PortfolioAssignment1 - Garrett Carlson Acct 509 Graded...

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Garrett Carlson Acct. 509 Graded Asssignment 1 Fall 2014, 25 points Manufacturing Costs Cost/Unit Direct Materials 19.5 Direct Labor 20 Variable OH 6.5 Fixed Manufacturing OH 10 Total manufacturing 56 Nonmanufacturing Costs Variable Marketing, distribution & administrative 6 Fixed marketing * administrative 2 Total Nonmanufacturing 8 Total cost/unit 64 A. Compute the following 1. What is the company's breakeven point in units? To find breakeven, we need to break up the costs into fixed and variable. For variable we have direct materials, direct labor, variable OH, variable marketing = 19.5+20+ For fixed we have fixed manufacturing OH at 10 and fixed marketing at 2 which gives us 12/un Q=3000000/(78-52)=115,385 units or $9,000,030 in sales 2. What is the company's operating income before tax at the normal volume level? Operating Income = Sales - (units sold * VC/unit) - FC Operating Income = 19,500,000 - (250,000 * 52) - 3,000,000 Operating Income = 3,500,000 3. What if the company increased their production and sales volume by 10%, what would the A 10% increase would mean they sold 275,000 units. Fixed costs remain unchanged Operating Income = Sales - (units sold * VC/unit) - FC Operating Income = 21,450,000 - (275,000 * 52) - 3,000,000 Operating Income = 4,150,000 Caltron Corp. manufactures and sells a popular product, Romuls, at a price of $78.00 per unit. The costs of manufa marketing Romuls at the company's normal valume of 250,000 units per year follow: B. An outside supplier has offered to produce and sell Romuls to Caltron at a price of $50/unit. Caltron estimates costs would continue regardless of whether they accept or reject the outside supplier's offer. Assume the normal distribution and administrative costs would be unaffected by this decisionsince these costs are unrelated to soruci supplier's offer? What is the impact to income from their decision?
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