Assignemnt: Accounting for Managers
Part I: Cost-Volume-Profit Analysis
1. Wesley's income statement is as follows:
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Sales (10,000 units)
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$150,000
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Less variable costs
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- 48,000
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Contribution margin
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$102,000
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Less fixed costs
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- 24,000
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Net income
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$ 78,000
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If sales increase by 1,000 units, profits will:
a. Increase by $12,000
b. Increase by $10,200
c. Increase by $4,800
d. Increase by $8,000
2. Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.
a. 5,000
b. 6,667
c. 15,000
d. 12,000
3. The following information pertains to Oliwander's 2014 operations:
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Selling price per unit
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$50
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Variable costs per unit
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$20
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Total fixed costs
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$110,000
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The sales dollars required to obtain a target pretax profit of $30,000 is:
a. $125,000
b. $208,333
c. $250,000
d. $233,333
4. Buckbeak Corporation had the following income statement for 2014:
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Sales
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$50,000
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Less variable costs
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- 28,000
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Contribution margin
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$22,000
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Less fixed costs
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- 16,000
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Net income
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$ 6,000
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Buckbeak's 2014 operating leverage is:
a. 0.333
b. 2.000
c. 3.667
d. 2.333
5. The following information is available for Bluewood Corporation for a sales volume of 500 stereo speakers for the past month:
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Total
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Per Unit
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Sales
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$225,000
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$450
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Less: variable expenses
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80,000
|
160
|
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Contribution margin
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$145,000
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$290
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Less: fixed expenses
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$ 35,000
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|
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Net operating income
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$110,000
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What is the contribution margin ratio?
a. 12.0%
b. 30.0%
c. 40.0%
d. 64.4%
6. The following information is available for Bluewood Corporation for a sales volume of 500 stereo speakers for the past month:
|
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Total
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Per Unit
|
|
Sales
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$225,000
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$450
|
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Less: variable expenses
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80,000
|
160
|
|
Contribution margin
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$145,000
|
$290
|
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Less: fixed expenses
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$ 35,000
|
|
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Net operating income
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$110,000
|
|
If sales increase by $51,750, net income will increase by what amount?
a. $ 6,000
b. $ 8,000
c. $20,000
d. $33,350
7. The following information pertains to Pellino's 2014 operations:
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Selling price per unit
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$100
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Variable costs per unit
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$65
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Total fixed costs
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$75,000
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Tax rate
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40%
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Pellino's break-even point in sales dollars is:
a. $133,333
b. $214,286
c. $500,000
d. $333,333
Part II: Variance Analysis
1. Assume that the standard cost to make one unit of product includes 15 units of raw materials at a price of $3 per unit. In July, 34,000 units of raw materials were purchased for $100,800, and 30,600 units of raw materials were used to produce 2,000 units of finished product.
What is the materials quantity variance?
a. $2,400 (U)
b. $1,800 (U)
c. $1,200 (F)
d. $1,200 (U)
2. Assume that the standard cost to make one finished unit includes 2 hour of direct labor at $8 per hour. During April, 22,000 direct labor-hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $160,000.
What is the labor rate variance for April?
a. $ 2,000 (U)
b. $ 2,000 (F)
c. $16,000 (U)
d. $16,000 (F)
3. The following materials standards have been established for a particular raw material used in the company's sole product:
Standard quantity per unit of output.......... 1.0 pound
Standard price............................................ $17.60 per pound
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ....................... 2,400
pounds Actual cost of materials purchased ........... $35,650
Actual materials used in production.......... 2,000 pounds
Actual output ............................................. 2,100 units
What is the materials quantity variance for the month?
a. $1,760 U
b. $1,760 F
c. $5,280 U
d. $5,280 F
4. Using the same information in Question 3, what is the material price variance for the month?
a. $6,590 U
b. $6,590 F
c. $1,310 F
d. $1,310U
Part III: Overhead Allocations
Refer to the Aerotech example used in class.
