Sandhill Company reports the following operating results for the month of August: sales $382,500 (units 5,100), variable costs $245,000, and fixed costs $98,000. Management is considering the following independent courses of action to increase net income.1. Increase selling price by 16% with no change in total variable costs or units sold.
2. Reduce variable costs to 59% of sales.
Compute the net income to be earned under each alternative.
1. Net Income
$enter a dollar amount
2. Net Income
$enter a dollar amount
Which course of action will produce the higher net income? select an option
Answers
Answer:
Results are below.
Explanation:
Giving the following information:
Sales $382,500 (units 5,100 $75 per unit)
variable costs $245,000 (48.04 per unit)
fixed costs $98,000.
Option 1:
Increase selling price by 16%.
New selling price= 75*1.16= 87
Sales= 5,100*87= 443,700
variable costs= (245,000)
fixed costs= (98,000)
Net income= 100,700
2. Reduce variable costs to 59% of sales.
Contribution margin= (382,500*0.41)= 156,825
fixed costs= (98,000)
Net income= 58,825
The most profitable option is the first one.
Related Questions
In the last few decades the car manufacturing sector has found it difficult to compete with foreign car imports. High labor costs is one of the main reasons economist site as the lack of competitiveness for the car manufacturing industry. If there was modest inflation, how could it possibly help the car manufacturing industry in the United States compete with foreign car manufacturers?a. The consumers of the cars have increased purchasing power.b. Business loans would cost less for the U.S. car manufacturers.c. It could allow real wages to downwardly adjust more easily.
Assuming the cost of direct materials used is $1,500,000, compute the total manufacturing costs using the information below. Raw materials inventory, January1 $ 30,000 Raw materials inventory, December 31 60,000 Work in process, January 1 27,000 Work in process, December 31 18,000 Finished goods, January 1 60,000 Finished goods, December 31 48,000 Raw materials purchases 1,500,000 Direct labor 690,000 Factory utilities 225,000 Indirect labor 75,000 Factory depreciation 500,000 Operating expenses 630,000.
Over the next 14 years, inflation is expected to be 5 percent per year in Ectenia and 10 percent per year in Wiknam. If this inflation comes to pass, what will happen over this period to the price of Spam and the exchange rate?
Classify the following markets as perfectly competitive, monopolistic, or monopolistically competitive, and explain your answers.Wooden no. 2 pencilsCopper (hint: there are many sellers)Local public utilities (ex. water, electricity)Peanut butterLipstick
Answers
Answer:
beginning inventory = 3,200 units
units produced during the year = 23,000
units sold during the year = 21,000
ending inventory = 23,000 + 3,200 - 21,000 = 5,200 units
variable costs per unit:
- direct labor = $110
- direct materials = $160
- factory overhead = $85
- SG&A = $60
- total = $415
fixed costs:
- factory overhead = $245,000
- SG&A = $1,500,000
- total = $1,745,000
- per unit = $1,745,000 / 23,000 = $75.87 per unit
A) Variable costing calculates COGS using only variable costs since fixed costs are considered period costs and are not carried over.
carrying value of initial inventory:
- using variable costing = $415 x 3,200 units = $1,328,000
- using absorption costing = ($415 + $75.87) x 3,200 = $1,570,784
carrying value of ending inventory:
using variable costing = $415 x 5,200 units = $2,158,000
using absorption costing = ($415 + $75.87) x 5,200 = $2,552,524
B) net profit using variable costing:
total revenue = 21,000 x $620 = $13,020,000
- COGS = 21,000 x $415 = $8,715,000
gross contribution margin = $4,305,000
- total fixed costs = $1,745,000
net income = $2,560,000
C) net profit using absorption costing:
first we need to determine COGS = carrying value beginning inventory + (17,800 x variable manufacturing costs per unit) + (17,800 x fixed manufacturing costs per unit) = $1,570,784 + (17,800 x $355) + (17,800 x $10.6522) = $1,570,784 + $6,319,000 + $189,609 = $8,079,393
total revenue = $13,020,000
- COGS = $8,079,393
gross margin = $4,940,607
- variable SG&A = 17,800 x $60 = $1,068,000
- fixed SG&A = 17,800 x ($1,500,000 / 23,000) = $1,160,870
net income = $2,711,737
Answers
Answer:
Option B
Explanation:
In economics, the J-curve impact is frequently used to explain, for example, how a nation's trade balance negatively affects briefly after a depreciation of its exchange rate, then gradually recovers, and eventually exceeds its previous results.
If the currency of a country is appreciated, economists note, there may be a reverse J-curve. For importing nations, the country 's products unexpectedly become more competitive. When other countries will meet the gap at a cheaper profit, the stronger currency would weaken its advantage on exports.
Final answer:
According to the 'J curve effect', a weakening of the U.S. dollar would cause an initial decrease in the current account balance due to the instant effects on import and export prices. However, with time, the balance is likely to increase due to adjustments in export and import volumes. Therefore, the correct response to your question is (b) decrease; increase.
Explanation:
The 'J curve effect' is a theory in international economics that describes the likely effects of a currency devaluation on a country's trade balance. In specific, when the U.S. dollar weakens relative to its trading partners' currencies, it could initially cause a decrease in the current account balance. The reason is that the immediate effect of a weaker dollar is to make foreign imports more expensive and the U.S. exports less valuable, deteriorating the trade balance. However, in the longer term, the trade balance may increase in the current account balance. This is because over time, the cheaper U.S. exports become more appealing to overseas buyers and imports into the U.S. decrease due to their higher price, improving the balance.
