Please give a solution writing task of question 6&7. Green Thumb, Inc. has a factory that produces custom greenhouses and other garden related...
Please give a solution writing task of question 6&7.Green Thumb, Inc. has a factory that produces custom greenhouses and other garden related items. It has multiple product lines. Materials and labor for the green houses are determined by each job. To simplify the assignment, we will assume the following average costs. The company estimates that it will have 30,000 direct labor hours in total for the green houses. The materials include $1,200 on a per job basis. It requires 15 hours of labor on average for a custom greenhouse. The hourly rate is $10. The sales price will be set at a markup of 75%. It assumes 2,000 units are sold on average per year. A breakdown of estimated yearly costs related to the greenhouses follows. Please note that the amounts are per year unless identified otherwise:Salaries- office & administrative $600,000Salaries for factory supervisors and janitors $120,000Office Rent $120,000 Factory Rent $90,000Office Utilities and Misc office expenses(based on units sold) $20,000Sales Travel(based on units sold) $24,000 Insurance - office $14,000Depreciation - office equipment $45,000Depreciation for factory equipment $55,000Advertising $100,000Sales commissions(based on units sold) $80,000Factory Property taxes $10,000Maintenance for factory equipment $60,000Question 6. Prepare three Cost Volume Profit (CVP) Income Statements using the following yearly volumes: 1,500,2,000 and 2,400. Keep in mind how variable and fixed costs behave. The traditional income statementfrom #5 should be about the same net income as the 2,000 units for the CVP format.a) Calculate Break-even in units and sales $ for the companyb) Calculate units and sales $ if the company wants a profit of $1,000,000.c) Margin of safety for 2,000 units.Discuss the importance of these calculations to a company. Fully discuss the differences(at least 3)between the traditional vs CVP format. Give examples supported by numbers of how you would usethese calculations as the CFO of the company.Question 7. If the following changes were to be made, calculate a new CVP Income Statement: Direct Material costsdecrease by 10%; fixed costs increase by 50% and sales price would increase by 5%. Assume you areselling the 2,000 units. Should the company consider these changes? Why or why not? This question is not just based onthe new net income. Please review the full income statement for changes. What if the sales volumechanges? Does this change your answer? I would recommend using volumes higher and lower tosee how the changes impact your answer. Include any CVP income statements that are needed tosupport your answer.Discuss real examples of cost increases for fixed costs (at least 2) and decreases for directmaterials (at least 2) that could be implemented for this business. Can the company increase price?What other areas might be impacted due to the price increase? You are the CFO of this businesswhat is important to consider? Give 2 industry specific details that can impact this discussion.
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Jan 02, 2020
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