given below: Pens to be produced 100,000 Direct material variable! "##,000 Direct $abor variable! "%&,000 'upplies variable! "(),*00 'upervision +ixed! "%0,000 Depreciation +ixed! "(0,000 ,t-er +ixed! "10,000 .n December, Bexley expects to produce /0,000 pens. 0ssuming no structural c-anges, w-at is Bexley1s budgeted production cost per pen +or December2 0! "1.)( B! "1.&* C! "1.&/ D! "1./# Solurion: (33,000+48,000+27500)/100,000 + (40,000+20,000+10,000)/90,000 = 1.85 (. 3se t-e cost in+ormation in 1! above. .n November, t-e actual direct labor costs were "%4,000 and Bexley produced and sold /0,000 pens. 5-e direct labor per+ormance variance di++erence! is: 0! "*,000 un+avorable. B! "(,&00 un+avorable. C! "1,000 un+avorable. D! "*,000 +avorable. Solution: $46,000 ($48,000/100,000 x 90,000) = 2,800 unf!or"l# #. Bubba1s stea6-ouse -as budgeted t-e +ollowing costs +or a mont- in w-ic- 1,400 stea6 dinners will be sold: 7aterials, "%,0&08 -ourly labor variable!, "*,(008 rent +ixed!, "1,)(08 depreciation, "4008 and ot-er +ixed costs, "**0. 9ac- dinner sells +or "1(.40. :ow muc- would Bubba1s pro+it increase i+ 10 more dinners were sold2 0! "4&. B! ")(. C! "*(. D! "1(4. Solution: ($12.60 (4,080+5,200)/1,600) x 10 = $68 %. 0 manu+acturing company produces &0,000 units o+ product 0 at a total cost o+ "(.% million. 5otal +ixed costs are "1 million. .+ t-e company increases production by (*; and uses a %0; mar6up t-e price per unit will be: 0! "#0.&0 B! "#1.*% C! "#).10 D! "#&.*0 1 Solution: ($2,400,000 $ $1,000,000) / 80,000 = $17.50 $1,000,000 / (80,000 x 1.25) = $10.00 %otl &o't = $28.50 (ri&# = ($18.50 x 1.4) = $38.50 3se t-e +ollowing to answer <uestions *=4: >N, Company?s mar6et +or t-e 7odel ** -as c-anged signi+icantly, and >N, -as -ad to drop t-e price per unit +rom "(&* to "(00. 5-ere are some units in t-e wor6 in process inventory t-at -ave costs o+ "(&0 per unit associated wit- t-em. >N, could sell t-ese units in t-eir current state +or "140 eac-. .t will cost >N, "#* per unit to complete t-ese units so t-at t-ey can be sold +or "(00 eac-. *. 0 new employee loo6s at t-e analysis and exclaims, @Ae?ll lose money wit- eit-er o+ t-ese alternativesB $et?s Cust t-row t-ese units in t-e tras-BD 'uppose t-e alternative to tras-ing is c-oosing t-e more pro+itable o+ t-e two alternatives t-at t-e new employee loo6ed at and did not li6e!. A-at e++ect will t-e tras-ing option t-at t-e new employee wants! -ave on net income2 0! Net income will increase by "#* per unit +or eac- unit discarded. B! Net income will decrease by "11* per unit +or eac- unit discarded. C! .t will -ave no e++ect on net income. D! Net income will decrease by "14* per unit +or eac- unit discarded. 4. A-en t-e incremental revenues and expenses are analyEed, t-e company is better o++ by 0! "* per unit i+ t-ey complete t-e units. B! "1* per unit i+ t-ey sell t-e units in t-eir current state. C! "(* per unit i+ t-ey sell t-e units in t-eir current state. D! "#* per unit i+ t-ey complete t-e units. ). 0 company using activity based pricing mar6s up t-e direct cost o+ goods by #/; plus c-arges customers +or indirect costs based on t-e activities utiliEed by t-e customer. .ndirect costs are c-arged as +ollows: "4.00 per order placed8 "#.00 per separate item ordered8 "(&.00 per return. 