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COST-VOLUME-PROFIT ANALYSIS mcq homework and questions

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Question;Ex. 141;Hewitt Co. has 4,000 machine hours;available to produce either Product 22 or Product 44. The cost accounting;department developed the following unit information for each product;Product;22 Product 44;Sales price $25 $50;Direct materials 6 8;Direct labor 3 2;Variable manufacturing overhead 4 5;Fixed manufacturing overhead 3 5;Machine time required 15 minutes 60 minutes;Instructions;Management wants to know which product to produce;in order to maximize the company?s income. Taking into consideration the;constraints under which the company operates, prepare a report to show which;product should be produced and sold.;Ex. 142;Reynolds, Inc. manufactures and sells two;products. Relevant per unit data concerning each product are given below;Product;Standard Deluxe;Selling;price $50 $75;Variable;costs $26 $33;Machine;hours 2 3;Instructions;(a) Compute the contribution margin per unit of;limited resource for each product.;(b) If 1,000 additional machine hours are;available, which product should be manufactured?;Ex. 143;Oscar Corporation produces and sells;three products. Unit data concerning each product is shown below.;Product;X Y Z;Selling price $200 $300 $250;Direct labor costs 45 75 60;Other variable costs 110 130 106;Ex 143 (cont.);The company has 2,000 hours of labor;available to build inventory in anticipation of the company's peak season.;Management is trying to decide which product should be produced. The direct;labor hourly rate is $15.;Instructions;(a) Determine the number of direct labor hours;per unit.;(b) Determine the contribution margin per direct;labor hour.;(c) Determine which product should be produced;and the total contribution margin for that product.;Ex. 144;Shanahan Co. of Dublin, Ireland is contemplating;a major change in its cost structure. Currently, all of its drafting work is;performed by skilled draftsmen. Mike Shanahan the owner, is considering;replacing the draftsmen with a computerized drafting system.;However, before making the change, Mike;would like to know the consequences of the change, since the volume of business;varies significantly from year to year. Shown below are CVP income statements;for each alternative.;Manual;System Computerized System;Sales $1,500,000 $1,500,000;Variable costs 1,200,000 900,000;Contribution margin 300,000 600,000;Fixed costs;150,000 450,000;Net income $150,000 $150,000;Ex. 144 (cont.);Instructions;(a) Determine the degree of operating leverage;for each alternative.;(b) Which alternative would produce the higher net;income if sales increased by $300,000?;\;Ex. 145;The following CVP income statements are available;for Chantal Corp. and Mantle, Inc.;Chantal;Corp. Mantle;Inc.;Sales revenue $700,000 $700,000;Variable costs;350,000 210,000;Contribution margin 350,000 490,000;Fixed costs;175,000 315,000;Net income $175,000 $175,000;Instructions;(a) Compute the degree of operating leverage for;each company.;(b) Assume that sales revenue decreases by 20%.;Prepare a CVP income statement for each company.;Ex. 146;An investment banker is analyzing two companies;that specialize in the production and sale of gourmet cappuccino and chai;mixes. Roasted Beans Co. uses a labor-intensive approach and Monat Industries;uses a mechanized system. Variable costing income statements for the two;companies are shown below;Roasted Beans Monat Industries;Sales $1,000,000 $1,000,000;Variable costs 650,000 300,000;Contribution margin 350,000 700,000;Fixed costs;175,000 525,000;Net Income $ 175,000 $ 175,000;The investment banker is interested in acquiring;one of these companies. However, she is concerned about the impact that each;company?s cost structure might have on its profitability.;Instructions;(a) Calculate;each company?s degree of operating leverage.;(b) Determine;the effect on each company?s net income if sales decrease by 10% and if sales;increase by 15%. Do not prepare income statements.;aEx. 147;Indicate with a check mark whether each of the;following would be a product cost or a period cost under an absorption or a;variable system for Sour Industries.;Absorption Variable;Product Period Product Period;a. Direct;materials;b. Direct;labor;c. Factory;utilities;d. Factory;rent;e. Indirect;labor;f. Factory;supervisor salaries;g. Factory;maintenance (variable);h. Factory;depreciation;i. Sales;salaries;j. Sales;commissions;aEx. 148;Nimble Corp. manufactures and sells a variety of;camping products. Recently the company opened a new plant to manufacture a;deluxe portable cooking unit. Cost and sales data for the first month of;operations are shown