1 compute the manufacturing product cost per unit for each


1. Compute the manufacturing product cost per unit for each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcase were assigned to the standard bookcases at $6 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of postmanufacturing activities such as distribution, marketing and customer service. The postmanufacturing costs were $19 per standard bookcase and $15 per unfinished bookcase. Compute the full product costs per unit.

3. Which product costs are reported in the external financial statements? Which costs are used for   management decision making? Explain the difference.

4. What price should Johnston's managers set for unfinished bookcases to earn a unit profit of $16?

Budgeted Cost



Cost

of Activity


Allocation Base

Allocation Rate

$250,000


Number of parts

$0.90

3,500,000


Direct labor hours

15

190,000


Number of finished units

3.7

Lawton produced two types of bookcases in April: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs and other data.

Compute the manufacturing product cost per unit of each type of bookcase. Standard and Unfinished.


Standard Bookcase

Unfinished Bookcase

Direct materials

29300

28400

Materials handling



Assembling



Finishing


0

Total manufacturing cost



Number of units

3000

3000

Manufacturing cost per unit



Compute the full product costs per unit.


Standard Bookcase

Unpainted Bookcase

Manufacturing product costs



Postmanufacturing activities



Premanufacturing activities



Full product cost per unit



Sales price per unit unfinished _________

Christi, Inc., is using a cost of quality approach to evaluate design engineering efforts for a new skateboard. Christ's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the 2 year life of the skateboards follow. Also shown are the cost allocation rates for each activity.


Predicted

Activity Cost


Reduction in

Allocation Rate

Activity

Activity Units

Per Unit

Inspection of incoming materials

420

$46

Inspection of finished goods

420

18

Number of defective units



discovered in-house

1,000

54

Number of defective units



discovered by customers

400

74

Lost sales to dissatisfied customers

125

98

1. Calculate the predicted quality cost savings from the design engineering work.

2. The predictive quality cost savings from the design work is ______

3. Christi spent $101,000 on design engineering for the new skateboard.  What is the net benefit of this "preventive" activity? The net benefit of "preventive" quality activity is $ ____

Too Sweet sells 2 dozen for every dozen of custard filled donuts. A dozen plain donuts sells for $6. A dozen custard filled donuts sells for $8, with a variable cost of $5.20 per dozen.

Determine Too Sweet's monthly breakeven point in dozens of plain donuts and custard filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.

Compute Too Sweet's margin of safety in dollars for May 2012.

If Too Sweet can increase monthly sales volume by 10%, what will operating income be? (The sales tax remains unchanged.)

The breakeven point is _____ dozen plain donuts and _____ dozen custard filled donuts.



Plain/doz.

Filled/doz.

Total

Sales revenue





Variable costs





Contribution margin





Fixed costs





Operating income





Compute Too Sweet's margin of safety in dollars for May 2012.

The margin of safety in dollars is ______

If Too Sweet can increase sales revenue by 10%, keeping the sales mix the same, operating income will be _____

Fill in the blanks for each missing balance.

Which company has the lowest breakeven point in sales dollars?

What causes the lowest breakeven point?

(Round the contribution margin per unit to the nearest cent. Enter the ratio as a decimal rounded to two decimal places. Use parenthesis or a minus sign for operating losses.)


Company





Up

Down

Left

Right

Sales revenue

$710,000


$608,000


Variable costs


150,100

291,840

164,320

Fixed costs


125,000

139,000


Operating income (loss)

$15,800



$35,680

Units sold

190,000

10,000



Contribution margin per unit

$1.42


$98.80

$13.44

Contribution margin ratio


0.21


0.21

Calculate the breakeven sales dollars for company - Up ____

Calculate the breakeven sales dollars for company - Down ____

Calculate the breakeven sales dollars for company - Left ____

Calculate the breakeven sales dollars for company - Right ____

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