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vazorg [7]
2 years ago
5

Senate Inc. is considering two alternative methods for producing playing cards. Method 1 involves using a machine with a fixed c

ost (mainly depreciation) of $17,000 and variable costs of $1.00 per deck of cards. Method 2 would use a less expensive machine with a fixed cost of only $5,000, but it would require a variable cost of $1.50 per deck. The sales price per deck would be the same under each method. At what unit output level would the two methods provide the same operating income (EBIT)?
Business
1 answer:
photoshop1234 [79]2 years ago
4 0

Answer:

24,000 units

Explanation:

We know,

According to the contribution margin approach,

Operating Income (EBIT) = Sales - Variable cost - Fixed cost

or, EBIT = (Price x Quantity) - (Quantity x VC per unit) - Fixed cost

As there are two methods,

Method 1, Variable cost = $1.00/unit, Fixed cost = $17,000

Method 2, Variable cost = $1.50/unit, Fixed cost = $5,000

According to the Question, as both methods will yield same EBIT at the same output levels,

Method 1 EBIT = Method 2 EBIT

or,  (Price x Quantity) - (Quantity x $1.00) - 17,000 = (Price x Quantity) - (Quantity x $1.50) - $5,000

or, (Quantity x $1.50) - (Quantity x $1.00) = $(17,000 - 5,000) [Deducted (price x quantity from both the sides]

or, $0.50 x Quantity = $12,000

or, Quantity = $12,000/$0.50

Hence, Quantity = 24,000 units

At 24,000 output level, the EBIT of both methods will be same.

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4 0
3 years ago
The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some coun
Eva8 [605]

Answer:

4000

Explanation:

Calculation to determine how many units of foreign currency does the same basket of goods cost in that country

Based on the information given we were told that the PRICE OF A BASKET OF GOODS is the amount of $2000 in which the dollar buys TWO UNITS of some country’s currency, now let determine HOW MANY UNITS of foreign currency does the same basket of goods cost in that country

Using this formula

Units of foreign currency=Basket of goods price*Some country’s currency units

Let plug in the formula

Units of foreign currency=$2,000* 2 units

Units of foreign currency=4,000 units

Therefore the number of units of foreign currency that the same basket of goods cost in that country is 4,000

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country’s currency, then how many units of foreign currency does

7 0
3 years ago
Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borr
Igoryamba

Answer:

Brighton, Inc.

a) Schedules Computing Inventory Budgets by months

a1) for Production:

                                          April           May          June       Total

Beginning Inventory     120,000    100,000      120,000        120,000

Units Produced            500,000   500,000     500,000     1,500,000

Inventory available      620,000   600,000     620,000     1,620,000

Less Ending Inventory 100,000    120,000      120,000        120,000

Units sold                    520,000    480,000     500,000    1,500,000

a2) Raw Materials Purchases in pounds

                                                   April           May

Ending inventory                    50,000        50,000

Raw materials required        125,000       125,000

Raw materials available        175,000       175,000

Beginning Inventory              58,000        50,000

Purchases                            117,000        125,000

Purchases value $4 per pound $468,000    $500,000

b) Projected Income Statement for May:

Net Sales                                                          $1,970,000

Cost of goods sold:

Finished Beginning Inventory $480,000

Cost of production                   1,460,000

less closing inventory                480,000       $1,460,000

Gross profit                                                        $510,000

Selling expenses                    $200,000

Administrative expenses          155,000         $355,000

Net Income                                                      $155,000

Explanation:

a)    Sales =                             $2,000,000

less cash discounts (1%)            ($20,000)

less bad debts expense (0.5%) ($10,000)

Net Sales =                             $1,970,000

c) Sales Budget

                         April           May            June             July              Total

Sales units   600,000     500,000      600,000       600,000       2,300,000

Sales value$2,400,000 $2,000,000 $2,400,000 $2,400,000$9,200,000

d) Cost of Production:

                                                      May  

Cost of raw materials used   $500,000

Labor                                        390,000

Variable overhead                    180,000

Fixed overhead                       390,000

Total                                    $1,460,000

e) Budgets are financial tools to forecast an entity's projections for sales, production, expenses, and cash balances.  They help to anticipate developments ahead of time in order to plan for them and to prepare for unanticipated occurrences.

4 0
3 years ago
Pasadena Candle Inc. budgeted production of 730,000 candles for the January. Wax is required to produce a candle. Assume 11 ounc
Temka [501]

Answer:

696,325 Pounds

Explanation:

The computation of the direct material purchase budget is given below:

Here we assume that

one pound = 16 ounces

Now total wax needed is

= Production of Finished Goods × Pounds of wax needed for production

= 730,000 candles × 11 ÷ 16

= 501,875 pounds

Now

Total direct material purchased  = (Total Wax needed +  Ending Inventory, Jan.31 - opening inventory) × unit price

= (490,625 Pounds + 12,900 pounds - 17,400 pounds) × $1.40 per pound

= 696,325 Pounds

4 0
3 years ago
The Traffic Court of King James County operates between the hours of 9AM and 1PM. Each morning, roughly at 9AM, 200 defendants s
patriot [66]

Answer:

Explanation:

Please check attachment for the solution to the question.

7 0
3 years ago
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