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Category > Accounting Posted 18 Dec 2017 My Price 10.00

beneficial effect on Flex’s companywide profit.

1Flex Electronics manufactures and sells two types of custom USB flash drives with organization logo:USB drive #1 and USB drive #2. The company forecasts the following data for year 2017:USB Drive #1 USB Drive #2Direct Materials $3/unit $2/unitDirect Labor $4/unit $3/unitSetups 240 80Pounds of materials 36,000 12,000Machine hours 2,400 800Selling & administrative expense $1.5/unit $1/unitNumber of units completed 120,000 40,000Selling price $14/unit $10/unitFlex has determined the following activity cost pools and cost driver levels for 2017:Activity Cost Pool Activity Cost Activity Cost DriverMachine setup $96,000 320 setupsMaterial handling $88,000 48,000 poundsMachine operation $12,800 3,200 machine hoursTotal $196,800Assume income tax rate is 30%.Required (1): prepare a budgeted income statement for year 2017 based on the aboveinformation.Flex Electronics also considers three alternative plans to improve its companywide profit:Plan A: Terminate production of USB drive #2. Given the current plant conditions, Flex can use theexcess capacity to produce and sell additional 40,000 units of USB drive #1. This proposed plan doesnot change activity cost. Termination of USB drive #2 will impose order cancellation penalty of$38,000.Plan B: Lower the selling price of USB drive #1 to $13.5, which will increase the sales volume ofUSB drive #1 by 20,000 units. Assume Plan B does not affect the production and sale of USB drive#2. Further, activity cost pools and cost driver levels are presented below under this proposed plan:Activity Cost Pool Activity Cost Activity Cost DriverMachine setup $108,000 360 setupsMaterial handling $99,000 54,000 poundsMachine operation $14,400 3,600 machine hoursTotal $221,400Plan C: Shifting the focus of advertising from USB drive #2 to USB drive #1, which will increaseadvertising costs by $5000. Further, plan C will increase the sales volume of USB drive #1 by 10,000 2units, and decrease the sales volume of USB drive #2 by 10,000 units. Assume this proposed plandoes not change activity cost pools and cost driver levels.Required (2): prepare a budgeted income statement for each of the above three alternativeplans and identify the plan that has the most beneficial effect on Flex’s companywide profit.

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CourseLover
(12)
Status NEW Posted 18 Dec 2017 03:12 PM My Price 10.00

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