Zachary Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is...
Zachary Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which manufactures and sells heavy equipment; Division B, which manufactures and sells hand tools; and Division C, which makes and sells electric motors. Each division is housed in a separate manufacturing facility. Company headquarters is located in a separate building. In recent years, Division B has been operating at a net loss and is expected to continue to do so. Income statements for the three divisions for 2016 follow.
| Division A | Division B | Division C | |||||||||
| Sales | $ | 4,500,000 | $ | 1,170,000 | $ | 4,400,000 | |||||
| Less: Cost of goods sold | |||||||||||
| Unit-level manufacturing costs | (2,900,000 | ) | (832,000 | ) | (2,780,000 | ) | |||||
| Rent on manufacturing facility | (510,000 | ) | (280,000 | ) | (500,000 | ) | |||||
| Gross margin | 1,090,000 | 58,000 | 1,120,000 | ||||||||
| Less: Operating expenses | |||||||||||
| Unit-level selling and admin. expenses | (197,000 | ) | (56,810 | ) | (247,000 | ) | |||||
| Division-level fixed selling and admin. expenses | (330,000 | ) | (84,000 | ) | (329,000 | ) | |||||
| Headquarters facility-level costs | (190,000 | ) | (190,000 | ) | (190,000 | ) | |||||
| Net income (loss) | $ | 373,000 | $ | (272,810 | ) | $ | 354,000 | ||||
Required
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a-1. Based on the preceding information, recommend whether to eliminate Division B.
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a-2. Prepare companywide income statements before and after eliminating Division B.
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b. During 2017, Division B produced and sold 26,000 units of hand tools. Calculate the contribution to profit if sales and production increase to 38,000 units in 2018?
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c. Suppose that Zachary could sublease Division B’s manufacturing facility for $420,000, at a production and sales volume of 38,000 units, Calculate the contribution to profit of Division B.
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Zachary Manufacturing Co. produces and sells specialized
equipment used in the petroleum industry. The company is...
Zachary Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is...
Zachary Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which manufactures and sells heavy equipment; Division B, which manufactures and sells hand tools; and Division C, which makes and sells electric motors. Each division is housed in a separate manufacturing facility. Company headquarters is located in a separate building. In recent years, Division B has been operating at a net loss and is expected to...
Zachary Corporation sells hammocks; variable costs are $70 each, and the hammocks are sold for $132...
Zachary Corporation sells hammocks; variable costs are $70 each,
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fixed operating expenses annually.
Required
Determine the sales volume in units and dollars required to
attain a $78,000 profit. Prepare an income statement using the
contribution margin format.
Zachary is considering implementing a quality improvement
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cost per unit. To inform its customers of the quality improvements,
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Zachary Corporation sells hammocks; variable costs are $70 each,
and the hammocks are sold for $132 each. Zachary incurs $294,000 of
fixed operating expenses annually.
Required
Determine the sales volume in units and dollars required to
attain a $78,000 profit. Prepare an income statement using the
contribution margin format.
Zachary is considering implementing a quality improvement
program. The program will require a $8 increase in the variable
cost per unit. To inform its customers of the quality improvements,
the company...
Information concerning a product produced by Zachary Company appears as follows: Sales price per unit Variable cost per unit Total annual fixed manufacturing and operating costs $ 162 $ 82 $536,000 Required Determine the following: a. Contribution margin per unit. b. Number of units that Zachary must sell to break even. c. Sales level in units that Zachary must reach to earn a profit of $240,000. a. Contribution margin per unit b. Break-even in units c. Required sales in units
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