What is the dollar effect on the net income

Assignment Help Managerial Accounting

Reference no: EM132848443

Question - Wind breakers manufacturers of sport clothing. They make jackets such as Calm, Windy and Gale. The management has requested an analysis of Gale product due to its low sales and profitability. The sales and costs are summarized as below.

	Calm	Windy	Gale
Units sold last year	2500	18750	3750
Price ($)	30	32	40
Unit variable cost	24	24	36
Fixed Cost	3.60	3.60	3.60

Suppose the firm determines that deleting Gale will release more production capacity to manufacture additional Windy to generate more revenue for the firm. Assume that two production constraints are automated: sewing machine can make 20 Windys or 30 Gales per hour. Inspections require 15 minutes for Windy (4 per hour) and 5 minutes for Gale (12 per hour).currently 3750 gales and 18750 Windys are being manufactured and sold. Sales projections show that sales of windy could be increased to 30000 units of additional capacity available. Advertising costs last year were $20375 for calm, $15000 for windy and $5000 for Gale.

Required -

1. If Wind brakers deletes Gale entirely, how many units can be manufactured with the released capacity?

2. What is the dollar effect on the net income if wind breakers delete the production of Gale and uses the released capacity for production and sale of Windy.

3. What other factors should be considered in the decision to delete Gale and use the released capacity to produce additional units of Windy?

Reference no: EM132848443

Questions Cloud

Steps procedure in inferential statistics : Solve the following problem. Make sure to follow the 6 steps procedure in inferential statistics.

Describe the type numeric measurement : Specify a large population that you might want to study and describe the type numeric measurement that you will collect (examples: a count of things

What happens to the market price of each bond : As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy?

National financial capability challenge exam : High school students across the nation compete in a financial capability challenge each year by taking a National Financial Capability Challenge Exam.

What is the dollar effect on the net income : What is the dollar effect on the net income if wind breakers delete the production of Gale and uses the released capacity for production and sale of Windy

How changes have affected corporations : Compare and contrast the views of management and accountants regarding the changes required by the Sarbanes-Oxley Act on internal controls.

How managerial accounting helps manager to improve financial : Provide one specific, real-life example of how either financial accounting helps external stakeholders make informed decisions or how managerial accounting help

What is the probability that a randomly selected canadian : What is the probability that a randomly selected Canadian has a smartphone or a tablet? 94% 55% 122% 67%

Risk of developing retinopathy in patients : A study was conducted to evaluate whether an intensive therapy program reduces the risk of developing retinopathy in patients with diabetes

User Account

All Pages