# Project #61057 - Managerial Accounting Basic Homework

 Detroit Disk, Inc. is a retailer for digital video disks. The projected net income for the current year is  \$600,000 based on a sales volume of 400,000 video disks. Detroit Disk has been selling the disks for \$24 each. The variable costs consist of the \$15 unit purchase price of the disks and a handling cost of \$3 per disk. Detroit Disk’s annual fixed costs are \$1,800,000. Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.)

 Required:
 1. Calculate Detroit Disk’s break-even point for the current year in number of video disks. Break Even point = ____ Units

 2. What will be the company’s net income for the current year if there is a 10 percent increase in projected unit sales volume? Net Income = ______

 3. What volume of sales (in dollars) must Detroit Disk achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at \$24, but the unit purchase price of the disks increases by 30 percent as expected? (Do not round  intermediate calculations.) Volume of Sales = ______

 4. In order to cover a 30 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Detroit Disk establish for the coming year? (Do not round intermediate calculations.)

Selling price per disk = ______

PART 2

 Phoenix-based CompTronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:

 Sales \$ 4,032,000 Variable costs 1,008,000 Fixed costs 2,736,000

 Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average \$21.60 per set; annual fixed costs are anticipated to be \$2,380,800. (In the following requirements, ignore income taxes.)

 Required: 1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. Current Income =  Required dollar sales =

 2. Determine the break-even point in speaker sets if operations are shifted to Mexico.

Break-even point =

 3 Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.

 a. If variable costs remain constant, by how much must fixed costs change?

Fixed Costs = ______ by ____

 b. If fixed costs remain constant, by how much must unit variable cost change? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Variable costs____ by_____ per unit

 4. Determine the impact (increase, decrease, or no effect) of the following operating changes.

a. effect of an increase in direct material costs on the break even point. = _________

b.Effect of an increase in fixed administrative costs on the unit contribution margin = __________

c. Effect of an increase in the unit contribution margin on net income. = ___________

d. effect of a decrease in the number of units sold on the break even point = __________

 Subject Business Due By (Pacific Time) 03/06/2015 10:00 am
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