Question
Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed...
Lobster Trap Company is considering automating its manufacturing
facility. Company information before and after the proposed
automation follows:
| Before Automation |
After Automation |
|||||
| Sales revenue | $ | 192,000 | $ | 192,000 | ||
| Less: Variable cost | 103,000 | 46,000 | ||||
| Contribution margin | $ | 89,000 | $ | 146,000 | ||
| Less: Fixed cost | 12,000 | 62,000 | ||||
| Net operating income | $ | 77,000 | $ | 84,000 | ||
Required:
1. Calculate Lobster Trap’s break-even sales dollars
before and after automation. (Round your contribution
margin ratio to 4 decimal places and final answers to 2 decimal
places.)
2. Compute Lobster Trap’s degree of operating
leverage before and after automation. (Round your answers
to 4 decimal places.)
Homework Answers
Answer #1
Not the answer you're looking for?
Similar Questions
Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed...
Lobster Trap Company is considering automating its manufacturing
facility. Company information before and after the proposed
automation follows:
Before Automation
After
Automation
Sales revenue
$
202,000
$
202,000
Less: Variable cost
97,000
45,000
Contribution margin
$
105,000
$
157,000
Less: Fixed cost
13,000
61,000
Net operating income
$
92,000
$
96,000
Required:
1. Calculate Lobster Trap’s break-even sales dollars
before and after automation. (Round your contribution
margin ratio to 4 decimal places and final answers to 2 decimal
places.)
Break-Even...
Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed...
Lobster Trap Company is considering automating its manufacturing
facility. Company information before and after the proposed
automation follows:
Before Automation
After
Automation
Sales revenue
$
195,000
$
195,000
Less: Variable cost
104,000
56,000
Contribution margin
$
91,000
$
139,000
Less: Fixed cost
14,000
56,000
Net operating income
$
77,000
$
83,000
Required:
1. Calculate Lobster Trap’s break-even sales
dollars before and after automation.
2. Compute Lobster Trap’s degree of operating
leverage before and after automation.
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.60...
Beacon Company is considering automating its production
facility. The initial investment in automation would be $9.60
million, and the equipment has a useful life of 8 years with a
residual value of $1,120,000. The company will use straight-line
depreciation. Beacon could expect a production increase of 38,000
units per year and a reduction of 20 percent in the labor cost per
unit.
Current (no automation)
Proposed (automation)
77,000 units
115,000 units
Production and sales volume
Per Unit
Total
Per Unit...
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.40...
Beacon Company is considering automating its production
facility. The initial investment in automation would be $9.40
million, and the equipment has a useful life of 8 years with a
residual value of $1,000,000. The company will use straight-line
depreciation. Beacon could expect a production increase of 38,000
units per year and a reduction of 20 percent in the labor cost per
unit.
Current (no automation)
Proposed (automation)
77,000 units
115,000 units
Production and sales volume
Per Unit
Total
Per Unit...
The Sterling Tire Company’s income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement...
The Sterling Tire Company’s income statement for 20XX is as
follows:
STERLING TIRE COMPANY
Income Statement
Year ended December 31, 20XX
Sales (25,000 tires
at $40 each)
$
1,000,000
Less: Variable costs (25,000
tires at $15)
375,000
Contribution margin
625,000
Less: Fixed costs
500,000
Earnings before interest and taxes (EBIT)
125,000
Interest expense
75,000
Earnings before taxes (EBT)
50,000
Income tax expense (32%)
16,000
Earnings after taxes (EAT)
$
34,000
Given this income statement, compute the following:...
The following income statement was drawn from the records of Thornton Company, a merchandising firm: THORNTON...
The following income statement was drawn from the records of
Thornton Company, a merchandising firm:
THORNTON COMPANY
Income Statement
For the Year Ended December 31, 2018
Sales revenue (4,000
units × $162)
$
648,000
Cost of goods sold (4,000 units
× $80)
(320,000
)
Gross margin
328,000
Sales commissions (10% of
sales)
(64,800
)
Administrative salaries
expense
(88,000
)
Advertising expense
(34,000
)
Depreciation expense
(47,000
)
Shipping and handling expenses
(4,000 units × $1)
(4,000
)
Net income
$...
Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all...
Casas Modernas of Juarez, Mexico, is contemplating a major
change in its cost structure. Currently, all of its drafting work
is performed by skilled draftsmen. Rafael Jiminez, Casas’ owner, is
considering replacing the draftsmen with a computerized drafting
system. However, before making the change, Rafael would like to
know the consequences of the change, since the volume of business
varies significantly from year to year. Shown below are CVP income
statements for each alternative.
Manual
System
Computerized
System
Sales
$1,740,000...
Problem 18-5A Mozena Corporation has collected the following information after its first year of sales. Sales...
Problem 18-5A Mozena Corporation has collected the following
information after its first year of sales. Sales were $1,500,000 on
100,000 units; selling expenses $250,000 (40% variable and 60%
fixed); direct materials $511,000; direct labor $290,000;
administrative expenses $270,000 (20% variable and 80% fixed);
manufacturing overhead $350,000 (70% variable and 30% fixed). Top
management has asked you to do a CVP analysis so that it can make
plans for the coming year. It has projected that unit sales will
increase by...
Exercise 6-5 Companywide and Segment Break-Even Analysis [LO6-5] Piedmont Company segments its business into two regions—North...
Exercise 6-5 Companywide and Segment Break-Even Analysis
[LO6-5]
Piedmont Company segments its business into two regions—North
and South. The company prepared the contribution format segmented
income statement as shown:
Total Company
North
South
Sales
$
937,500
$
750,000
$
187,500
Variable expenses
637,500
600,000
37,500
Contribution margin
300,000
150,000
150,000
Traceable fixed expenses
142,000
71,000
71,000
Segment margin
158,000
$
79,000
$
79,000
Common fixed expenses
62,000
Net operating income
$
96,000
Required:
1. Compute the companywide break-even point in...
Crane Corporation has collected the following information after its first year of sales. Sales were $1,600,000...
Crane Corporation has collected the following information after
its first year of sales. Sales were $1,600,000 on 100,000 units,
selling expenses $240,000 (40% variable and 60% fixed), direct
materials $514,000, direct labor $270,800, administrative expenses
$280,000 (20% variable and 80% fixed), and manufacturing overhead
$376,000 (70% variable and 30% fixed). Top management has asked you
to do a CVP analysis so that it can make plans for the coming year.
It has projected that unit sales will increase by 10%...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 5 minutes ago
asked 5 minutes ago
asked 5 minutes ago
asked 5 minutes ago
asked 5 minutes ago
asked 5 minutes ago
asked 6 minutes ago
asked 10 minutes ago
asked 28 minutes ago
asked 38 minutes ago
asked 39 minutes ago
asked 43 minutes ago