Question

I. Comprehensive review of short-term decisions. The following data relate to the planned operations of Kimble Company before considering the changes described later. All fixed costs are direct, but unavoidable. Chair $120 $ 40 Product Table $400 $160 120 $280 $120 3,000 Selling price Variable costs Fixed costs Total costs Profit per unit Annual volume 30 Sofa $600 $360 180 $540 $ 60 4,000 $70 $50 8,000

1.) What is total profit expected to be?

2.) What will be the impact on profit if Kimble drops sofas?

3.) What will be the impact on profit if Kimble drops chairs, but is able to shift the facilities to making more sofas so that volume of sofas increases to 7,000 units? (total fixed costs remain constant).

4.) Variable cost per sofa includes $60 for parts that the company now buys outside. The company could make the parts at a variable cost of $45. It would also have to increase fixed costs by $35,000 annually. What would happen to profit if the company took the proposed action?

5.) Kimble has received a special order for 1,000 tables at $245. Capacity is sufficient to make the units, and sales at the regular price would not be affected. What will happen to profit if Kimble accepts the order? 6.) Repeat question 5 above, assuming now that the order is for 1,500 tables and that capacity is limited to 4,000 tables.

Answer 1

Hey Dear,

Hope you are also doing well.

I have tried to give best possible answer. If you have any doubts, please mention in comment section. I'll definitely respond back as early possible.

And please excuse my bad handwriting.

ANS : Amount in $ (1) Expected to tak profit : $ 1480000 Chair Note: Total- Totay- cis seres amount : $960000 (") Variable cosit : $ 320000 find total fined cost $ 240000 Table sofa $1200000 $2400000 $ 480,000 $1440000 $ 369000 $ 720000 profit (1-13.-) $ 400000 $840000 Total profit : $ 1480000

(2) proat will reduced to $520000 lest! Lens Current total profit : : $1489000 profit of - sofa profeet :46 2400od) fined cast af sofa produet : (€ 420.000) profit $520000 even if the fixed sofa cost will remain product has been to be incurred dropped. profit will increas to $1560,000 Note: curement total profit : $ 1480000 Add: Increased poufit from sofaf{500-360)300} : $ 720000 Less: profit of chair product :($400,000) less: fixed cost of Chair product :($ 240000) $1560,000

(4) profit will increase to $ 1505000 Note: Currunt total profit $1480000 Adda saving in Variable cost of sofa (60-45) * 4000 :$ 60000 les: Increase in fixed cost *($ 35000) $ 1505000 (5) profit will increased to $ 15,65.000 • $ 1480000 Note: current profit Add: profit from special order (245-160) A 1000 :$85000 $1565000

Sorry Dear, times up. Please be patient, i will definitely update the point no-6 also.