Managerial accounting, accounting, Basic Statistics

Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year at a selling price of $40 per unit. The company’s unit costs at this level of activity are given below:

Direct materials $ 9.50
Direct labor 10.00
Variable manufacturing overhead 2.80
Fixed manufacturing overhead 5.00 ($400,000 total)
Variable selling expenses 1.70
Fixed selling expenses 4.50 ($360,000 total)



Total cost per unit $ 33.50






A number of questions relating to the production and sale of Zets are given below. Each question is

Assume that Barker Company has sufficient capacity to produce 100,000 Zets each year without any increase in fixed manufacturing overhead costs. The company could increase sales by 25% above the present 80,000 units each year if it were willing to increase the fixed selling expenses by $150,000.

a. Calculate the incremental net operating income. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Incremental net operating income $

b. Would the increased fixed selling expenses be justified?


2. Assume again that Barker Company has sufficient capacity to produce 100,000 Zets each year. The company has an opportunity to sell 20,000 units in an overseas market. Import duties, foreign permits, and other special costs associated with the order would total $14,000. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. Compute the per unit break-even price on this order. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Break-even price per unit $

3. One of the materials used in the production of Zets is obtained from a foreign supplier. Civil unrest in the supplier’s country has caused a cutoff in material shipments that is expected to last for three months. Barker Company has enough material on hand to operate at 25% of normal levels for the three-month period. As an alternative, the company could close the plant down entirely for the three months. Closing the plant would reduce fixed manufacturing overhead costs by 40% during the three-month period and the fixed selling expenses would continue at two-thirds of their normal level. What would be the impact on profits of closing the plant for the three-month period? (Input the amount as a positive value. Do not round intermediate calculations. Omit the "$" sign in your response.)

Net (Click to select)disadvantageadvantage of closing the plant $

4. The company has 500 Zets on hand that were produced last month and have small blemishes. Due to the blemishes, it will be impossible to sell these units at the normal price. If the company wishes to sell them through regular distribution channels, what unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Relevant unit cost $

5. An outside manufacturer has offered to produce Zets and ship them directly to Barker’s customers. If Barker Company accepts this offer, the facilities that it uses to produce Zets would be idle; however, fixed manufacturing overhead costs would continue at 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be reduced by 60%. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total avoidable unit cost $
Posted Date: 3/14/2012 3:58:15 PM | Location : United States

Related Discussions:- Managerial accounting, accounting, Assignment Help, Ask Question on Managerial accounting, accounting, Get Answer, Expert's Help, Managerial accounting, accounting Discussions

Write discussion on Managerial accounting, accounting
Your posts are moderated
Related Questions
Introduction Background information so the reader can better grasp the analyses you are going to present. This can include anything that puts the analyses into perspective for

In a certain lake a limnologist wishes to estimate the proportion of lake trout with lamprey scars. (a) How large of a random sample should be taken if the limnologist has no pr

how cost classification can helpful for planning, controlling and decision making

what is the difference between histotigrams and histograms?

SCENARIO It is proposed to construct a 3m diameter, 50m long tunnel, heading 0950, through the andesite lava flow at Maori Bay (Muriwai). As part of the preliminary investigati

What is job costing? Definition of job costing, Job costing usually, it is the allocation of all material, time & expenses to an individual project or job. Particularly, Jobs costi

the guinegog is a trader in portable cd-man. His budgeted output is 5000 units per quarter. The following data was available for the year 1998: Direct labour @ $6 Direct material @

It is a numerical average, as equal to the sum of terms in a given series divided by the number of terms in that series is the mean which is also called the expected value.