Folgers manufactures coffee:
Item
Total Cost
Salaries for Administrative Staff
$264,000
Salary for Factory Manager
14,800
Rent on Factory and Equipment
184,600
Utilities for Factory
40,200
Advertising (fixed)
20,400
Rubber and plastic
448,200
Wages for Assembly Staff
358,000
Total
$1,330,200
a. Identify all costs above as either a product cost(specifically DM, DL or OH) or a period cost (PC).
b. If Folgers had produced 12,000 units, but only sold ¾ of itsinventory what amount would it report for inventory?
c. Identify all of their costs as either a variable cost (VC) ora fixed cost (FC) then calculate the variable cost per unit(rounded to the nearest penny) assuming 12,000 units were producedand the total fixed costs. Prepare a CM model assuming all unitswere sold at $125each.
Use the contribution margin model toanswer each situation below, which is independent of the others andunless specified otherwise, uses the VC and FC data above.
d. Management expects a 20% increase in unit sales. If so, whatis the Folgersâ projected net income under this scenario?
e. Folgers is considering using recycled rubber and plastic fortheir product. If so, its most recent costs for materials wouldincrease by $10 per unit; as a result, Folgers would increase theprice by $5 per unit to help offset that cost increase. Inaddition, management would increase advertising by 50 percent. Ifthose changes are made,Folgers anticipates that unit sales wouldincrease by 15 percent. What is the projected net income under thisscenario?
f.Folgers is considering whether it should make upgrades to thefactory and equipment; if so, the rent on factory and equipmentwould increase by 15 percent. Management projects that itsproduction (and sales) volume would increase by 20 percent if theprice were lowered by $5 per unit for all units. What is theprojected net income under this scenario?
Folgers manufactures coffee:
Item | Total Cost |
Salaries for Administrative Staff | $264,000 |
Salary for Factory Manager | 14,800 |
Rent on Factory and Equipment | 184,600 |
Utilities for Factory | 40,200 |
Advertising (fixed) | 20,400 |
Rubber and plastic | 448,200 |
Wages for Assembly Staff | 358,000 |
Total | $1,330,200 |
a. Identify all costs above as either a product cost(specifically DM, DL or OH) or a period cost (PC).
b. If Folgers had produced 12,000 units, but only sold ¾ of itsinventory what amount would it report for inventory?
c. Identify all of their costs as either a variable cost (VC) ora fixed cost (FC) then calculate the variable cost per unit(rounded to the nearest penny) assuming 12,000 units were producedand the total fixed costs. Prepare a CM model assuming all unitswere sold at $125each.
Use the contribution margin model toanswer each situation below, which is independent of the others andunless specified otherwise, uses the VC and FC data above.
d. Management expects a 20% increase in unit sales. If so, whatis the Folgersâ projected net income under this scenario?
e. Folgers is considering using recycled rubber and plastic fortheir product. If so, its most recent costs for materials wouldincrease by $10 per unit; as a result, Folgers would increase theprice by $5 per unit to help offset that cost increase. Inaddition, management would increase advertising by 50 percent. Ifthose changes are made,Folgers anticipates that unit sales wouldincrease by 15 percent. What is the projected net income under thisscenario?
f.Folgers is considering whether it should make upgrades to thefactory and equipment; if so, the rent on factory and equipmentwould increase by 15 percent. Management projects that itsproduction (and sales) volume would increase by 20 percent if theprice were lowered by $5 per unit for all units. What is theprojected net income under this scenario?
Related questions
1. The following is a list of various costs of producingT-shirts. Classify each cost as either a variable, fixed, or mixedcost for units produced and sold.
(a) | Leather used to make a handbag. |
(b) | Warehouse rent of $8,000 per month plus $.50 per square foot ofstorage used. |
(c) | Thread. |
(d) | Electricity costs of $.038 per kilowatt-hour. |
(e) | Janitorial costs of $4,000 per month. |
(f) | Advertising costs of $12,000 per month. |
(g) | Accounting salaries. |
(h) | Color dyes for producing different colors of sweatshirts. |
(i) | Salary of the production supervisor. |
(j) | Straight-line depreciation on sewing machines. |
(k) | Patterns for different designs. Patterns typically last manyyears before being replaced. |
(l) | Hourly wages of sewing machine operators. |
(m) | Property taxes on factory, building, and equipment. |
(n) | Cotton and polyester cloth. |
(o) | Maintenance costs with sewing machine company. The cost is$2,000 per year plus $.001 for each machine hour of use. |
2. Copper Hills manufactures laser printers within a relevantrange of production of 70,000 to 100,000 printers per year. Thefollowing partially completed manufacturing cost schedule has beenprepared:
Number of Printers Produced | |||
70,000 | 90,000 | 100,000 | |
Total costs: | |||
Total variable costs | $350,000 | (d) | (j) |
Total fixed costs | 630,000 | (e) | (k) |
Total costs | $980,000 | (f) | (l) |
Cost per unit: | |||
Variable cost per unit | (a) | (g) | (m) |
Fixed cost per unit | (b) | (h) | (n) |
Total cost per unit | (c) | (i) | (o) |
Complete the preceding cost schedule, identifying each cost bythe appropriate letter (a) through (o).
3. For the current year ending April 30, Haley Company expectsfixed costs of $60,000, a unit variable cost of $70, andanticipated break-even of 1,715 sales units.
(a) | Compute the unit sales price. |
(b) | Compute the sales (units) required to realize an operatingprofit of $8,000. |
Round your answer to the nearest whole number.
4. Currently, the unit selling price is$50, the variable cost, $34, and the total fixed costs, $108,000. Aproposal is being evaluated to increase the selling price to$54.
(a) | Compute the current break-even sales (units). |
(b) | Compute the anticipated break-even sales (units), assuming thatthe unit selling price is increased and all costs remainconstant. |
5. For the coming year, Reve Companyestimates fixed costs at $109,000, the unit variable cost at $21,and the unit selling price at $85. Determine (a) the break-evenpoint in units of sales, (b) the unit sales required to realizeoperating income of $150,000 and (c) the probable operating incomeif sales total $500,000.
Round units to the nearest whole number and percentage to onedecimal place.