0 customer places 10 orders wit- a total direct cost o+ "(,(10, orders #1( separate items, and ma6es & returns. A-at will t-e customer be c-arged2 0! "#,000 B! "%,(/( C! "*,##0 D! "*,)** Solution: ($6 x 10) + (3 x 312) + (28 x 8) = 1220 + (2210 x 1.39) = $4,292 &. 7anu+acturing over-ead is allocated to products based on t-e number o+ mac-ine -ours re<uired. .n a year w-en (0,000 mac-ine -ours were anticipated, costs were budgeted at "1(*,000. .+ a product re<uires ),000 mac-ine -ours, -ow muc- manu+acturing over-ead will be allocated to t-is product2 0! "%1,44) B! "%#,)*0 ( C! "1,1(0 D! "*0,000 Solution: ($125,000 / 20,000 x 7,000) = $43,750 3se t-e +ollowing in+ormation to answer <uestions /=10: 5-e 'unrise :otel -as (00 rooms. 9ac- room rents at "140 per nig-t and variable costs total "#* per room per nig-t o+ occupancy. Fixed costs total "&0,000 per mont-. /. .+ t-e -otel spends an additional "10,000 in t-e mont- o+ February on advertising t-ey +eel t-at t-ey can expect occupancy rate to increase by 10;. A-at would be t-e +inancial impact o+ spending t-is additional money on advertising +or t-e mont- o+ February (& days!2 0! 5otal +ixed costs will increase by "10,*00. B! Net income will increase by "40,000. C! Net income will increase by "(4,#(0. D! 5otal +ixed costs will remain t-e same. Solution: ($160 $ $35) x (200 x 10) x 28) = $70,000 $ $10,000 = $60,000 10. .+ )0; o+ t-e rooms are occupied eac- nig-t in t-e mont- o+ February (& days! w-at will total costs be +or t-e mont-2 0! "11&,*40. B! "1)#,400. C! "(1),(00. D! "1**,4&0. Solution = (200 x 70) x 28 x $35) + 80,000 = $217,200
11. 0 company believes it can sell 4,000,000 o+ its proposed optical mouse +or "1% eac-. 5-ere will be "),*00,000 in +ixed costs associated wit- t-e mouse. .+ t-e company desires to ma6e a pro+it o+ "#,000,000 on t-e mouse, w-at is t-e target variable cost per mouse2 0! "10.40 B! "11.00 C! "1(.(* D! "/.00 Solution: (6,000,0000 x 14) $ (7,500,000 + 3,000,000) = 73,500,000 / 6,000,000 = $12.25 1(. Below is a per+ormance report t-at compares budgeted and actual pro+it o+ Boyles Beer +or t-e mont- o+ 0pril: Budget 0ctual Di++erence 'ales "(00,000 "(0(,000 "(,000 $ess: Cost o+ ingredients "14(,000 "144,000 "%,000 'alaries "#1,000 "#1,(00 "(00 # Controllable Pro+it "%),000 "%%,&00 ="(,(00 .n evaluating t-e department in terms o+ its increase in sales and expenses, w-at will be most important to investigate2 0! 'ales B! Cost o+ ingredients C! 'alaries D! 0ll t-ree components -ave e<ual importance. 1#. 5ynex .nc ma6es a product t-at sells +or "41 and -as "%( per unit in variable costs. 0nnual +ixed costs are "(%,000. .+ G=>andy1s sells 10 units less t-an brea6=even. :ow muc- loss would t-e company realiEe on its income statement2 0! "()* B! "(40 C! "(%0 D! "1/0 Solution: ($61 $ $42) x 10 = $190 1%. Della1s Furniture -as a contribution margin ratio o+ 1*;. .+ +ixed costs are "1)*,*00, -ow many dollars o+ revenue must t-e company generate in order to reac- t-e brea6= even point2 0! "1,111,### B! "1,(11,### C! "1,1)0,000 D! "(,111,%*0 Solution: $175,500 / 15) = $1,170,000 1*. 7ax1s PiEEa produced and sold 1,000 piEEas last mont- and -ad total variable ingredients t-at cost "%,*)*. .+ production and sales are expected to increase by 1); next mont-, w-ic- o+ t-e +ollowing statements is true2 0! 5otal variable materials costs are expected to be "%,))/.