E12-23. Time-Adjusted Cost-Volume-Profit Analysis Boardwalk Treat Shop is consid
ID: 2455423 • Letter: E
Question
E12-23. Time-Adjusted Cost-Volume-Profit Analysis Boardwalk Treat Shop is considering the desirability of producing a new chocolate candy called Pleasure Bombs. Before purchasing the new equipment required to manufacture Pleasure Bombs, Marty Dey, the shop’s proprietor performed the following analysis. Unit selling price .........................................................$1.45 Variable manufacturing and selling costs .....................................(1.15) Unit contribution margin .................................................$0.30 Annual fixed costs Depreciation (straight-line for 4 years) ......................................$15,000 Other (all cash).........................................................30,000 Total .................................................................$45,000 Annual break-even sales volume 5 $45,000 4 $0.30 5 150,000 units Because the expected annual sales volume is 160,000 units, Dey decided to undertake the produc- tion of Pleasure Bombs. This required an immediate investment of $60,000 in equipment that has a life of four years and no salvage value. After four years, the production of Pleasure Bombs will be discontinued. Required a. Evaluate the analysis performed by Dey. b. If Boardwalk Treat Shop has a time value of money of 12 percent, should it make the invest- ment with projected annual sales of 160,000 units? c. Considering the time value of money, what annual unit sales volume is required to break even. E12-23. Time-Adjusted Cost-Volume-Profit Analysis Boardwalk Treat Shop is considering the desirability of producing a new chocolate candy called Pleasure Bombs. Before purchasing the new equipment required to manufacture Pleasure Bombs, Marty Dey, the shop’s proprietor performed the following analysis. Unit selling price .........................................................$1.45 Variable manufacturing and selling costs .....................................(1.15) Unit contribution margin .................................................$0.30 Annual fixed costs Depreciation (straight-line for 4 years) ......................................$15,000 Other (all cash).........................................................30,000 Total .................................................................$45,000 Annual break-even sales volume 5 $45,000 4 $0.30 5 150,000 units Because the expected annual sales volume is 160,000 units, Dey decided to undertake the produc- tion of Pleasure Bombs. This required an immediate investment of $60,000 in equipment that has a life of four years and no salvage value. After four years, the production of Pleasure Bombs will be discontinued. Required a. Evaluate the analysis performed by Dey. b. If Boardwalk Treat Shop has a time value of money of 12 percent, should it make the invest- ment with projected annual sales of 160,000 units? c. Considering the time value of money, what annual unit sales volume is required to break even.Explanation / Answer
E12-23. Time-Adjusted Cost-Volume-Profit Analysis Boardwalk Treat Shop is consid
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.