E-Z Seats manufactures swivel seats for customized vans. It currently manufactures 10,000 seats per year, which it sells for $500 per seat. It incurs variable costs of $200 per seat and fixed costs of $2,000,000. It is considering automating the upholstery process, which is now largely manual. It estimates that if it does so, its fixed costs will be $3,000,000, and its variable costs will decline to $100 per seat.
Multiproduct CVP Analysis
Rio Coffee Shoppe sells two coffee drinks, a regular coffee and a latte. The two drinks have the following prices and cost characteristics:
Sales price (per cup)
Variable costs (per cup)
The monthly fixed costs at Rio are $6,720. Based on experience, the manager at Rio knows that the store sells 60 percent regular coffee and 40 percent lattes.
How many cups of regular coffee and lattes must Rio sell every month to break even?
Required 1. Do Problem 5- 30 using the FIFO method of process costing. If you did Problem 5- 30, explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department under the weighted- average method and the FIFO method. 2. Should Porter’s managers choose the weighted- average method or the FIFO method? Explain briefly. Problem 5- 30 .:. aDegree of completion: direct materials, 100%; conversion costs, 40%. bDegree of completion: direct materials, 100%; conversion costs, 5%.
A company requires 100 pounds of plastic to meet the production needs of a small toy. It currently has 30 pounds of plastic inventory. The desired ending inventory of plastic is 10 pounds. How many pounds of plastic should be budgeted for purchasing during the coming period?
a. 80 pounds
b. 110 pounds
c. 120 pounds
d. 130 pounds
e. None of these
What-If Analysis As the management accountant for the Tyson Company you have been asked to construct a financial planning model for collection of accounts receivable and then to perform a what-if analysis in terms of the assumption regarding estimated uncollectible accounts. You are provided with the following information:
Collection Pattern for Credit Sales: 75 percent of the company’s credit sales are collected in the month of sale, 20 percent in the month following month of sale, and 5 percent are uncollectible.
Credit Sales: January 2010, $100,000; February 2010, $120,000; March 2010, $110,000.
What is meant by the term what-if analysis?
Generate a spreadsheet model regarding estimated bad debts expense under the following assumptions regarding the rate of uncollectible accounts: 1 percent, 3 percent, 5 percent (base case), and 8 percent. Prepare an estimate of bad debts expense for each of three months, January through March, and for the quarter as a whole.
What is the value to Tyson Company of creating a model and then performing the what-if analysis described above?
Ajax Manufacturing produces a single product, which takes 8.0 pounds of direct materials per unit produced. We are currently at the end of the first quarter of the year and there are 50,000 pounds of material on hand. The company’s policy is to maintain an end-of-quarter inventory of materials equal to 25 percent of the following quarter’s material requirements for production. How many units of product were produced in the first quarter of the year? Under the assumption that production will increase by 10 percent in the second quarter, what are the direct materials requirements (in pounds) for planned production in the second quarter?
Problem 8-1A (Part Level Submission) At December 31, 2014, House Co. reported the following information on its balance sheet.
Accounts receivable $954,030 Less: Allowance for doubtful accounts 81,040
During 2015, the company had the following transactions related to receivables.
1. Sales on account $3,703,890 2. Sales returns and allowances 51,900 3. Collections of accounts receivable 2,804,030 4. Write-offs of accounts receivable deemed uncollectible 89,960 5. Recovery of bad debts previously written off as uncollectible 27,420
(a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
(To reverse account previously written off.)
(To record the collection of accounts receivable.)
Kerensky Corporation, a wholesale company, has provided the following data:
Sales per period
Selling price .
$35 per unit
Variable production cost
$15 per unit
$5,000 plus 5% of selling price
$3,000 plus 10% of selling price
The margin of safety percentage is closest to:
A budget too easily achieved will lead to diminished performance. Do you agree? Explain.
Question: oster Inc. is trying to decide whether to lease or purchase a piece of equipment needed for the next ten years. The equipment would cost $45,000 to purchase, and maintenance costs would be $5,400 per year. After ten years, Foster estimates it could sell the equipment for $26,000. If Foster leases the equipment, it would pay $16,000 each year, which would include all maintenance costs. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) If the hurdle rate for Foster is 11%, Foster should:(Use appropriate factor from the PV tables. Do not round intermediate calculations. Round your final answer to the nearest hundred.)
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