question archive Cost Volume Profit Analysis 1) A new client MN Company has approached your consulting firm for help
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The company produced and sold 300 units during the month and had no beginning or ending inventories.
Required:
Refer to the original data. In the third option management wants to automate a portion of the production process for Product SD. The new equipment would reduce direct labor costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000. Management believes that the new equipment will increase the reliability of Product SD thus resulting in an increase in monthly sales of 12%. Should these changes be made?
2. Cutting Edge Corp. produces sporting equipment. In 2012, the first year of operations, Cutting Edge produced 25,000 units and sold 20,000 units. The selling price was $100, variable-manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000.
A. Compute the net income under variable costing.
B. Compute the net income under absorption costing
3. Define variable costing and absorption costing. Discuss at least two benefits to a manager from using variable costing instead of absorption costing for internal decision-making?
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