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Submitted by neel on Sat, 2013-05-11 15:49
due on Wed, 2013-05-15 15:49
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Mendel Paper Company

Case: Mendel Paper Company

Mendel Paper Company produces four basic paper product lines at one of its plants: computer paper, napkins, place mats, and poster board. Materials and operations vary according to the line of product. The market has been relatively good. The demand for napkins and place mats has increased with more people eating out, and the demand for the other lines has been growing steadily.

The plant superintendent, Marlene Herbert, while pleased with the prospects for increased sales, is concerned about costs:

"We hear talk about a paperless office, but I haven't seen it yet. The computers, if anything, have increased the market for paper. Our big problem now is the high fixed cost of production. As we have automated our operation, we have experienced increases in fixed overhead and even variable overhead. And, we will have to add more equipment since it appears that we need even more plant capacity. We are operating over our normal capacity as it is.

The place mat market concerns me. We may have to discontinue printing the mats. Our specialty printing is driving up the variable overhead to the point where we may not find it profitable to continue with that line at all."

Cost and price data for the next fiscal quarter are as follows:

 

Computer paper

Napkins

Place mats

Poster board

Estimated sales volume in units

30,000

120,000

45,000

80,000

Selling prices................

     $14.00

      $7.00

     $12.00

      $8.50

Materials costs............

       6.00

       4.50

       3.60

        2.50

Variable overhead includes the cost of hourly labor and the variable cost of equipment operation. The fixed plant overhead is estimated at $420,000 for the quarter. Direct labor, to a large extent, is salaried; the cost is included as a part of fixed plant overhead. The superintendent's concern about the eventual need for more capacity is based on increases in production that may reach and exceed the practical capacity of 60,000 machine hours.

In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000.

"I share your concern about increasing fixed costs," the supervisor of plant operations replies. "We are still operating with about the same number of people we had when we didn't have this sophisticated equipment. In reviewing our needs and costs, it appears to me that we could cut fixed plant overhead to $378,000 a quarter without doing any violence to our operation. This would be a big help."

"You may be right," Herbert responds. "We forget that we have more productive power than we once had, and we may as well take advantage of it. Suppose we get some hard figures that show where the cost reductions will be made."

Data with respect to production per machine hour and the variable cost per hour of producing each of the products are given as follows:

 

Computer paper

Napkins

Place mats

Poster board

Units per hour

6

10

5

4

Variable overhead per hour

 $9.00

  $6.00

 $12.00

  $8.00

"I hate to spoil things," the vice-president of purchasing announces. "But the cost of our materials for computer stock is now up to $7. Just got a call about that this morning. Also, place mat materials will be up to $4 a unit."

"On the bright side," the vice-president of sales reports, "we have firm orders for 35,000 cartons of computer paper, not 30,000 as we originally figured."

Questions:

  1. From all original estimates given, prepare estimated contribution margins by product line for the next fiscal quarter. Also, show the contribution margins per unit.
  2. Prepare contribution margins as in part (1) with all revisions included.
  3. For the original estimates, compute each of the following:

    (a) Break-even point for the given sales mix.

    (b) Margin of safety for the estimated sales volume.
  4. For the revised estimates, compute each of the following:

    (a) Break-even point for the given sales mix.

    (b) Margin of safety for the estimated sales volume.
  5. Comment on Herbert's concern about the variable cost of the place mats.

 

Answer
Submitted by RSaleem on Mon, 2014-06-09 09:02
teacher rated 377 times
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Mendel Paper Company

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Mendel Paper Company

The Mendel Paper xxxxxxx xxx xxxx a relatively steady market xxx the increase in demand xxx some of xxxxx xxxxxxxx is a xxxx xxxx for xxx future. So xxx the biggest xxxxxxxx xx xxxxxx xx xxx xxxxxxx xxx place mats, xxx xxxx increase is not without xxxxxxxxx The xxxx objective is xxx xx xxx xxx high cost xx xxxxxxxxxx while xxxxxx more xxxxxxxxx xx xxx xxxx xxxxxx of xxxxxx xxx following xxxxxxxxx xxx xxxxxxxxxxxx xxx xxxxx to xxxx xxxxxxxxx xxx xxxxxxxx way to xxxxxxx xxxx xxxxxxxxxx and increased sales xxxxx trying to xxxx money at the same xxxxx

xxxxxx xxxxxx xxxxx xxxxxxx xxxx determine xxxxx xxxx xxx xxx in xxxxx xx cost xxx xxxxxx for xxx xxxx fiscal xxxxxxxx A xxxxx starting xxxxx is xx xxxxxxxxx xxx xxxxxxxxx margins by xxxxxxx xxxx for the xxxx xxxxxx quarter, xxx xxxx the contribution margins per unit. When used xx a measurement xx profitability reporting, contribution xxxxxx more xxxxxxx shows xxx cost xxxxxxxx xxxxxxx profitability xxxxxxxxx xxxxxx xx xxxxx xx xx the following xxxxxxxxxxxx xxx xxxxxxxxxx

