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##### Assignment: HW Set #2 - E3.10, E3.19, E16.16, E16.20

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Question;Assignment: HW Set #2 -;E3.10, E3.19, E16.16, E16.20;1.;Exercise 3.10;Cost Behavior;SmokeCity, Inc., manufactures barbeque smokers. Based on past experience;SmokeCity has found that its total annual overhead costs can be represented by;the following formula: Overhead cost = $543,000 + $1.34X, where X equals number;of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs;for the year were as expected.;Required;1. What is the driver for the overhead activity?;For questions 2-4, Enter the final answers rounded to the nearest;dollar.;2. What is the total overhead cost incurred by SmokeCity last;year?;$;3. What is the total fixed overhead cost incurred by SmokeCity;last year?;$;4. What is the total variable overhead cost incurred by SmokeCity;last year?;$;For questions 5-8, round your answers to the nearest cent. Use;those rounded figures in subsequent computations, if necessary.;5. What is the overhead cost per unit produced?;$ _________________ per unit;6. What is the fixed overhead cost per unit?;$ _________________ per unit;7. What is the variable overhead cost per unit?;$ _________________ per unit;8. Recalculate Requirements 5, 6, and 7 for the following levels;of production: (a) 19,500 units and (b) 21,600 units.;19,500 Units 21,600 Units;Unit cost;$;$;Unit Fixed cost;Unit variable cost;The reason the unit costs changed in the way they did is because;2.;Exercise 3.19;High-Low Method, Cost Formulas;The controller of the South Charleston plant of Ravinia, Inc.;monitored activities associated with materials handling costs. The high and low;levels of resource usage occurred in September and March for three different;resources associated with materials handling. The number of moves is the;driver.;The total costs of the three resources and the activity output, as;measured by moves for the two different levels, are presented as follows;Forklift depreciation;Number of Moves;Total Cost;Low;6,500;$1,800;High;20,000;$1,800;Indirect labor;Number of Moves;Total Cost;Low;6,500;$74,250;High;20,000;$1,35,000;Fuel and oil for forklift;Number of Moves;Total Cost;Low;6,500;$4,940;High;20,000;$15,200;Required;If required, round your answers to two decimal places. Enter a;0" if required.;1. Determine the cost behaviour formula of each resource. Use the;high-low method to assess the fixed and variable components.;Forklift depreciation;V$;F$;Y$;Indirect labor;V$;F$;Y$;+ $ _________________ X;Fuel and oil for forklift;V$;F$;Y$;X;2. Using your knowledge of cost behavior, predict the cost of each;item for an activity output level of 9,000 moves. For interim computations;carry amounts out to two decimal places. Round your final answer to the nearest;dollar.;Forklift depreciation $;Indirect labor $;Fuel and oil for forklift;$;3. Construct a cost formula that can be used to predict the total;cost of the three resources combined. If required, round your answers to two decimal;places.;Materials handling cost = $ _________________ + $;X;Using this formula, predict the total materials handling cost if;activity output is 9,000 moves.;Y= $;3.;Exercise 16.16;CVP: Before- and After-Tax Targeted Income;Head-Gear Company produces helmets for bicycle racing. Currently;Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per;helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year;14,000 helmets were sold.;Required;1. What is Head-Gear's net income for last year?;$;2. What is Head-Gear's break-even revenue? In your computations;round the contribution margin ratio to two decimal places.;$;3. Suppose Head-Gear wants to earn before-tax operating income of;$900,000. How many units must be sold? Round to the nearest whole unit.;units;4. Suppose Head-Gear wants to earn after-tax net income of;$650,000. How many units must be sold? Round to the nearest whole unit.;units;5. Suppose the income tax rate rises to 35 percent. How many units;must be sold for Head-Gear to earn after-tax income of $650,000? Round to the;nearest whole unit.;units;4.;Exercise 16.20;Contribution Margin, CVP, Net Income, Margin of Safety;Nail Glow, Inc., produces novelty nail polishes. Each bottle sells;for $5.90. Variable unit costs are as follows;Fixed overhead costs are $34,475 per year. Fixed selling and;administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last;year.;Required;1. What is the contribution margin per unit for a bottle of nail;polish?;$ _________________ per unit;What is the contribution margin ratio? Round your answer to four;decimal places.;2. How many bottles must be sold to break even?;bottles;What is the break-even sales revenue? Round your answer to the;nearest dollar, if rounding is required.;$;3. What was Nail Glow?s operating income last year?;$;4. What was the margin of safety in revenue?;$;5. Suppose that Nail Glow, Inc., raises the price to $6.50 per;bottle, but anticipated sales will drop to 28,750 bottles. What will the new;break-even point in units be? Round your answer up to the nearest whole number;of units.;Should Nail Glow raise the price?

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