*0 B! Hariable material cost per unit is expected to be "%.//. C! 5otal variable materials costs are expected to be "%,#%* D! 5otal variable materials costs are expected to be "*,#*(.)* Solution: $4,575 x (1,000 x 1.17) = 5352750 14. ,ne 'mall Irill Company is a start up wit- t-e +ollowing pro+ile: 3nit selling price J "(#08 Hariable cost per unit J "1#08 Fixed Costs J "#4,0008 5ax rate J %0;. :ow many units s-ould 'mall Irill sell to ac-ieve an a+ter=tax target income o+ "4,0002 0! (00 B! %40 C! (#0 D! #00 Solution: (36,000 + 6,000 / 60)) / (230 130) = 460 unit' % 1). Aestern 0pparel Company owns two stores and management is considering eliminating t-e 9ast store due to declining sales. 'egmented contribution income statements are as +ollows and common +ixed costs are allocated on t-e basis o+ sales. Aest 9ast 5otal 'ales "*00,*00 /0,000 "*/0,*00 Hariable costs (4(,*00 %*,000 #0),*00 Direct +ixed costs 4(,*00 (*,000 &),*00 'egment margin 1)*,*00 (0,000 1/*,*00 0llocated +ixed costs 1#),*00 #*,000 1)(,*00 Net .ncome "#&,000 "1*,000! "(#,000
Aestern +eels t-at i+ t-ey eliminate t-e 9ast store t-at sales in t-e Aest store will decline by 1*;. .+ t-ey close t-e 9ast store, overall company net income will: 0! decline by "/0,000. B! decline by "4(,000. C! decline by "&*,4(*. D! decline by "**,)00. Solution = *urr#nt +rofit = $23,000 ,#- +rofit = ((500,500 262,500) x 85)) 62,500 172,500 = $32700 .#&lin# in +rofit = $32700 23000 = $55700 1&. ,n Kuly (4, (01(, radio '-ac6 announced disappointing ( nd <uarter earnings t-at caused t-e stoc6 to +all (/; to all time lows. 0lt-oug- sales were up 1.(; to "/*#.( million gross pro+it +ell 14.4; to "#40.# million. 0ssuming >adio '-ac61s store count and +ixed costs were t-e same in t-e ( nd <uarter o+ (011 and (01(, w-ic- o+ t-e +ollowing statements is t-e best explanation +or t-e decrease in t-e +irm1s pro+itability2 0! ,pportunity costs decreased. B! 7argin o+ sa+ety decreased. C! Contribution margin decreased. D! 'elling price decreased. .n+ormation +or Luestions 1/=(0 0nderson 7anu+acturing ma6es a single product. Budget in+ormation regarding t-e current period is given below:
>evenue 100,000 units at "&.00! "&00,000 Direct materials 1*0,000 Direct labor 1(*,000 Hariable manu+acturing over-ead (#*,000 Fixed manu+acturing over-ead 110,000 Net income "1&0,000 *
Dye Company approac-es 0nderson wit- a special order +or 1*,000 units at a price o+ ").*0 per unit. Hariable costs will be t-e same as t-e current production and accepting t-e special order will not -ave any impact on t-e rest o+ t-e company?s orders. :owever, 0nderson is operating at capacity and will incur an additional "*0,000 in +ixed manu+acturing over-ead i+ t-e order is accepted. 1/. A-at is t-e incremental income loss! associated wit- accepting t-e special order2 0! "1%,000! B! "#4,000 C! "(#,*00! D! "(),000 Solution= (15,000 x 7.50) ((150,000+125,000+235,000)/100,000 x 15,000) 50,000 = (14,000) (0. A-at is t-e incremental revenue associated wit- accepting t-e special order2 0! "1)0,000 B! "11(,*00 C! ")0,000 D! "1(0,000 Solution= (15,000 x 7.50) = $112,500 (1. .nnovations, .nc is loo6ing to ac-ieve a net income o+ 1* percent o+ sales. 3nit sales price is "108 variable cost per unit is "48 total +ixed costs are "*0,000 w-at is t-e level o+ sales in units! re<uired to ac-ieve a net income o+ 1* percent o+ sales2 0! 