Question

Question 3

1) Summarize the information for TrueBeat from Q9 & 10 of HW1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for “per unit" values. 516 True Beat - Summarized connect given data Average Cost per Total Unit Dollars Direct materials $ 19 Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ 7000+ 16000 + 42,000 Fixed selling & administrative expense $ 239.000 33.000+ 7600 170,000 Variable selling & administrative expense s 25 Sales price per unit 2) Assume, due to the significant success of the drum sets, TrucBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). • Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. .

Answer 1

Yeary $3096000 ($210000) C$156000) $2736600 1994eto True Beat Income statement variable costing) for years ended 31 December Year2 Years sales Rerenue, Variable production coch CMLYO000) $140000) $1548000 $25&DOD variatice SRA C$15000) ($125000) expenses contribution $13330DO $2315000 $3000 $34650DD margin fized overbeads. Plastic for caring $19000 $19000 $19000 klager for workers $90000 $ 90000 $90000 property taxes on $1000 $7000 $1000 factory Accounting staff $33000 $33000 $33500 salaries equipment for $42000 $2323000 Rent cost of $36000 $3600D $36000 sales staff Upper management $116000 $170000 $116000 salaries Maintenance fees $16600 $16000 $16000 machinery depreciatim $42000 $42.000 Net opua ting income $92000D $1902000 Tree Beat Income statement Cabsorption casting) for years ended December 31 Year2 Year3 salu Revenue $1548000 (-) cost of goods sold C$1400od) ($16PODOD) Gross Margin $14OEODO $24QODOD selling expenses C$ 15000) C$1250 DO) Net operating income $1383,000 $ 23150DO Yeary 42580000 $3696000 $ 210000) $288600D ($150000) $213 COD 7/7 =