Question

Question-3

Spring Manufacturing sold 610,000 units of its product for $98 per unit in 2019. Variable cost per unit is $50, and total fixed costs are $1,870,000.

Required:

1. Calculate (a) contribution margin and (b) operating income.

2. Spring’s current manufacturing process is labor intensive. Jim Gate, Spring’s production

manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,770,000. The variable costs are expected to decrease to $35 per unit. Spring expects to maintain the same sales volume and selling price next year. How would acceptance of

Gate’s proposal affect your answers to (a) and (b) in requirement 1?

3. Should Spring accept Gate’s proposal? Explain.

question 4.) Travel Agency specializes in flights between Toronto and Peru. It books passengers on Toronto Air. North’s fixed costs are $35,000 per month. Toronto Air charges passengers $1,700 per round-trip ticket.

Calculate the number of tickets North Travel must sell each month to (a) break even and (b) make a target operating income of $17,000 per month in each of the following independent cases.

Required:

1. North’s variable costs are $33 per ticket. Toronto Air pays Sunset 5% commission on ticket price.

2. North’s variable costs are $37 per ticket. Toronto Air pays Sunset 7% commission on ticket price.

3. North’s variable costs are $53 per ticket. Toronto Air pays $68 fixed commission per ticket to North. Comment on the results.

4. North’s variable costs are $40 per ticket. It receives $60 commission per ticket from Toronto

Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.

please do majority of question its request and do step by step process with proper explanation

Answer 1

Ques 3

1)

Sales(610,000*$98) $59,780,000

(-)variable cost(610,000*$50) ($30,500,000)

Contribution. $29,280,000

(-)fixed costs. ($1,870,000)

Operating profit. $27,410,000

2)

Sales(610,000*$98) $59,780,000

(-)variable cost(610,000*$35) ($21,350,000)

Contribution $38,430,000

(-)fixed costs ($6,770,000)

Operating profit $31,660,000

Acceptance of Gate's proposal increases operating profit from $27,410,000 to $31,660,000

Thus, I would recommend Spring to accept Gate's proposal.