The Hartnett Corporation manufactures baseball bats with SammySosaâs autograph
stamped on them. Each bat sells for $13 and has a variable cost of$8.
There is $20,000 in fixed costs involved in the productionprocess.
a. Compute the break-even point in units.
Selling price per item= $ 13
Variable cost per bat= $ 8
Contribution margin= 5
Fixed costâ¦â¦â¦â¦= 20,000
Breakeven Units=20,000/5= 4,000
b. Find the sales (in units) needed to earn a profit of$15,000
(how do you find the sales in units to earn profits of15,000?)
Do you increase the selling price or decrease the VC?
The Hartnett Corporation manufactures baseball bats with SammySosaâs autograph
stamped on them. Each bat sells for $13 and has a variable cost of$8.
There is $20,000 in fixed costs involved in the productionprocess.
a. Compute the break-even point in units.
Selling price per item= $ 13
Variable cost per bat= $ 8
Contribution margin= 5
Fixed costâ¦â¦â¦â¦= 20,000
Breakeven Units=20,000/5= 4,000
b. Find the sales (in units) needed to earn a profit of$15,000
(how do you find the sales in units to earn profits of15,000?)
Do you increase the selling price or decrease the VC?
Unlock all answers
Related questions
| 9. | Johnson Company manufactures widgets. Old Ham Company has approached Jones with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:
The manufacturing overhead consists of $32,000 of costs that will be eliminated if the components are no longer produced by Jones. The remaining manufacturing overhead will continue whether or not Jones makes the components. What is the amount of avoidable costs if Jones buys rather than makes the components? | |||||||||
| A) | $60,000 | |||||||||
| B) | $96,000 | |||||||||
| C) | $124,000 | |||||||||
| D) | $100,000 | |||||||||
10. Below is a performance report that compares budgeted and actual profit of Famous Beer
for the month of April:
| Budget | Actual | Difference | |
| Sales | $200,000 | $202,000 | $2,000 |
| Less: | |||
| Cost of ingredients | $162,000 | $166,000 | $4,000 |
| Salaries | $31,000 | $31,200 | $200 |
| Controllable Profit | $47,000 | $44,800 | -$2,200 |
In evaluating the department in terms of its increase in sales and expenses, what will be
most important to investigate?
Sales
Cost of ingredients
Salaries
All three components have equal importance.
| 11. | Fatimaâs Diner has a contribution margin ratio of 17%. If fixed costs are $176,800, how many dollars of revenue must Fatimaâs generate in order to reach the break-even point? | |
| A) | $282,880 | |
| B) | $1,040,000 | |
| C) | $1,060,800 | |
| D) | $1,105,000 | |
| 12. | New Visions, Inc. is looking to achieve a net income of 15 percent of sales. Hereâs the firmâs profile: Unit sales price is $10; variable cost per unit is $6; total fixed costs are $40,000. What is the level of sales in units required to achieve a net income of 15 percent of sales? | |
| A) | 12,000 units | |
| B) | 21,000 units | |
| C) | 16,000 units | |
| D) | 20,000 units | |
| 13. | At Zikâs Apparel, the break-even point is 2,400 units. If fixed costs total $300,000 and variable costs are $25 per unit, what is the selling price per unit? | |
| A) | $210 | |
| B) | $180 | |
| C) | $5 | |
| D) | $150 | |
14. Which of the following situations will most likely violate cost-volume-profit
assumptions about fixed costs?
| A) | When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. |
| B) | The companyâs raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. |
| C) | Fixed costs per unit decrease as volume increases. |
| D) | As volume increases, per unit fixed manufacturing overhead remain constant. |
15. Neighborhood Grill Company is a start up with the following profile:
Unit selling price = $200; Variable cost per unit = $100; Fixed Costs = $36,000;
Tax rate = 25%. How many units should Neighborhood Grill sell to achieve an
after-tax target income of $6,000?
| A) | 200 |
| B) | 460 |
| C) | 440 |
| D) | 300 |
| 16. | Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.
Northern feels that if they eliminate the South store, sales in the North store will decline by 20%. If they close the South store, overall company net income will: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A) | decline by $90,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B) | decline by $85,625. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C) | decline by $62,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D) | decline by $20,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17. | Forest Park, a best-selling toy has a selling price of $15. If the contribution margin ratio is 40% and if the fixed costs are $60,000, how many Forest Parks must the company sell to realize a profit of $450,000? | |
| A) | 30,000 | |
| B) | 34,000 | |
| C) | 85,000 | |
| D) | 100,000 | |
Information for Questions 18
Anderson Manufacturing makes a single product. Budget information regarding the current period is given below:
|
| Revenue (100,000 units at $8.00) | $800,000 |
| Direct materials | 150,000 | |
| Direct labor | 125,000 | |
| Variable manufacturing overhead | 235,000 | |
| Fixed manufacturing overhead | 110,000 | |
| Net income | $180,000 |
Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.