So the answer to your question is: a weakening of the U.S. dollar relative to its trading partners' currencies would result in an initial decrease in the current account balance, followed by a subsequent increase in the current account balance. Hence, the correct option is (b) decrease; increase.
Learn more about J curve effect here:
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Answers
Answer:
Explanation:
a. The computation of the economic order quantity is shown below:
=
where,
Carrying cost = $20 × 15% = 3
And, the annual demand = 450 bicycles × 12 months × 2 tyres = 10,800
And, the ordering cost is $50
Now put these values to the above formula
So, the value would equal to
=
= 600 tires
b. The number of orders would be equal to
= Annual demand ÷ economic order quantity
= $10,800 ÷ 600 tires
= 18 orders
c. The average annual ordering cost would equal to
= Number of orders × ordering cost
= 18 orders × $50
= $900
Final answer:
The Economic Order Quantity for the company is around 240 units. This leads to an estimated 23 orders per year with an average annual ordering cost of $1150.
Explanation:
The Economic Order Quantity (EOQ) is calculated using the equation √((2DS)/H). In this example, D represents the demand rate which is the number of bicycles produced a year (450 per month times 12, totaling 5400). S represents the ordering cost ($50) and H represents the holding cost which is 15% of the tire cost ($20) per unit, totaling $3 per unit.
So if you substitute these values into the formula, the EOQ equals √((2 * 5400 * 50)/3), which results in approximately 240 units. From this solution, the number of orders per year would be the annual demand divided by the EOQ, i.e., 5400 / 240 giving approximately 22.5 orders (rounded upwards it means 23 orders per year). The average annual ordering cost would be the cost per order times the number of orders per year (23 * $50), resulting in $1150.
Learn more about Economic Order Quantity here:
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Answers
Answer:
December 31, 2022 Bad debts $ 2975
Explanation:
On December 31, 2021, Accounts Receivable $70,000
Allowance for Uncollectible Accounts $1,250
During 2022, Bad Debts $2,675
Allowance for Uncollectible Accounts $5,650 at December 31, 2022
Bad debt expense for 2022 would be
December 31, 2021
Allowance for Uncollectible Accounts $1,250
During 2022, Bad Debts $2,675
Required Adjustment $ 1425
December 31, 2022 Bad debts $ 2975
Allowance for Uncollectible Accounts $5,650 adjusted Balance
Allowance for Uncollectible Accounts Written Off $2,675
Required Adjustment $ 2975
Answer:
$7,075
Explanation:
Bad debt expense occur when the account receivables are no longer collectible due to inability to fulfill financial obligations by the customers in which it must be recorded and accounted for every time a company prepares its financial statements
Bad debt expense = $5,650− ($1,250 − $2,675) = $7,075
Therefore Bad debt expense for 2022 would be $7,075
Answers
Answer:
Ensure that customers can find the firm when they search for information on products and services.
Explanation:
Inbound marketing involves attracting customers to a business's products and services by improved customer service and building trust.
Various channels that can be used for inbound marketing are social media, content marketing, search engine optimisation, and branding.
Outbound marketing on the other hand involves pushing out of various products an services to customers via various channels.
Steps in inbound marketing are:
Define the customer
Understanding customer purchase cycles
Establish potential customer
Build loyalty
Use customer relationship management (CRM)
Content management
Years 11-20: 12%
Required: What is the maximum amount the Claussens should pay John Duggan for the hardware store?
Answers
Answer:
Explanation:
Calculate maximum that should pay:
Compute present value of cash flows from the store, year 1 to 5:
Annual cash flows are $70,000
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 5
Present value of cash flows generated during 1 to 5 years =
= $287,013.82
Compute present value of cash flows from the store for years 6 to 10
Annual cash flows are $70,000
Desired rate of return on investment for 6 to 10 years is 10%
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 5
Present value of cash flows generated during 6 to 10 years = annual cash flows x PVIFA (10%,5) x PVIF (7%,5)
= $70,000 x 3.79079 x 0.7130 = $189,198.33
Compute present value of cash flows from the store for years 11 o 20
Annual cash flows are $70,000
Desired rate of return on investment for 11 to 20 years is 12%
Desired rate of return on investment for 6 to 10 years is 10%
Desired rate of return on investment for 1 to 5 years is 7%
Number of years is 10
Present value of cash flows generated during 11 to 20 years = [annual cash flows x PVIFA (12%,10)] x PVIF (10%,5) x PVIF (7%,5)
= $70,000 x 5.65022 x 0.62092 x 0.7130 = $175,100.98
Calculate present value of estimated sale amount to be received for sale of store
Present value of estimted sale amount to be received = [Estimated sale amount x PVIF (12%,10)] x PVIF (10%,5) x PVIF (7%,5)
=$400,000 x 0.32197 x 0.62092 x 0.7130=
=$57,016.50
Calculate total maximum amount that should be paid
Particulars Amount ($)
Present value of cash flows during 1 to 5 years $287,013.82
Present value of cash flows during 6 to 10 years $189,198.33
Present value of cash flows during 11 to 20 years $175,100.98
Present value of estimated sale value $57,016.50
Maximum amount that C should pay to JD for store $708,329.63
Therefore, Maximum amount that should be paid $708,329.63