Reference no: EM131800155
Assignment
Red Rock, Inc. mines and distributes various types of rocks. Most of the company's rock is sold to contractors who use the product in highway construction projects. Aracely Hudson, company president, believes that the company needs to advertise to increase sales. She has proposed a plan to the other managers that Red Rock, Inc. spend $107,000 on a targeted advertising campaign. The company currently sells 28,000 tons of aggregate for total revenue of $5,150,000. Other data related to the company's production and operational costs follow:
Direct labor $1,400,000
Variable production overhead 200,000
Fixed production overhead 350,000
Selling and administrative expenses:
Variable 51,000
Fixed 299,000
Required:
A. Compute the break-even point in units (i.e., tons) for Red Rock, Inc. If required, round interim calculations to 2 decimal places, use your rounded number in subsequent calculations, and round your answer to nearest whole number.
B. Compute the contribution margin ratio for Red Rock, Inc. Round your answer to two decimal places. Ensure that answer is entered in decimals and not in percentages.
C. If Aracely decides to spend $100,000 on advertising and the company expects the advertising to increase sales by $200,000, should the company increase the advertising?
If the company increases the advertising, the contribution margin will INCREASE by$_______ and net income will INCREASE by $___________.
Partially Correct
Check My Work Feedback
A) BE (units) = fixed costs divided by contribution margin per unit. Contribution margin is the difference between sales and variable costs. Calculate CM/ton.
Sales - variable costs (DL+VOH+VS&A) = CM. Divide CM by units = CM/ton.
B) Contribution margin ratio is calculated by dividing the contribution margin in dollars by sales in dollars.
C) (1) Prepare both income statements side by side for proposed changes.
(2) Compute additional profit using contribution margin ratio x sales and compare to additional costs.
|
Determine the elasticity of vehicle traffic
: In the City of Joplin, due to weather devastation and hurricane effects, the cost of parking in the local Square has increased by 15%.
|
|
Compute the cost per equivalent unit for materials
: Beginning work in process 60,000 $13,200. Using weighted-average method, compute the cost per equivalent unit for materials
|
|
Describe the meaning of average cost
: Describe the meaning of average cost. You normally buy a crate of wine for $75. One crate has 8 bottles of wine.
|
|
Prepare a schedule of expected cash collections
: Use this information to prepare a Schedule of Expected Cash Collections from Customers for the months of FEBRUARY and MARCH only
|
|
Compute the contribution margin ratio for red rock inc
: Compute the contribution margin ratio for Red Rock, Inc. Ensure that answer is entered in decimals and not in percentages.
|
|
Prepare a new income statement for the year
: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing
|
|
Supply a new ambulatory healthcare facility
: a. How would you fund, build, staff, and supply a new ambulatory healthcare facility while still running the hospital?
|
|
Strengths and weaknesses of nursing homes
: Comment on the strengths and weaknesses of nursing homes. nursing home development and evolution has been driven by finance and reimbursement
|
|
Prepare the entry to record the interest expense
: Prepare the entry to record the interest expense at April 1, 2011. Assume that interest payable was credited when the bonds were issued
|