1(,000 units. B! (1,000 units. C! 14,000 units. D! (0,000 units. Solution= 20,0000 x (10$6) $50,000 = 30,000 / (20,000 x 10) = 15) ((. 0nt-ony1s Ba6ery sold (,000 mu++ins last mont- and -ad +ixed costs o+ "4,000. .+ production and sales are expected to increase by 10; next mont-, w-ic- o+ t-e +ollowing statements is true2 0! 5otal +ixed costs will decrease. B! Fixed cost per unit will decrease. C! 5otal +ixed costs will increase. D! Fixed cost per unit will increase. 4 (#. 0n auto executive is considering -ow to price a (01% -ybrid in order to maximiEe pro+its +or t-e company. 7anu+acturing eac- -ybrid involves "/,*00 o+ materials, "1(,*00 o+ labor, "#,&00 o+ s-ipping and "%,000 o+ ot-er supplies. 5-e +acility w-ere t-e car is manu+actured -as "1(.* million o+ +ixed costs. 5-e mar6eting department says t-at adding a Bose sound system would boost demand, but it would add an additional ")*0 per car. 5-e <uantity demanded at eac- unit price is as +ollows: Price Luantity Demanded No Bose! Luantity Demanded wit- Bose! "#1,000 &,/40 10,)*( "#(,000 ),14& &,40( "##,000 *,)#% 4,&&1 "#%,000 %,*&& *,*0* "#*,000 #,4)0 %,%0% "#4,000 (,/#4 #,*(# "#),000 (,#%/ (,&1/ "#&,000 1,&)/ (,(** "#/,000 1,*0# 1,&0% A-at pro+it maximiEing price s-ould t-e executive c-oose2 0! "#%,000 wit-out Bose sound system. B! "#/,000 wit- Bose sound system. C! "#4,000 wit-out Bose sound system. D! "#*,000 wit- Bose sound system Solution: ,o /o'# 0it1 /o'# Price Luantity Demanded No Bose! Luantity Demanded wit- Bose! 'ale value Hariable Cost Pro+it 'ale value Hariable Cost Pro+it "#1,000 &,/40 10,)*( "()),)40,000 "(4),00&,000 "10,)*(,000 "###,#1(,000 "#(&,%)#,400 "%,&#&,%00 "#(,000 ),14& &,40( "((/,#)4,000 "(1#,404,%00 "1*,)4/,400 "()*,(4%,000 "(4(,)/1,100 "1(,%)(,/00 "##,000 *,)#% 4,&&1 "1&/,(((,000 "1)0,&)#,(00 "1&,#%&,&00 "((),0)#,000 "(10,(1%,**0 "14,&*&,%*0 "#%,000 %,*&& *,*0* "1**,//(,000 "1#4,)((,%00 "1/,(4/,400 "1&),1)0,000 "14&,1)),)*0 "1&,//(,(*0 "#*,000 #,4)0 %,%0% "1(&,%*0,000 "10/,#44,000 "1/,0&%,000 "1*%,1%0,000 "1#%,*%(,(00 "1/,*/),&00 "#4,000 (,/#4 #,*(# "10*,4/4,000 "&),%/(,&00 "1&,(0#,(00 "1(4,&(&,000 "10),4(),4*0 "1/,(00,#*0 "#),000 (,#%/ (,&1/ "&4,/1#,000 ")0,000,(00 "14,/1(,&00 "10%,#0#,000 "&4,1(0,%*0 "1&,1&(,**0 "#&,000 1,&)/ (,(** ")1,%0(,000 "**,//%,(00 "1*,%0),&00 "&*,4/0,000 "4&,&/0,(*0 "14,)//,)*0 "#/,000 1,*0# 1,&0% "*&,41),000 "%%,)&/,%00 "1#,&(),400 ")0,#*4,000 "**,11(,(00 "1*,(%#,&00 ) (%. 5-e Bell+ont Company uses cost=plus pricing wit- *0; mar6=up. 5-e company is currently selling 100,000 units at "1( per unit. 9ac- unit -as a variable cost o+ "4. .n addition, t-e company incurs "(00,000 in +ixed costs annually. .+ demand +alls to "&0,000 and t-e company wants to earn a *0; return, w-at price s-ould t-e company c-arge2 0! "10./* B! "1(.)* C! "1#.*0 D! "1%.** Solution: $200,000 + (80,000 x 6) + ($80,000 x 50)) / 80,000 = 12.75 (*. Hisit +inance.ya-oo.com and determine w-ic- o+ t-e +ollowing statements is incorrect: 0! 5-e current mar6et cap o+ Ioogle is greater t-an t-e mar6et cap o+ 7icroso+t. B! 5-e current ratio +or t-e most recent <uarter +or 7icroso+t is greater t-an t-e current ratio +or Ioogle. C! 5-e current Price per s-are o+ Ioogle is more t-an ten times t-at o+ 7icroso+t. D! >eturn on e<uity +or t-e most recent <uarter +or 7icroso+t is -ig-er t-an return on e<uity +or Ioogle. &