Macadamia Co
Subject:AccountingPrice: Bought3
Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows: $120.00 Revenues Cost of Goods Sold: Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Cost of Goods Sold Gross Margin 15.00 20.00 10.00 6.00 51.00 69.00 Selling and Administrative Costs: Sales Commissions (10% of Sales) Administrative Salaries Total Selling and Administrative Operating Income <Loss> 12.00 5.00 17.00 52.00 The Production Manager has proposed leasing a new machine at a cost of $80,000 per year. This will reduce Direct Labour by 30% and improve quality so that the selling price per unit can be increased by $10. Production and sales units are expected to remain the same as last year. The plant provides a capacity of 50,000 units. Required: (15 marks) Prepare a complete statement of operating income assuming the leasing proposal is accepted. Should the company lease the new piece of equipment? (Use the gross margin presentation, show totals, show your calculations).
