Buy Existing Paper - Oscar Incorporated currently sells its products for $400 per

Description

Oscar Incorporated currently sells its products for $400 per unit. Management is contemplating a 10% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change next year. Fixed expenses are $140,000 per year.

If fixed costs were to increase 10% during the current year and the new selling price goes into effect, how many units will need to be sold to breakeven?

B.E= Fixed cost/ contribution margin

C.M= Selling prices per unit- Variable cost per unit

New Selling price = 110/100×400= $440

Variable cost  per unit= 20/100×400=$80

Contribution margin=440-80=$360

New Fixed cists= 110/100×140000=$154000

B.E= $154000/$360=427.778 units

Oscar Incorporated currently sells its products for $400 per

 

  1. Lewis Enterprises management has budgeted the following amounts for its next fiscal year:
Total fixed expenses $500,000
Selling price per unit $1,000
Variable expenses per unit $750

 

Requirements:

  1. If Lewis Enterprises can reduce fixed expenses by $25,000, how will breakeven sales in units be affected?

Contributon margin = $1000-$750= $250

New fixed costs=$500000-$25000=$475000

B.E= Fixed cost/ contribution margin

New B.E =$475000/$250=1900 units.

B.E before= 500000/250=2000 units

Break even sales in units reduces to 1900 units from 2000 units

  1. If Lewis Enterprises spends an additional $1,100 on advertising, sales volume should increase by 1,000 units. What effect will this have on operating income?

Operating Income =1000*$1000-($1000*750)-( $1000)= $240000

Operating income increases by $240000

  1. If Lewis Enterprises can reduce fixed expenses by $41,000, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?

2000=$500000-$41000/(1000-y)

2000=$459000/(1000-y)

2000(1000-y)=$459000

2000000-2000y=$459000

-2000y=$459000-2000000

-2000y=-$1541000

New Variable cost per unit Y=$770.5 per unit

=$770.5-$750= $20.5

Variable cost per unit can increase by $20.5

  1. A pizza company produces frozen pizzas in three departments: assembly, freezing, and packaging. In assembly, crust ingredients are added at the beginning of the process. After the crust is made, the sauce, cheese, and toppings are added at the end of the process. Conversion costs are added evenly. Data for the assembly department includes:

Oscar Incorporated currently sells its products for $400 per

Beginning WIP Inventory 0 units
Units started 26,000 units
Units completed/transferred to freezing 22,400 units
Ending WIP (55% through assembly) 3,600 units
Crust ingredients added $33,800
Cheese added $15,100
Sauce and toppings added $7,450
Direct labor $2,400
Manufacturing Overhead $5,750

Note: Crust, cheese, sauce and toppings are direct materials.

Determine the following for the pizza company:

 

  1. The cost per equivalent unit for crust ingredients

=Total cost for crust/ Total  units

Total Units=

Units completed (A)= 22400

Add: Ending inventory (B) 3600*100=3600

Total units (A + B) = 26000 units

Cost of Crust ingredients = $33800

Cost per unit of Crust ingredients = $33800/ 26000

Cost per unit of Crust ingredients = $1.3 per unit

  1. The cost per equivalent unit for cheese, sauce, and toppings

Completed units= 22400+(0.55*3600)=24380 units

Total cost for cheese, sauce  and toppings= 15100+7450=$22550

=22550/24380= $0.925 per unit

  1. The cost per equivalent unit for conversion costs

Completed units= 22400+(0.55*3600)=24380 units

Total cos conversion cost= 2400+5750

C.P. UNIT= 8150/24380=$0.3344 per unit

 

  1. A tennis ball maker gives us its data for the year:

 

WIP Inventory, January 1 0 units
Units started 8,500 units
Units completed and transferred out 5,600 units
WIP Inventory, ending 2,900 units
Direct materials $14,078
Direct labor $6,450
Manufacturing Overhead $5,511

 

Units in ending WIP Inventory were 90% complete for materials and 60% complete for conversion costs.

Oscar Incorporated currently sells its products for $400 per

On December 31, calculate the following for the company:

 

  1. The cost per equivalent unit for direct materials and conversion costs.

equivalent unit for conversion cost = 5600+(2900*60%) = 7340 units

Cost per equivalent unit = Cost incurred during period/equivalent unit of conversion

= (6450+5511)/7340

Cost per equivalent unit = $1.6295

  1. The total cost of the units in ending WIP.

Ending inventory= 2900 units

DM                    CON. COST

Unts completed and transferred=  5600,                  5600

Units ending WIP=        0.9*2900 =2610   0.6 2900=1740

Total equivalent units=  5600+2610=8210         5600+1740=  7340

Costs==                                14078                           6450+5511= 11961

Cost per equivalent= 14078/8210 *2610 +11961/7340*1740= $16436.4

 

 

  1. The total costs of units completed and transferred.

DM                 C.C

Units completed and transferred= 5600

Unts completed and transferred=  5600,                  5600

Units ending WIP=        0.9*2900 =2610              0.6 *2900=1740

Total equivalent units=  5600+2610=8210         5600+1740=  7340

Costs==                                14078                           6450+5511= 11961

Cost per equivalent unit= 14078/8210 =1.7147       11961/7340= $1.6296

Total price per unit completed and transferred= 1.7147+1.6296=3.3443

Total cost= 3.3443*5600=$18727.88