- Question Two 20 Marks Hewtex Electronics Manufactures Two Products Tape Recorders And Electronic Calculators And Sel 1 (207.57 KiB) Viewed 25 times
QUESTION TWO (20 marks) Hewtex Electronics manufactures two products, tape recorders and electronic calculators, and sells them nationally to wholesalers and retailers. The Hewtex management is very pleased with the company's performance for the current fiscal year. Projected sales through December 31, 2022, suggest that 120,000 tape recorders and 190,000 electronic calculators will be sold this year. The projected earnings statement, which follows, shows that Hewtex will not meet its earnings goal of 9% of sales after taxes. HEWTEX ELECTRONICS Projected Earnings Statement For the Year Ended December 31, 2022 120,000 UNITS 190,000 UNITS TAPE RECORDERS ELECTRONIC CALCULATOR Total Amount Per Unit Total Amount Per Unit (000 omitted) (000 omitted) $1,800 $15.00 $5,320 $28.00 TOTAL (000 omitted) $7,120 480 360 Sales Flexible costs Materials Labour Other Committed costs Total costs Gross Margin Facility-sustaining costs Net income before income taxes 120 280 1,240 560 4.00 3.00 1.00 2.33 10.33 4.67 1,140 1,710 570 1,400 4,820 500 6.00 9.00 3.00 7.37 25.37 2.63 1,620 2,070 690 1,680 6,060 1,060 2,000 (940) Part (a) - 5 marks Compute the quantity of units of tape recorders and electronic calculators Hewtex Electronics would have to sell in 2022 to break even assuming that the sales mix in the planning documents is achieved. (5 marks) Part (b)- 6 marks Determine the volume of sales required if Hewtex Electronics is to earn a profit in 2023 equal to 9% of sales after tax? Hewtex faces a tax rate of 42%. (6 marks) Part (c)-9 marks Hewtex now allocates committed costs based on flexible labour costs. A study has determined that committed costs are as follows: (1) supervisory costs for tape recorder production - $500,000; (2) supervisory salaries for electronic calculator production - $600,000; (3) the balance of the committed costs are proportional to the number of batches of production. Hewtex schedules tape recorders for production in batches of 1,000; and electronic calculators in batches of 10,000. Finally, $300,000 of what was originally classified as facility- sustaining cost was actually attributable to tape recorders, and $400,000 was attributable to the electronic calculator line. Recast the original financial statements to correct the costing errors due to misclassification. (9 marks) Word count for this entire question should not exceed 500 words