please help for my homework and give me answers of plan B and C in the word and excel.

please help for my homework and give me answers of plan B and C in the word and excel.

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CRITICAL THINKING Variable Costing / Segment Reporting DATE: 2/10/2016 TO: Cost Accountant FROM: Adam Smith, Controller SUBJECT: Improving Profi…

please help for my homework and give me answers of plan B and C in the word and excel.

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CRITICAL THINKING
Variable Costng / Segmen± Reportng
DATE: 2/10/2016
TO:
Cost Accountant
FROM:
Adam Smith, Controller
SUBJECT: Improving Proftability o± Processing Plants
Enviro Recyclers has processing plants in Maine and Connecticut. Both plants use recycled glass to produce jars that are
used in ±ood canning by a variety o± processors. The jars sell ±or $20 per unit. Budgeted revenues and costs ±or the year
ending Dec 31 2011 are:
2016 Segment Margin
Budget
Maine
Connecticut
Total
Sales Units
110,000
200,000
310,000
Sales $
$2,200,000
$4,000,000
6,200,000
Variable production costs:
Direct material
550,000
1,000,000
1,550,000
Direct labor
660,000
1,000,000
1,660,000
Variable Factory overhead
440,000
700,000
1,140,000
Total Variable Cost
1,650,000
2,700,000
4,350,000
Contribution Margin
550,000
1,300,000
1,850,000
Direct/Traceable Fixed Costs:
Fixed
factory overhead
700,000
900,000
1,600,000
Fixed
regional promotion costs
100,000
100,000
200,000
Total Fixed Cost
800,000
1,000,000
1,800,000
Segment Margin
(250,000)
300,000
50,000
Fixed regional promotional costs are discretionary advertising costs needed to obtain budgeted sales levels.
Because o± the budgeted operating loss, Enviro is considering the possibility o± ceasing operations at its Maine plant. I±
Enviro ceases operations at its Maine plant, all fxed ±actory overhead costs would be eliminated.
Enviro is considering the ±ollowing three alternative plans:
PLAN A:
Expand Maine’s operations ±rom its budgeted 110,000 units to a budgeted 170,000 units. It is believed that
this can be accomplished by increasing Maine’s
fxed regional promotional
expenditures by $120,000.
PLAN B:
Close the Maine plant and expand Connecticut’s operations ±rom the current budgeted 200,000 units to
310,000 units in order to fll Maine’s budgeted production o± 110,000 units. The Connecticut Plant’s Fixed Factory
Overhead will increase by $50,000 to cover this additional production.
The Maine region would continue to incur
promotional costs
in order to sell the 110,000 units. All sales and costs
would be budgeted through the Connecticut plant.
PLAN C:
Close the Maine plant and enter into a long-term contract with a competitor to serve the Maine region’s
customers. This competitor would pay Enviro a royalty o± $2.50 per unit ±or the 110,000 units that Maine would
have sold. Enviro would continue to incur fxed regional promotional costs to maintain sales o± 110,000 units in the
Maine region.
Note – there are no common Fixed Costs

View the Answer

Requirements
1)
Break Even
:
Using the 2016 Budget ONLY,
determine the number of units that must be produced and sold
by the
Maine plant
to cover all of the costs per the budget above (i.e. break even). Use the amounts from the
budget above to do this “Break Even” calculation. Do not consider the eFects of implementing Plans A, B, and C.
***Show your calculations
Hint
– Compute Sales Price per unit & Variable Cost per unit to determine Per Unit Contribution Margin (Sales
price per unit – Variable cost per unit = Contribution Margin per unit).
Then use the Break Even formula (Total Fixed Cost / Contribution Margin per Unit – Break Even Unit
Sales) to compute break even units
2) Plan A
: Prepare a Segmented income statement for each plant and in total in the same format as the budget above
from the implementation of Plan A. Use the same level of detail for variable and ±xed costs per above (i.e.
itemize by type).
Plan A-C Hint
Hint
– compute variable costs per unit for each variable cost type. Do for each plant using 2016 budget. Apply these
rates to new unit sales per Plan assumptions. Compute ±xed costs per Plan assumptions.
Compute sales price per unit using 2016 budget. Apply these rates to new unit sales per Plan assumptions to calc new
sales $.
3) Plan B:
Prepare a contribution margin budgeted income statement for the company which now includes only the
Connecticut Plant from the implementation of Plan B. Use the same level of detail for variable and ±xed costs per
above (i.e. itemize by type).
Hint
– Make sure to budget for total company regional promotion costs (the Maine plant is gone but the costs are
not!)
4) Plan C:
Prepare a contribution margin budgeted income statement for the company which now includes only the
Connecticut Plant from the implementation of Plan C. Use the same level of detail for variable and ±xed costs per
above (i.e. itemize by type).
Hint –
The sales units will be 200,000. The revenue from the royalty is a separate revenue line and does not
impact sales units or costs.
Hint –
Fixed Factory overhead will go back to $900,000 as the Conn. Plant is back at a 200,000 sales level.
Hint –
make sure to use the units Maine would have sold when computing royalty revenue
Hint – Make sure to budget for total company regional promotion o±ce costs (the Maine plant is gone but the
costs are not!)
Brie²y discuss the advantages and disadvantages of each plan considering qualitative factors and recommend a
course of action.
In order to Get Credit
for This Assignment:
Do your own work, very easy for me to see sharing of Excel work
All work must be prepared in Excel.
Hard copy
and emailed Excel ±le are due per date in syllabus.
*
Label each section for example Step
1) Break Even, Step 2) Plan A, etc.
* Pages must not break within a Plan (i.e. a plan may not print on multiple pages)

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