Contribution Margin x xxxxx xxxxxxx – xxxxxxxx Cost) x Sales Revenue

xxxxxxxx xxxxx xxxxxxx

30,000 – 8.00 x xxxxxx 120,000 – 2.50 x 120,000

= 1.00 x 1.00

Place Mats Poster xxxxx

xxxxxx – 8.40 / 45,000 80,000 – 6 x 80,000

= xxxxxxxxxxxx xxxx

xxxxxxxxxxxx Margin per

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file2.xlsx preview (1268 words)

xxxxxxxx

xx
xx you want the formulas xxx any calculations, select xxx corresponding cell xxx xxxxx xxxxxxxxxxx xxx xx key xxxxxxx
xx xxxx show all calculations and xxxxxxxx xxxxxxxxxxxxx
Question :
In xxxx xxxxx xxx are xxxxxxxx information regarding selling prices xxx xxxxx xx xxxxxxx xxxxxxxx xxxxxxx xx Mendel xxxxx xxxxxxxx xx xxxxxxxxx xxxxxxxxxx has xxxxxxxx xxxxx xxxxx mix and rising xxxxxx Address xxx questions (1-5) xx the end of the xxxxx xxxxx on the xxxx xxxxxxxxxx you xxx required xx provide a xxxxx to five double-spaced xxxxxxx report xxxxxxxxxx xxxxxxxxxx’s xxxxxxxxx The written xxxxxx xxxxxx be xxxxxxxx xxxxxxxxx according to xxx guidelines xxx xxxxxxxxxxx research xxx xxxxxxxx xxxxxxxx xxxxxxx xxxxxxxxxxx xxx xxxxxxxxxxxxxxx should be supported xx at xxxxx 2 scholarly xxxxxxx from xxx Ashford xxxxxxx or other xxxxxxxx sources, xxxxxxxxx xxx xxxxxxxxx For xxxxxxxxx x through 4, xxx xxxx need to xxxxxxxx several calculations – be sure xx label xxx clearly identify

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Answer
Submitted by Good_Morning on Wed, 2015-03-25 10:09
teacher rated 40 times
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purchased one time
price: $10.00

Mendel Paper

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xxxxxx Paper

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Sheet1

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Units per hour x 10 x x
xxxxxxxx overhead xxx hour xxxxx $6.00 $12.00 xxxxx
xxxx xxxxxNapkins Place mats xxxxxx xxxxxTotal
xxxxxx 30000xxxxxx xxxxxxxxxx
Selling pricexx x xx8.5
xxxxxxxx costxxxx3.62.5
xxxxx per xxxxxxx 54
Variable xxxxxxxxx x6 12x
xxxxxxxx overheads xxx unit1.5xxx xxx2
Total xxxxx 420000 xxxxxx xxxxxx 6800002480000
xxxxxxxx cost 180000 xxxxxxxxxxxx200000
Variable xxxxxxxxx45000xxxxx 108000160000
x
xxxxxxxxxxxx xxxxxx $195,000 $228,000 $270,000xxxxxxxx xxxxxxxxxx
xx xxx unit xxxxx$1.90 $6.00$4.00
xxxx xxxxx NapkinsPlace xxxxPoster xxxxx xxxxx
Volume 35000xxxxxx xxxxxxxxxx
Selling pricexx x 12 8.5
xxxxxxxx xxxx x 4.54 2.5
Units per hour 6xxx 4
Variable overheads96 xx8
xxxxxxxx xxxxxxxxx per unit 1.5 xxx xxx2
xxxxx Sales490000 xxxxxx 540000 680000 2550000
xxxxxxxx xxxx xxxxxx 540000 xxxxxx 200000
xxxxxxxx xxxxxxxxx5250072000 108000 160000
2
xxxxxxxxxxxx Margin $192,500xxxxxxxx $252,000 xxxxxxxx xxxxxxxx
xx per unit$5.50 xxxxx$5.60 $4.00
x
xxxxx even x xx margin $1,013,000
Margin xx xxxxxx$1,467,000xxxxxx
Sales -CM
x
xxxxx xxxx x xx xxxxxx xxxxxxxx
Margin of Safety $1,557,500 61.08%
xxxxx xxx
x
The xxxxxxx xx xxx will reduce the xxxxxx xx xxx company as the xxx is xxxxxxxxxx xxxxxxxxxxxx margin xx xxxx cases. As xxx xx xxx
variable cost xx xxxxx xxx xxxxxxx xxxxxx xxx xxxxxxx xxxxxx xxx be discontinue.

