+1-415-670-9189
info@expertsmind.com
Determine the minimum order size in sales dollars
Course:- Accounting Basics
Reference No.:- EM132048551




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Accounting Basics

Q1. Multiple-Level Break-Even Analysis

Nielsen Associates provides marketing services for a number of small manufacturing firms. Nielsen receives a commission of 10 percent of sales. Operating costs are as follows:

Unit-level costs $0.02 per sales dollar

Sales-level costs $200 per sales order

Customer-level costs $800 per customer per year

Facility-level costs $60,000 per year

(a) Determine the minimum order size in sales dollars for Nielsen to break even on an order.

(b) Assuming an average customer places five orders per year, determine the minimum annual sales required to break even on a customer.

(c) What is the average order size in (b)?

(d) Assuming Nielsen currently serves 100 customers, with each placing an average of five orders per year, determine the minimum annual sales required to break even.

(e) What is the average order size in (d)?

Q2. Profitability Analysis

Assume a local Cost Cutters provides cuts, perms, and hairstyling services. Annual fixed costs are $120,000, and variable costs are 40 percent of sales revenue. Last year's revenues totaled $250,000.

(a) Determine its break-even point in sales dollars.

(b) Determine last year's margin of safety in sales dollars.

(c) Determine the sales volume required for an annual profit of $80,000.

Q3. CVP Analysis and Special Decisions

Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,300,000. Sweet Grove is evaluating two alternatives designed to enhance profitability.

  • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales.
  • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales.

(a) What is the current break-even point in sales dollars?

(b) Assuming an income tax rate of 34 percent, what dollar sales volume is currently required to obtain an after-tax profit of $500,000?

(c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
Explain the significance of this transaction to an analyst. Explain the consequences of poor quality reporting. What has the U.S. government done to improve the quality of rep
If the unearned revenue account hadan unadjusted normal balance of $4,800 and an adjustment was made debiting the account for $1,500, the account would appear on the adjuste
1. List an advantage and a disadvantage of using the U.S. Tax Court as the trial court for Federal tax litigation. 2. A taxpayer lives in Michigan. In a controversy with the
Prior to process of liquidation, Matt, Nicole, and Otis have balances of 70,000, 20,000, and 30,000. Cash Balance of 10,000,noncash assets total 160,000, and liabilities tot
Bob meets next month with a banker to secure a 60 day line of credit. He asks Mark which financial ratios will be of the most interest to the loan officer. How should Mark r
Design a multiple choice question on ordinary income and statutory income from the individual point.- Advise whether sale of the property receipts would be ordinary income and
On January 1, 2010, the Fastor Company had a retained earnings balance of $218,600. It is subject to a 30% corporate income tax rate. During 2010, the company earned net incom
Calculate the net present value NPV of the investment. Calculate the discounted payback period for investment. Prepare a memo that summarizes your calculations and makes a rec