Oregon Inc All Depreciation Charges Are Fixed and Are Expected to Remain

question 82

Essay

Oregon Inc.has the following information for its first year of operations: $\begin{array}{|l|r|}\hline \text { Revenues (250,000 units) } & \underline{ \$3,730,000} \\\hline \text { Manutacturing costs: } & \\\hline \text { Materials } & \$ 666,000 \\\hline \text { Variable cash costs } & 904,000 \\\hline \text { Fixed cash costs } & 360,000 \\\hline \text { Depreciation (fixed) } & 445,000 \\\hline \text { Marketing } \& \text { administrative costs: } & \\\hline \text { Marketing (variable) } & 475,000 \\\hline \text { Marketing depreciation } & \$ 113,000 \\\hline \text { Administrative (fixed) } & \$ 450,550 \\\hline \text { Administrative depreciation}&\underline{42,000}\\\hline \text { Total costs } & \$ 3,454,550 \\\hline \text {Operating profits}& \underline{ \$276,450}\\\hline\end{array}$
All depreciation charges are fixed and are expected to remain the same for year 2.Sales volume is expected to increase by 13%,and marketing prices are expected to increase by 4%.Material costs per unit are expected to increase by 8%.Other unit variable manufacturing costs are expected to increase by 10% per unit.Fixed manufacturing costs (other than depreciation)are expected to increase by 6%.Variable marketing costs per unit will remain constant.Administrative costs (other than depreciation)are expected to increase by 12%.Assume there are no inventories.Oregon operates on a cash basis.Required:
Prepare a budgeted income statement for year 2.

Identify how express warranties are formed and recognized.

Comprehend the criteria for the application of implied warranties and their types.

Recognize the role and implications of warranties within the scope of the Uniform Commercial Code (UCC).

Distinguish between express and implied warranties and their enforcement.

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Definitions:

Natural-Monopoly Situation

A market condition in which a single firm can produce output at a lower cost than can multiple firms, leading to a monopoly justified by efficiencies of scale.

Implicit Costs

The opportunity costs that arise from using resources that a business already owns rather than earning revenue from those resources elsewhere.

Explicit Costs

Direct, out-of-pocket expenses incurred in conducting a business activity, such as wages, rent, and materials.

Economic Profits

Profits earned by a company after accounting for both explicit (direct) and implicit (opportunity) costs.