Florida Atlantic Income Targeting and Forecasting Break Even Analysis Paper

Problem 21-4A Break-even analysis; income targeting and forecasting C2 P2 A1

Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2020’s activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $200,000. The maximum output capacity of the company is 40,000 units per year.

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Required

1. Compute the break-even point in dollar sales for 2019.
2. Compute the predicted break-even point in dollar sales for 2020 assuming the machine is installed and there is no change in the unit selling price.
3. Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due.

Check (3) Net income, $150,000

1. Compute the sales level required in both dollars and units to earn $200,000 of target pretax income in 2020 with the machine installed and no change in unit sales price. Round answers to whole dollars and whole units.

(4) Required sales, $1,083,333 or 21,667 units (both rounded)

1. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume no income taxes will be due.

Problem 20-3A Weighted average: Process cost summary; equivalent units C2 C3 P4

Fast Co. produces its product through two processing departments: Cutting and Assembly. Direct materials are added at the start of production in the Cutting department, and conversion costs are added evenly throughout each process. The company uses monthly reporting periods for its weighted-average process costing system. The Work in Process Inventory—Cutting account has a balance of $84,300 as of October 1, which consists of $17,100 of direct materials and $67,200 of conversion costs.

During the month, the Cutting department incurred the following costs.

Page 765At the beginning of the month, 30,000 units were in process in the Cutting department. During October, the Cutting department started 140,000 units and transferred 150,000 units to the Assembly department. At the end of the month, the Cutting department’s work in process inventory consisted of 20,000 units that were 80% complete with respect to conversion costs.

Required

1. Prepare the Cutting department’s process cost summary for October using the weighted-average method.

Check (1) Costs transferred out, $982,500

1. Prepare the journal entry dated October 31 to transfer the cost of the partially completed units to Assembly.

Problem 18-1ACost computation, classification, and analysis C2 C3

Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $500 each.

Required

1.Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

Check(1) Total variable production cost, $125,000

2.Compute the manufacturing cost per drum set.

Analysis Component

3.Assume that 1,200 drum sets are produced in the next year. What do you predict will be the total cost of plastic for the casings and the per unit cost of the plastic for the casings?

4.Assume that 1,200 drum sets are produced in the next year. What do you predict will be the total cost of property taxes and the per unit cost of the property taxes?