Given that the plant currently runs at full capacity, examine the following inde

Question

Given that the plant currently runs at full capacity, examine the following independent scenarios 1. Calculate the current contribution margins of each product 2. What is the effect of discontinuing Shed A? 3. Calculate the net change in profits if the company focuses more on selling Shed C instead of Shed A. Such a of 10,000 unit sales of Shed A and an increase of 10,000 unit sales of Shed C. 4, what is the effect if Shed C is decreased by $5 and the volume of Shed C increases by 10%? 5. Prepare a purchases and cash receipts budget for September, October, and November using the 2018 sales bud 6. Rank the proposed investments in Exhibit 4 using the net present value criteria and the accounting rate of retu the organization's cost of capital is 12%, which investment would you recommend?

Explanation / Answer

Johnson Manufacturing Company Requirement 1 Current contribution margins of each product Per Unit Shed A Per Unit Shed B Per Unit Shed C Total Planned Units 75000 100000 205000 380000 Sales Price & Sales Revenue 157.5 11812500 115.5 11550000 84 17220000 40582500 Less : Variable Costs Materials 17 1275000 10 1000000 7 1435000 3710000 Labor 21 1575000 16 1600000 4 820000 3995000 Indirect cost Supplies 7 525000 2 200000 1 205000 930000 Labor 5 375000 4 400000 2 410000 1185000 Energy 6 450000 3 300000 2 410000 1160000 Total Variable costs 56 4200000 35 3500000 16 3280000 10980000 Contribution Margin 101.5 7612500 80.5 8050000 68 13940000 29602500 Less : Fixed cost Labor 1185000 Energy 1160000 Supervision 1105000 Depreciation 3375000 Accounting/Legal/IT su 2115000 Other Fixed cost 1230000 Total fixed cost 10170000 Profitability 19432500 Requirement 2 Effect of discontinuing Shed A Per Unit Shed A Per Unit Shed B Per Unit Shed C Total Planned Units Discontinued 100000 205000 305000 Sales Price & Sales Revenue 115.5 11550000 84 17220000 28770000 Less : Variable Costs 0 Materials 10 1000000 7 1435000 2435000 Labor 16 1600000 4 820000 2420000 Indirect cost 0 Supplies 2 200000 1 205000 405000 Labor 4 400000 2 410000 810000 Energy 3 300000 2 410000 710000 Total Variable costs 35 3500000 16 3280000 6780000 Contribution Margin 80.5 8050000 68 13940000 21990000 Less : Fixed cost Labor 1185000 Energy 1160000 Supervision 1105000 Depreciation 3375000 Accounting/Legal/IT su 2115000 Other Fixed cost 1230000 Total fixed cost 10170000 Profitability 11820000 Profit will decrease by 7612500 Compared to original plan Requirement 3 Net change in profit if Decrease of Shed A by 10000 units & Increase of Shed C by 10000 units Per Unit Shed A Per Unit Shed B Per Unit Shed C Total Planned Units 65000 100000 215000 380000 Sales Price & Sales Revenue 157.5 10237500 115.5 11550000 84 18060000 39847500 Less : Variable Costs Materials 17 1105000 10 1000000 7 1505000 3610000 Labor 21 1365000 16 1600000 4 860000 3825000 Indirect cost Supplies 7 455000 2 200000 1 215000 870000 Labor 5 325000 4 400000 2 430000 1155000 Energy 6 390000 3 300000 2 430000 1120000 Total Variable costs 56 3640000 35 3500000 16 3440000 10580000 Contribution Margin 101.5 6597500 80.5 8050000 68 14620000 29267500 Less : Fixed cost Labor 1185000 Energy 1160000 Supervision 1105000 Depreciation 3375000 Accounting/Legal/IT su 2115000 Other Fixed cost 1230000 Total fixed cost 10170000 Profitability 19097500 Profit will decrease by 335000 Compared to original plan Requirement 4 Effect of decreasing selling price by $5 & Volume of Shed C increases by 10% Per Unit Shed A Per Unit Shed B Per Unit Shed C Total Planned Units 75000 100000 225500 400500 Sales Price & Sales Revenue 157.5 11812500 115.5 11550000 79 17814500 41177000 Less : Variable Costs Materials 17 1275000 10 1000000 7 1578500 3853500 Labor 21 1575000 16 1600000 4 902000 4077000 Indirect cost Supplies 7 525000 2 200000 1 225500 950500 Labor 5 375000 4 400000 2 451000 1226000 Energy 6 450000 3 300000 2 451000 1201000 Total Variable costs 56 4200000 35 3500000 16 3608000 11308000 Contribution Margin 101.5 7612500 80.5 8050000 63 14206500 29869000 Less : Fixed cost Labor 1185000 Energy 1160000 Supervision 1105000 Depreciation 3375000 Accounting/Legal/IT su 2115000 Other Fixed cost 1230000 Total fixed cost 10170000 Profitability 19699000 Profit will Increase by 266500 Compared to original plan Working Note Calculation of fixed cost Less : Fixed cost Labor 5 375000 4 400000 2 410000 1185000 Energy 6 450000 3 300000 2 410000 1160000 Supervision 8 600000 3 300000 1 205000 1105000 Depreciation 22 1650000 7 700000 5 1025000 3375000 Accounting/Legal/IT su 12 900000 6 600000 3 615000 2115000 Other Fixed cost 11 825000 2 200000 1 205000 1230000 Total fixed cost 10170000 As per Chegg Policy, we are supposed to answer maximum of four sub-part of a question. We appreciate the rating of our answers Thank You

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