below;Manufacturing;Costs;Fixed Overhead $140,000;Variable overhead $3 per unit;Direct labor $12 per;unit;Direct material $30 per unit;Beginning;inventory 0;units;Units;produced 10,000;Units;sold 9,000;Selling;and Administrative Costs;Fixed $200,000;Variable $4;per unit sold;The portable cooking unit sells for;$110. Management is interested in the opening month?s results and has asked for;an income statement.;Instructions;Assume the company uses absorption costing.;Calculate the production cost per unit and prepare an income statement for the;month of June, 2013.;aEx. 149;On-Road Wheels, Inc. manufactures a basic road;bicycle. Production and sales data for the most recent year are as follows (no;beginning inventory);Variable production costs $90 per bike;Fixed production costs $400,000;Variable selling and administrative;costs $22 per bike;Fixed selling and administrative costs $550,000;Selling price $200;per bike;Production 20,000;bikes;Sales 18,000;bikes;Instructions;(a) Prepare a brief income statement using;absorption costing.;(b) Compute the amount to be reported for;inventory in the year-end absorption costing balance sheet.;aEx. 150;On-Road;Wheels, Inc. manufactures a basic road bicycle. Production and sales data for;the most recent year are as follows (no beginning inventory);Variable production costs $95 per bike;Fixed production costs $400,000;Variable selling and administrative;costs $22 per bike;Fixed selling and administrative costs $550,000;Selling price $200;per bike;Production 20,000;bikes;Sales 16,000;bikes;Instructions;(a) Prepare a brief income statement using;variable costing.;(b) Compute the amount to be reported for;inventory in the year-end variable costing balance sheet.;aEx. 151;Cutting Edge Corp. produces sporting equipment.;In 2012, the first year of operations, Cutting Edge produced 25,000 units and;sold 20,000 units. In 2013, the production and sales results were exactly;reversed. In each year, selling price was $100, variable manufacturing costs;were $40 per unit, variable selling expenses were $8 per unit, fixed;manufacturing costs were $540,000, and fixed administrative expenses were;$200,000.;Instructions;(a) Compute the net income under variable costing;for each year.;(b) Compute the net income under absorption;costing for each year.;(c) Reconcile the differences each year in income;from operations under the two costing approaches.;aEx. 152;Graham is a division of Flynn, Inc. The division;manufactures and sells a pump that is used in a wide variety of applications.;During the coming year, it expects to sell 30,000 units for $25 per unit. Steve;Moss, division manager, is considering producing either 30,000 or 35,000 units;during the period. Other information is presented in the schedule below;Division Information ? 2013;Beginning inventory 0;Expected sales in units 30,000;Selling price per unit $25;Variable manufacturing cost per unit $7;Fixed manufacturing overhead costs;(total) $420,000;Fixed manufacturing overhead costs per;unit;Based on 30,000 units ($420,000? 30,000) $14;Based on 35,000 units ($420,000? 35,000) $12;Manufacturing;cost per unit;Based on 30,000 units ($7 variable + $14 fixed) $21;Based on 35,000 units ($7 variable + $12 fixed) $19;Selling;and administrative expenses (all fixed) $25,000;Instructions;(a) Prepare an absorption costing income;statement with one column showing the results if 30,000 units are produced and;one column showing the results if 35,000 units are produced.;(b) Why is income different for the two;production levels when sales is 30,000 units either way?;aEx. 153;Graham is a division of Flynn, Inc. The division;manufactures and sells a pump that is used in a wide variety of applications.;During the coming year, it expects to sell 30,000 units for $20 per unit. Steve;Moss, division manager, is considering producing either 30,000 or 40,000 units;during the period. Other information is presented in the schedule below;Division Information ? 2013;Beginning inventory 0;Expected sales in units 30,000;Selling price per unit $20;Variable manufacturing cost per unit $7;Fixed manufacturing overhead costs;(total) $360,000;Fixed manufacturing overhead costs per;unit;Based on 30,000 units ($360,000? 30,000) $12;Based on 40,000 units ($360,000? 40,000) $9;Manufacturing;cost per unit;Based on 30,000 units ($7 variable + $12 fixed) $19;Based on 40,000 units ($7 variable + $9 fixed) $16;Selling;and administrative expenses (all fixed) $25,000;Instructions;Prepare a variable costing income;statement with one column showing the results if 30,000 units are produced and;one column showing the results if 40,000 units are produced.

 

Paper#41744 | Written in 18-Jul-2015

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