xxxxxx

xxxxxx


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Answer
Submitted by neel on Sat, 2013-05-11 15:49
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Answer rating (rated 2 times)

2.5

Mendel Paper Company

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Running Headx MENDEL xxxxx xxxxxxx x

xxxxxx PAPER xxxxxxx

Mendel Paper xxxxxxx

xxxxxxx’s xxxx

Professor’x xxxxxx

xxx 11, 2013

Mendel xxxxx Company

Estimated xxxxxxxxxxxx margins xx product line xxx xxx next fiscal quarter

xxxxxxxxxxxx xxxxxxx xx xx part (1) xxxx all revisions included

Break-even point xxx xxx xxxxx sales mix

xxxxx xxxx xxx sales= xx

xxx xxxxxxxxxx

xxxxxx of safety for the xxxxxxxxx xxxxx volume

Margin xx safety: xxxxxxxxxx

xxxxx xxxxxx

xxxxxxxxxx point for xxx xxxxx sales xxx

Break even = CM xxxxxxx xxxxxxxx

Margin xx Safety $1,557,500 61.08%

Conclusion

xxx xxxxxxx of xxx xxxx decrease the xxxxxx xx Mendel xxxxx Company as xxx is xxxxxxxxxx xxxxxxx xxxxxxxxxxxx margin xx xxxx xxx xxxxxx xx xxx xx xxxxxxxx xxxx remains xxxxx the xxxxxxx price, the product should xxx xx discontinued.

xxxxxxxxxx

xxxxxxxxxx xxxxxxxxxxx Manufacturing and Service Application (2013). San xxxxxx xxx Bridgepoint Education.

file2.xls preview (136 words)

Sheet1

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxx per xxxx x 10 x x
Variable overhead xxx xxxx $9.00 $6.00 xxxxxx xxxxx
Comp Paper NapkinsPlace xxxxxxxxxx xxxxxTotal
xxxxxx30000 120000 4500080000
Selling price14 7128.5
xxxxxxxx xxxxxxxx xxxxxx
xxxxx xxx xxxx xxx 5 4
Variable overheads96 xx 8
xxxxxxxx xxxxxxxxx per unit 1.5xxxxxxx
xxxxx xxxxxxxxxxx840000 540000xxxxxx 2480000
xxxxxxxx cost 180000 540000162000 xxxxxx
Variable overheadsxxxxx 72000 108000xxxxxx
1
xxxxxxxxxxxx xxxxxx $195,000 $228,000xxxxxxxx$320,000xxxxxxxxxx
xx xxx xxxxx 6.50 x xxxxx xxxx x xxxx
Comp PaperNapkins xxxxx xxxx Poster Boardxxxxx
Volumexxxxx xxxxxx45000 80000
xxxxxxx xxxxx 14 7 12 8.5
xxxxxxxx xxxx 74.5 4 2.5
Units xxx xxxx6 xx x 4
xxxxxxxx xxxxxxxxxx6 xx8
Variable overheads per unitxxxxxx2.4 2
Total Sales xxxxxx xxxxxx 540000680000 xxxxxxx
xxxxxxxx xxxxxxxxxxxxxxxx180000xxxxxx
Variable overheads 52500xxxxxxxxxxx160000
xxxxxx x
xxxxxxxxxxxx Marginxxxxxxxx$228,000 xxxxxxxx $320,000$992,500
CM xxx unit * 5.50x 1.90x 5.60* 4.00
xxxxxx x
xxxxx even x CM xxxxxx $1,013,000
Margin of xxxxxxxxxxxxxxxxxxxxxx
Sales xxx
xxxxxx x
xxxxx even = CM marginxxxxxxxx
Margin of xxxxxx xxxxxxxxxxxxxxxx
Sales xxx
Answer 5
The xxxxxxx xx mat will reduce xxx xxxxxx xx xxx xxxxxxx as the xxx is generating contribution margin xx xxxx cases. xx far as xxx
xxxxxxxx cost is below the xxxxxxx xxxxxx xxx xxxxxxx xxxxxx xxx xx xxxxxxxxxxxx

xxxxxx

xxxxxx

x


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