Homework # 4 The objective of this homework exercise is to illustrate the calculation and use of…


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Homework # 4 The objective of this homework exercise is to illustrate the calculation and use of… 1 answer below » Homework # 4 The objective of this homework exercise is to illustrate the calculation and use of several important managerial issues relating to CVP, including breakeven and indifference points, target profit, cost structure and production decisions. No Streak, Inc. manufactures windshield wipers for its single client, Go Fast Motors. No Streak sells each wiper to Go Fast for $25. Direct material costs per unit equal $4 and direct labor cost per unit equals $1. Also, No Streak incurs $5 of variable overhead costs for every unit that it manufactures and sells. Finally, the fixed costs View complete question » Homework # 4 The objective of this homework exercise is to illustrate the calculation and use of several important managerial issues relating to CVP, including breakeven and indifference points, target profit, cost structure and production decisions. No Streak, Inc. manufactures windshield wipers for its single client, Go Fast Motors. No Streak sells each wiper to Go Fast for $25. Direct material costs per unit equal $4 and direct labor cost per unit equals $1. Also, No Streak incurs $5 of variable overhead costs for every unit that it manufactures and sells. Finally, the fixed costs associated with No Streak’s manufacturing plant equal $20,000 and the fixed costs related to No Streak’s marketing and distribution equal $30,000. Document Preview: Homework # 4

The objective of this homework exercise is to illustrate the calculation and use of several important managerial issues relating to CVP, including breakeven and indifference points, target profit, cost structure and production decisions.

No Streak, Inc. manufactures windshield wipers for its single client, Go Fast Motors. No Streak sells each wiper to Go Fast for $25. Direct material costs per unit equal $4 and direct labor cost per unit equals $1. Also, No Streak incurs $5 of variable overhead costs for every unit that it manufactures and sells. Finally, the fixed costs associated with No Streak’s manufacturing plant equal $20,000 and the fixed costs related to No Streak’s marketing and distribution equal $30,000.

[Basic breakeven analysis.] Calculate No Streak’s breakeven point output volume.

[Profit goals and taxes.] What output volume would No Streak need to achieve to generate a $15,000 pre-tax profit? What output volume would No Streak need to achieve to generate an after-tax profit of $15,000? [No Streak’s tax rate is 40%].

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[Changing cost structures.] No Streak realizes that its biggest competitor, Spot Free, manufactures its windshield wipers in an overseas production plant. Spot Free is able to produce wipers at a significantly lower cost due to the lower labor cost in its overseas plant. In order to compete more effectively on costs, No Streak is considering changing its cost structure by automating a greater portion of its manufacturing process. Specifically, No Streak’s new cost structure would increase total fixed costs to $100,000 and reduce variable cost per unit to $5. At what level of output volume would No Streak be indifferent between the current cost structure and the proposed new cost structure? What profit is generated at this output volume?

_x000C_4. [Changing revenue and cost structures.] Assume the same information as in #3. However, Spot Free believes that in addition to… Attachments: Q-Attachment.doc View less » Aug 03 2015 09:45 AM

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