calculations. Round your answer to 2 decimal places.Omit the "$" sign in your response.) |
| Break-even price perunit | $ |
| 3. | One of the materials used in the production of Zets is obtainedfrom a foreign supplier. Civil unrest in the supplierâs country hascaused a cutoff in material shipments that is expected to last forthree months. Barker Company has enough material on hand to operateat 25% of normal levels for the three-month period. As analternative, the company could close the plant down entirely forthe three months. Closing the plant would reduce fixedmanufacturing overhead costs by 30% during the three-month periodand the fixed selling expenses would continue at two-thirds oftheir normal level. What would be the impact on profits of closingthe plant for the three-month period?(Input the amount as a positive value.Round your intermediate calculations of units produced and sold tothe nearest whole number. Do not round your other intermediatecalculations. Omit the "$" sign in your response.) |
| Net (Click toselect)disadvantageadvantage of closing the plant | $ |
| 4. | The company has 500 Zets on hand that were produced last monthand have small blemishes. Due to the blemishes, it will beimpossible to sell these units at the normal price. If the companywishes to sell them through regular distribution channels, whatunit cost figure is relevant for setting a minimum selling price?(Round your answer to 2 decimal places. Omit the "$" signin your response.) |
| Relevant unitcost | $ |
| 5. | An outside manufacturer has offered to produce Zets and shipthem directly to Barkerâs customers. If Barker Company accepts thisoffer, the facilities that it uses to produce Zets would be idle;however, fixed manufacturing overhead costs would continue at 30%.Because the outside manufacturer would pay for all shipping costs,the variable selling expenses would be reduced by 60%. Compute theunit cost that is relevant for comparison to the price quoted bythe outside manufacturer. (Do not roundintermediate calculations. Round your answer to 2decimal places. Omit the "$" sign in your response.) |
| Total avoidable unitcost | $ |
Related questions
Barker Company has a single product called a Zet. The companynormally produces and sells 82,000 Zets each year at a sellingprice of $44 per unit. The companyâs unit costs at this level ofactivity are given below:
| Direct materials | $ | 7.50 | |
| Direct labor | 10.00 | ||
| Variable manufacturing overhead | 2.80 | ||
| Fixed manufacturing overhead | 5.00 | ($410,000total) | |
| Variable selling expenses | 4.70 | ||
| Fixed selling expenses | 5.50 | ($451,000total) | |
| Total cost per unit | $ | 35.50 | |
| A number ofquestions relating to the production and sale of Zets are givenbelow. Each question is independent. |
| Required: | |
| 1. | Assume that Barker Company has sufficient capacity to produce106,600 Zets each year without any increase in fixed manufacturingoverhead costs. The company could increase sales by 30% above thepresent 82,000 units each year if it were willing to increase thefixed selling expenses by $110,000. |
| a. | Calculate theincremental net operating income. |
| b. | Would theincreased fixed selling expenses be justified? | ||||
|
| 2. | Assume again that Barker Company has sufficient capacity toproduce 106,600 Zets each year. The company has an opportunity tosell 24,600 units in an overseas market. Import duties, foreignpermits, and other special costs associated with the order wouldtotal $19,680. The only selling costs that would be associated withthe order would be $1.70 per unit shipping cost. Compute the perunit break-even price on this order. (Round your answers to2 decimal places.) |
| 3. | One of the materials used in the production of Zets is obtainedfrom a foreign supplier. Civil unrest in the supplierâs country hascaused a cutoff in material shipments that is expected to last forthree months. Barker Company has enough material on hand to operateat 25% of normal levels for the three-month period. As analternative, the company could close the plant down entirely forthe three months. Closing the plant would reduce fixedmanufacturing overhead costs by 30% during the three-month periodand the fixed selling expenses would continue at two-thirds oftheir normal level. What would be the impact on profits of closingthe plant for the three-month period? (Any reductions oroutflows should be indicated by a minus sign.) |
| 4. | The company has 500 Zets on hand that were produced last monthand have small blemishes. Due to the blemishes, it will beimpossible to sell these units at the normal price. If the companywishes to sell them through regular distribution channels, whatunit cost figure is relevant for setting a minimum selling price?(Round your answer to 2 decimal places.) |
