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.)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
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.

Ask a Question
ADVERTISEMENT