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Application Problems Week 4

  • Page 209: Brief Exercises 5-1, 5-2, 5-4
  • Pages 260-261: Exercises 6-2, 6-5, 6-7

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х X _ Managerial Accounting х e х Bb Week 4 "Cost Volume Pr S SOLUTION: Complete En My Library Eagle Educatic X c Secure https://platform.virdocs.com/app/v5/doc/200781/pg/227 O = a 101 < 209 > is plotted, and (b) how the level of activity and dollar sales at the break-even point are determined. margin. BRIEF EXERCISES Classify costs as variable, fixed, or mixed (LO 1), BE5-1 Monthly production costs in Dilts Company for two levels of production are as follows. Cost 2,000 Units 4,000 Units Indirect labor $10,000 $20,000 Supervisory salaries 5,000 5,000 Maintenance 4,000 6,000 Indicate which costs are variable, fixed, and mixed, and give the reason for each answer. BE5-2 For Lodes Company, the relevant range of production is 40ā€“80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear. Diagram the behavior of costs within the relevant range. (LO 1), AN BE5-3 For Wesland Company, a mixed cost is $15,000 plus $18 per direct labor hour. Dia- gram the behavior of the cost using increments of 500 hours up to 2,500 hours on the horizontal axis and increments of $15,000 up to $60,000 on the vertical axis. Diagram the behavior of a mixed cost. (LO 1), AN paymentHistory-2.pdf A paymentHistory-2...pdf paymentHistory-2...pdf Show all х O Type here to search E a Š° w w] ? AD ) 2:07 PM 9/3/2018 х X _ Managerial Accounting х e х Bb Week 4 "Cost Volume Pr S SOLUTION: Complete En My Library Eagle Educatic X c Secure https://platform.virdocs.com/app/v5/doc/200781/pg/227 * G O = a < 209 TU IU UL Capacity, a van AVI WUSL 13 PT, VUV anu a macu WUSL 19 PU, vvv. Viagram UI ULLA VIVI of each cost within the relevant range assuming the behavior is linear. (LO 1), AN BE5-3 For Wesland Company, a mixed cost is $15,000 plus $18 per direct labor hour. Dia- gram the behavior of the cost using increments of 500 hours up to 2,500 hours on the horizontal axis and increments of $15,000 up to $60,000 on the vertical axis. Diagram the behavior of a mixed cost. (LO 1), AN BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using Determine variable- and miles as the activity level. fixed-cost elements using the high-low method. Miles Total Miles Total Driven Cost Driven Cost (LO 2), AP January 8,000 $14,150 March 8,500 $15,000 February 7,500 13,500 April 8,200 14,490 Compute the variable- and fixed-cost elements using the high-low method. BE5-5 Markowis Corp. has collected the following data concerning its maintenance costs for the past 6 months. Determine variable- and fixed-cost elements using the high-low method. (LO 2), AP July August September October November December Units Produced 18,000 32,000 36,000 22,000 40,000 38,000 Total Cost $36,000 48,000 55,000 38,000 74,500 62,000 paymentHistory-2.pdf A paymentHistory-2...pdf e paymentHistory-2....pdf Show all х O Type here to search Q a Š° w E w R AD 4) 2:07 PM 9/3/2018 х X _ Managerial Accounting х e х Bb Week 4 "Cost Volume Pr S Dashboard My Library Eagle Educatic X c Secure https://platform.virdocs.com/app/v5/doc/200781/pg/278 O = < 262 > . Instructions (a) Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. (b) If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? Compute contribution margin, break-even point, and margin of safety. (LO 1), AP E6-2 In the month of June, Jose Hebert's Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales. Instructions (a) Determine the contribution margin in dollars, per unit and as a ratio. (b) Using the contribution margin technique, compute the break-even point in dollars and in units. (c) Compute the margin of safety in dollars and as a ratio. Compute net income under different alternatives. (LO 1), AP E6-3 Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Manage- ment is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs or sales volume. 2. Reduce variable costs to 58% of sales. 3. Reduce fixed costs by $15,000. Instructions the net income to be earned under each alternative. Which course of action will XLS paymentHistory-2.pdf A of paymentHistory-2..pdf paymentHistory-2....pdf Show all х O Type here to search - a Š° W w] AD 4) 2:07 PM 9/3/2018 х X _ Managerial Accounting х e х Bb Week 4 "Cost Volume Pr S Dashboard My Library Eagle Educati X c Secure https://platform.virdocs.com/app/v5/doc/200781/pg/279 D = a < 261 > + . T Exercises 261 Instructions (a) Calculate the break-even point in (1) dollars and (2) number of passenger flights. (b) Without calculations, determine the contribution margin at the break-even point. (c) If ticket prices were decreased by 10%, passenger flights would increase by 25%. How- ever, total variable costs would increase by the same percentage as passenger flights. Should the ticket price decrease be adopted? E6-5 Carey Company had sales in 2016 of $1,560,000 on 60,000 units. Variable costs Prepare a CVP income totaled $900,000, and fixed costs totaled $500,000. statement before and A new raw material is available that will decrease the variable costs per unit by 20% after changes in business (or $3). However, to process the new raw material, fixed operating costs will increase by environment. $100,000. Management feels that one-half of the decline in the variable costs per unit (LO 1), AP should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the num- ber of units sold. Instructions Prepare a projected CVP income statement for 2017 (a) assuming the changes have not been made, and (b) assuming that changes are made as described. E6-6 Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix Compute break-even point and unit contribution margin are as follows. in units for a company with more than one product. Unit Contribution (LO 2), AP Sales Mix Margin paymentHistory-2.pdf A of paymentHistory-2.pdf paymentHistory-2...pdf Show all х O Type here to search E a Š° W w] ? AO I Ā») 2:08 PM 9/3/2018 х X _ Managerial Accounting х e х Bb Week 4 "Cost Volume Pr S Dashboard My Library Eagle Educati X c Secure https://platform.virdocs.com/app/v5/doc/200781/pg/279 * G O = a < 261 0 Yard Tools has fixed costs of $4,200,000. Instructions Compute the number of units of each product that Yard Tools must sell in order to break even under this product mix. E6-7 PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs Compute service line break- primarily two lines of service: oil changes and brake repair. Oil change-related services even point and target net represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair income in dollars for a represents 30% of its sales and provides a 40% contribution margin ratio. The company's company with more than fixed costs are $15,600,000 (that is, $78,000 per service outlet). one service. (LO 2), AN Instructions (a) Calculate the dollar amount of each type of service that the company must provide in order to break even. (b) The company has a desired net income of $52,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet? E6-8 Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue Compute break-even point in came from the delivery of mailing ā€œpouches" and small, standardized delivery boxes (which dollars for a company with provides a 20% contribution margin). The other 20% of its revenue came from delivering more than one service. non-standardized boxes (which provides a 70% contribution margin). With the rapid growth (LO 2), AN of Internet retail sales, Express believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $12,000,000. Instructions paymentHistory-2.pdf - paymentHistory-2...pdf paymentHistory-2....pdf Show all х O Type here to search E a Š° w g AD 4) 2:08 PM 9/3/2018
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