| 18. | What is the incremental income (loss) associated with accepting the special order? | |
| A) | ($14,000) | |
| B) | $36,000 | |
| C) | ($23,500) | |
| D) | $27,000 | |
| 19. | Auto Zone believes it can sell 3,500,000 of a new vehicle charger for $8 each. There will be $3,000,000 in fixed costs associated with the charger. If the company desires to make a profit of $2,000,000 on the charger, what is the target variable cost per charger? | |
| A) | $7.25 | |
| B) | $9.00 | |
| C) | $6.57 | |
| D) | $9.40 | |
| 20. | On July 26, 2012, Radio Shack announced disappointing 2nd quarter earnings that caused the stock to fall 29% to all time lows. Although sales were up 1.2% to $953.2 million gross profit fell 16.6% to $360.3 million. Assuming Radio Shackâs store count and fixed costs were the same in the 2nd quarter of 2011 and 2012, which of the following statements is the best explanation for the decrease in the firmâs profitability? | |
| A) | Opportunity costs decreased. | |
| B) | Margin of safety decreased. | |
| C) | Contribution margin decreased. | |
| D) | Selling price decreased. | |
| 21 | Paul's Pizza produced and sold 2,000 pizzas last month and had fixed costs of $6,000. If production and sales are expected to increase by 10% next month, which of the following statements is true? | |
| A) | Total fixed costs will decrease. | |
| B) | Fixed cost per unit will decrease. | |
| C) | Total fixed costs will increase. | |
| D) | Fixed cost per unit will increase. | |
| 22. | The Synergy Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A) | $13.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B) | $14.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C) | $12.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D) Use the following to answer question 23: Taylor's Treasures has collected the following information over the last six months.
| $10.95 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Question 1
In order to compete effectively in todayâs increasingly globalised market, many companies have used features related to environmental sustainability to âwinâ new customers.
In relation to the company you work in or one that you are familiar with,
(a) Explain the term âsustainable business strategyâ and how this strategy relates to operations and supply chain management.
(8 marks)
(b) Identify an operations and supply chain-related "disruption" that impacted the company. What could the company have done to minimise the impact of this type of disruption prior to it occurring?
(7 marks)
(c) You have recently been appointed as the production manager of the company. To meet the demands of its global market, the company has set up production locations in two different countries. One is located in the USA while the other is located in a Southeast Asian country. You want to find out what is the productivity of the current operations at the two production locations. You have obtained the following results from the production supervisor (Table 1).
Table 1
*FC â Foreign Currency where $1 = FC 10
| USA | Southeast Asia | |
| Sales (units) | 100,000 | 20,000 |
| Labour (hours) | 20,000 | 15,000 |
| Raw materials (currency) | $20,00 | *FC 20,000 |
| Capital equipment (hours) | 60,00 | 5,000 |
(i) Calculate the multifactor productivity figures for labour and capital together. Do the results make sense?
(5 marks)
(ii) Calculate raw material productivity figures (units/$) and explain any differences in these figures.
(5 marks)
Question 2
(a) A Japanese fast food restaurant, OiShi is concerned about its ability to provide quality service as they continue to grow and attract more customers. Its management has collected data from Friday and Saturday nights, its busiest times of the week. During these nights, about 75 customers arrive per hour for service. Given the number of tables and chairs, and the typical time it takes to serve a customer, the restaurant can serve on average about 100 customers per hour.
Analyse the restaurant service process in these nights where the data are collected and comment on whether the services are in the zone of service, the critical zone, or the zone of non-service? (Refer to Figure 2 when providing your answers)
Figure 2: Relationship between the Rate of Service Utilisation (r) and service quality
(4 marks)
The management anticipates that the restaurantâs demand will double in one year as long as it can provide good service to its customers. How much will the restaurant have to increase its service capacity to stay out of the critical zone?
(4 marks)
(b) Describe the characteristics of service processes of a typical fast food restaurant based on your service encounters.
(10 marks)
(c) Examine the strategies to manage service encounters. You should provide details on any TWO (2) possible customer-introduced variability in the service processes and propose THREE (3) accommodating strategies to effectively address these variabilities.
(7 marks)
Question 3
(a) Consider your organisation or one that you are familiar with that plays a role in the global supply chain network. This organisation can be a supplier, manufacturer, distributor, logistics service provider or retailer in a particular industry (e.g. fast-moving consumer goods, electronics, oil and gas, and pharmaceuticals). In your answer, you should relate the concepts and strategies in operations and supply chain management to the work environment.
Explain how the aggregate operations plan can help match supply with demand and optimise operational costs in this organisation.
(4 marks)
Provide TWO (2) strategies that can be used to influence demand and TWO (2) strategies that can be used to adjust capacity to match demand.
(8 marks)
(b) The development of web-based tools has allowed companies to collaborate on a larger scale and perform its operations and supply chain activities with greater ease. Demonstrate how collaborative techniques can be used to forecast demand. You should provide details such as the various stages of activities that are involved.
(8 marks)
Discuss the risks of being too reliant on the internet as a collaboration tool in demand forecasting and management.
(5 marks)
Question 4
Kee Wah Store sells a variety of exquisite European cookies and candies to the consumer market. The demand for cookies and candies is volatile and varies from month to month. The store orders from its suppliers. The lead time is normally one month, mainly consisting of the sea freight transportation time from Europe to Singapore. The store keeps a certain level of inventory at its warehouse.
The total demand for chocolate cookies is estimated to be 7,200 packets a year. The chocolate cookie packet is sourced from the supplier at $5 per packet and is sold to the end consumer at $15 per packet. It costs $100 to place an order to the supplier, and costs 20% of unit cost to store a packet of chocolate cookies for one year.
(a) Give FOUR (4) reasons why Kee Wah Store needs to maintain some inventory at its warehouse.
(8 marks)
(b) Examine the inventory situation for Kee Wah Store by applying the EOQ model to solve for order quantity and reorder point. What is the annual ordering cost, annual holding cost and total annual cost?
(10 marks)
(c) One supplier, Nee Ann Import Inc., approaches Kee Wah Store and proposes that it could shorten the lead time from one month to one week using airfreight.
What are the factors that Kee Wah Store needs to consider before deciding to accept or reject Nee Ann Importâs offer?
----- END OF PAPER -----
(7 marks)