1. Under the traditional volume-based product-costing system, what would be the per unit cost for Model I if machine time is used as the allocation base?
a. $200.56
b. $209.00
c. $302.00
d. $224.53
2. Under the traditional volume-based product-costing system, what would be the per unit cost for Model III if direct materials (in dollars) are used as the allocation base?
a. $191.81
b. $317.25
c. $126.00
d. $92.72
3. Under the ABC system, what would be the per unit cost for Model III if direct materials (in dollars) are used as the allocation base of machinery costs?
a. $390.85
b. $334.45
c. $344.64
d. $401.04
4. Under the ABC system, what would be the per unit cost for Model III if direct labour hours are used as the allocation bases for all activity cost pools?
a. $390.85
b. $334.45
c. $344.64
d. $126.00
5. Under the ABC system, what would be the per unit cost for Model III if machine hours are used as the allocation bases for all activity cost pools?
a. $390.85
b. $241.12
c. $344.64
d. $126.00
Part IV: Transfer Pricing
1. Which of the following is a legitimate disadvantage of a 100%-of-variable-cost transfer pricing?
a. This price will not allow the selling division to make a long-run profit.
b. This price will discourage the purchasing division from buying internally.
c. At this price, if the selling division does not have excess capacity, the selling division will not wish to sell anything to the outside market.
d. If the selling division has excess capacity, this transfer price will often lead the purchasing division to act inconsistently with corporate goals.
2. The Durango Lumber Company had the following historical accounting data, per 100 board feet, concerning one of its products in the Sawmill Division:
Finished shelving:
Direct materials $60
Direct labor 32
Variable manufacturing overhead 16
Fixed manufacturing overhead 24
The historical data is based on an average volume per period of 20,000 board feet. The shelving is normally transferred internally from the Sawmill Division to the Finishing Division. Durango may also sell the shelving externally for $180 per 100 board feet. The divisions are taxed at identical rates.
Which of the following transfer pricing methods would lead to the highest Finishing Division income if 10,000 board feet are produced and transferred in entirety this period from Sawmill to Finishing?
a. Market price
b. All variable costs plus 50 percent markup
c. Full absorption costing plus 10 percent markup
d. None of these methods generates a higher division income than another.
3. Plainfield Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
Direct materials $4.00 per gallon
Direct labor 1.60 per gallon
The Mixing Division uses the following predetermined overhead rate:
Variable overhead $2.40 per gallon
Fixed overhead 1.60 per gallon
Total $4.00 per gallon
What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?
a. $ 10.75
b. $ 12.48
c. $ 17.50
d. $ 9.50
4. Homer Glen Division has the capacity to make 3,000 units of an intermediate good that is sold both internally and on the open market for a price of $56 each. To make the product, Homer Glen incurs $12 of variable cost per unit and $24 of fixed costs per unit.
What is the minimum price Homer Glen would accept for an internal transfer of 1,000 units of the product if the division is operating at 50% capacity?
a. $36.00 per unit
b. $12.00 per unit
c. $50.00 per unit
d. $56.00 per unit
Part V: Performance Evaluation
1. Information for Tube division is as follows:
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Net earnings for division
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$40,000
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Asset base for division
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$100,000
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Target rate of return
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16%
|
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Operating income margin
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12%
|
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Weighted average cost of capital
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8%
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What is Tube's residual income?
2. Willowbrook Company has the following data for this year:
|
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Bottling Division
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Mixing Division
|
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Average operating assets
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$320,000
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$ 800,000
|
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Contribution margin
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160,000
|
500,000
|
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Operating income
|
80,000
|
120,000
|
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Sales
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500,000
|
1,300,000
|
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Weighted-average cost of capital
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17%
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17%
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Willowbrook Company has a target ROI of 17 percent.
Required: Calculate the following amounts for each division:
a. Return on sales ratio
b. Operating investment turnover
c. ROI
d. Residual income
3. Emerald Division had the following information:
Current Liabilities $ 3,600,000
Investment base 35,000,000
Net operating income before taxes 4,000,000
Tax rate 35%
Cost of capital 7%
Calculate Emerald Division's economic value added.