| 5. | An outside manufacturer has offered to produce Zets and shipthem directly to Barkerâs customers. If Barker Company accepts thisoffer, the facilities that it uses to produce Zets would be idle;however, fixed manufacturing overhead costs would continue at 30%.Because the outside manufacturer would pay for all shipping costs,the variable selling expenses would be reduced by 60%. Compute theunit cost that is relevant for comparison to the price quoted bythe outside manufacturer. (Do not roundintermediate calculations. Round your answer to 2decimal places.) |
Richter Company has a single product called a Wim. The companynormally produces and sells 75,000 Wims each year at a sellingprice of $43 per unit. The companyâs unit costs at this level ofactivity are given below: |
| Directmaterials | $ | 8.10 |
| Direct labor | 13.00 | |
| Variablemanufacturing overhead | 4.90 | |
| Fixed manufacturingoverhead | 4.00 | |
| Variable sellingexpenses | 5.70 | |
| Fixed sellingexpenses | 6.00 | |
| Total cost perunit | $ | 41.70 |
A number of questions relating to the production and sale ofWims are given below. Each question is |
| Required: | |
| 1. | Assume that Richter Company has sufficient capacity to produce90,000 Wims each year without any increase in fixed manufacturingoverhead costs. The company could increase sales by 20% above thepresent 75,000 units each year if it were willing to increase thefixed selling expenses by $110,000. |
| a. | Calculate the incremental netoperating income. |
Barker Company has a single productcalled a Zet. The company normally produces and sells 83,000 Zetseach year at a selling price of $48 per unit. The company%u2019sunit costs at this level of activity are given below:
| Direct materials | $ | 8.50 | |
| Direct labor | 9.00 | ||
| Variable manufacturing overhead | 1.80 | ||
| Fixed manufacturing overhead | 6.00 | ($498,000total) | |
| Variable selling expenses | 1.70 | ||
| Fixed selling expenses | 5.50 | ($456,500total) | |
| Total cost per unit | $ | 32.50 | |
| | | ||
| A number ofquestions relating to the production and sale of Zets are givenbelow. Each question is independent. |
| Required: | |
| 1. | Assume that Barker Company hassufficient capacity to produce 112,050 Zets each year without anyincrease in fixed manufacturing overhead costs. The company couldincrease sales by 35% above the present 83,000 units each year ifit were willing to increase the fixed selling expenses by$130,000. |
| a. | Calculate the incremental net operatingincome (Negative amount should beindicated with a minus sign. Do not round intermediatecalculations.) |
| Incremental net operating income | $ |
| b. | Would the increased fixed selling expenses be justified? | ||||
|
| 2. | Assume again that Barker Company hassufficient capacity to produce 112,050 Zets each year. The companyhas an opportunity to sell 29,050 units in an overseas market.Import duties, foreign permits, and other special costs associatedwith the order would total $20,335. The only selling costs thatwould be associated with the order would be $1.70 per unit shippingcost. Compute the per unit break-even price on this order.(Do not roundintermediate calculations. Round your answer to 2 decimalplaces.) |
| Break-even price per unit | $ |
| 3. | Oneof the materials used in the production of Zets is obtained from aforeign supplier. Civil unrest in the supplier%u2019s country hascaused a cutoff in material shipments that is expected to last forthree months. Barker Company has enough material on hand to operateat 25% of normal levels for the three-month period. As analternative, the company could close the plant down entirely forthe three months. Closing the plant would reduce fixedmanufacturing overhead costsby 35% during the three-month period and the fixed selling expenseswould continue at two-thirds of their normal level. What would bethe impact on profits of closing the plant for the three-monthperiod? (Input the amount as apositive value. Round your intermediate calculations of unitsproduced and sold to the nearest whole number. Do not round yourother intermediate calculations. Round your final answer to nearestwhole number.) |
| Net (Click to select)disadvantageadvantage of closingthe plant | $ |
| 4. | The company has 700 Zets on handthat were produced last month and have small blemishes. Due to theblemishes, it will be impossible to sell these units at the normalprice. If the company wishes to sell them through regulardistribution channels, what unit cost figure is relevant forsetting a minimum selling price? (Round your answer to 2decimal places.) |
| Relevant unit cost | $ |
| 5. | An outside manufacturer has offeredto produce Zets and ship them directly to Barker%u2019s customers.If Barker Company accepts this offer, the facilities that it usesto produce Zets would be idle; however, fixed manufacturingoverhead costs would continue at 30%. Because the outsidemanufacturer would pay for all shipping costs, the variable sellingexpenses would be reduced by 60%. Compute the unit cost that isrelevant for comparison to the price quoted by the outsidemanufacturer. (Do not round intermediatecalculations. Round your answer to 2decimal places.) |
| Total relevant unit cost | $ |
