XYZ Ltd. invested in new equipment and labour last year to give it extra capacity as it pursued new sales. Last year itwas operating at around 65% of total capacity. Late last year, the business won a major new contract, meaning it willnow be operating at nearly 80% of capacity. XYZ did not have to make pricing concessions to win this deal, and thecontract can be fulfilled at existing staff levels. What is likely to happen to XYZ's gross margin next year? Answers: It willlikely fall. It will likely increase. It will likely remain stable.

Answered: XYZ Ltd. invested in new equipment and…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 16PB: At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The...

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Supreme Ltd. Which manufactures the component EXCEL, has achieved a turnover of $ 6,00,000 for the calendar year 2018. The manager of the company has informed that the company has worked at a profit ratio of 25% and margin of safety of 20%. But he feels due to severe competition, the selling price is to be reduced to maintain the same volume of sales for the year 2019. He does not expect any change in variable costs. He expects that due to cost reduction programme, the profit volume ratio and margin of safety will be 20% and 30% respectively and considerable saving in fixed cost for 2019. Even if the company prefers to shut down its operations for 2019, it expects to incur a minimum fixed cost of $ 60,000. You are expected to: (a) Present the comparative statement for the year 2018 and 2019 showing under marginal Costing. (b) What will minimum sales be required, if it decides to shut down its unit in 2019?
Markson had the following results of operations for the past year (shown in picture). A foreign company whose sales will not affect Markson's market offers to buy 2000 units at $14 per unit. In addition to existing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. Markson's annual productive capacity is 12,000 units. If Markson accepts this additional business, it's profits will?
Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholder's desired profit level for 2020? Is this a viable option? Consider B/E units & dollars The margin of Safety and Operating Income due to the changed variables
Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholders desired profit level for 2020? Is this a viable option?
Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholder's desired profit level for 2020? Is this a viable option?
Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?
At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?
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Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
Smart Video Company is a manufacturer of videoconferencing products. Maintaining the videoconferencing equipment is an important area of customer satisfaction. A recent downturn in the computer industry has caused the videoconferencing equipment segment to suffer, leading to a decline in Smart Video’s financial performance. The following income statement shows results for 2017: Q.Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts.
What is Mirabel’s over-all break-even point in sales dollars? Scenario Mirabel Manufacturing is a small but growing company that manufactures and sells marine sonar equipment. They employee a national sales force and their primary customers are marine retailers and boat dealerships. The company has expanded over the last 5 years and Paul Mirabel, the founder and CEO has become concerned that he no longer has a clear picture of their cost structure. He calls his CFO, Mary Jane Montgomery in for a meeting. “Mary Jane, I am concerned that I am not current on our cost structure and how that is impacting our bottom line,” Paul begins. “Well, Paul, the company has grown considerably over the past 5 years, so I’m not surprised that you feel a little disconnected with how things are going,” Mary Jane replied. She continued “In fact, I’ve been meaning to talk to you about a couple of big items such as increasing the sales commission to 15%. We’ve lost two of our best account managers in the…
Mindspin Labs Inc. is a manufacturing firm that has experienced strong competition in its traditional business. Management is considering Joining the trend to the "service economy" by eliminating its manufacturing operations and concentrating on providing specialized maintenance services to other manufacturers. Management of Mindspin Labs has had a target ROI of 15% on an asset base that has averaged $8 million. To achieve this ROI, average total asset turnover of 2 was required. If the company shifts its operations from manufacturing to providing maintenance services, it is estimated that average total assets will decrease to $2 million. Required: a. Calculate net Income, margin, and sales required for Mindspin Labs to achieve its target ROI as a manufacturing firm. b. Assume that the average margin of maintenance service firms is 3.10%, and that the average ROI for such firms is also 17% Calculate the net Income, sales, and total asset turnover that Mindspin Labs will have if the…

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