1) Last year you sold 30,000 units for $10/unit and encountered a fixed cost of
ID: 2733419 • Letter: 1
Question
1) Last year you sold 30,000 units for $10/unit and encountered a fixed cost of $150,000, and a variable cost of $3/unit. Next year you expect sales to drop to 25,000 with the same Fixed and Variable costs.
a. What is your cost/unit next year?__________________
b. What is your total profit likely to be next year?_______
2) You currently spend $7/unit in variable costs to produce your product. You are anticipating on hiring a new engineering that will cost $65,000 a year in salary, If you plan to make 300,000 units next year, how much of a reduction in product cost/unit would the engineer need to achieve to justify her salary?
_________/unit cost reduction.
3) Compute the annual allowable BOOK depreciation for a machine that costs $35,000 to purchase, and $4,000 to train your staff on the machine and it has a 5 year life and a $5,000 salvage value. Use the SL method.
Answer?________________
4) Compute the allowable BOOK depreciation amounts for each year of a machine that costs $55,000 to purchase, and $4,000 to install with a 5 year life. Use the DDB method (factor=2) switching to straight line. Yr1?________________ Yr2?________________ Yr3?________________ Yr4?________________ Yr5?________________
Explanation / Answer
1).a.Cost per unit next year $9
Variable cost
75000
Fixed cost
150000
Total cost
225000
No.of units
25000
cost per unit
9
1)b.Total profit for the next year $ 25,000
Sales
250000
Variable cost
75000
Fixed cost
150000
Total cost
225000
Total profit
25000
2).Reduction in product cost/unit would the engineer need to achieve to justify her salary
__0.22*/unit cost reduction.
*$65,000/300000units=$o.22
3).Book depreciation per year $6,000**
**(Cost of asset-salvage value)/no.of years of life of asset=(35000-5000)/5=$6,000
4). BOOK depreciation amounts for each year of a machine are $23,600 as per DDB method
***[(Cost of asset+Installation chages)/no.of years]*2=[(55,000+4000)/5]*2=$23,600
Variable cost
75000
Fixed cost
150000
Total cost
225000
No.of units
25000
cost per unit
9
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.