chapter_3

direct labor

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Unformatted text preview: aintain the present profit level, assuming that the maximum price increase is implemented. b. Compute the volume of sales and the dollar sales level necessary to provide the 6 percent 3 Approaching College Assignments: increase in profits, assuming that the maximum price increase is implemented. Reading Textbooks and Following Directions c. If the volume of sales were to remain at 80,000 units, what price change would be required to attain the 6 percent increase in profits? 3-38. CVP Analysis—Missing Data Durant Manufacturers has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold): Total Annual Costs (150,000 units) Direct material . . . . . . . . . . . . . . . . . . . . . . . . . . Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing overhead . . . . . . . . . . . . . . . . . . Selling, general, and administrative . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 270,000 225,000 150,000 $945,000 Required a. Compute Durant’s unit selling price that will yield a profit of $300,000, given sales of 150,000 units. cor50782_ch01_001-072.indd 1 lan27114_ch03_080-109.indd 101 (L.O. 1) ✓ Related Resources See pages 000 to 000 of the Annotated Instructor’s Edition for general suggestions related to the chapters in Part One. 1 10/5/09 11:09:29 PM 10/22/09 10:34:03 PM REVISED PAGES Part II 102 b. c. (L.O. 1) S Cost Analysis and Estimation 1 Compute Durant’s dollar sales that will yield a projected 20 percent profit on sales, assuming PART variable costs per unit are 60 percent of the selling price per unit and fixed costs are $420,000. Management believes that a selling price of $8 per unit is reasonable given current market conditions. How many units must Durant sell to generate the revenues (dollar sales) determined in requirement (b)? 3-39. CVP Analysis with Subsidies Suburban Bus Lines operates as a not-for-profit organization providing local transit service. As a not-for-profit, it refers to an excess of revenues over costs as a “surplus” and an excess of costs over revenues as a “deficit.” Suburban charges $1.00 per ride. The variable costs of a ride are $1.50. The fixed costs of Suburban are $200,000 annually. The county government provides Suburban with a flat subsidy of $250,000 annually. Orientation Required a. What is the break-even point for Suburban? Preparing and Organizing b. Suburban expects 75,000 riders this year. Will it operate at a surplus or deficit? (L.O. 1) Yourself for Success in College 3-40. CVP Analysis—Sensitivity Analysis (spreadsheet recommended) Alameda Tile sells products to many people remodeling their homes and thinks that they could profitably offer courses on tile installation, which might also increase the demand for their products. The basic installation course has the following (tentative) price and cost characteristics: Tuition . . . . . . . . . . . . . . . . . . . . ....
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