Accounting Application

Anonymous
timer Asked: Mar 23rd, 2015

Question Description

Accounting Applications.docx 

Brief Exercises: BE5-1, BE5-2, BE5-4 BE5-1 Monthly production costs in Pesavento Company for two levels of production are as follows. Cost Indirect labor Supervisory salaries Maintenance 2,000 Units $10,000 5,000 4,000 4,000 Units $20,000 5,000 7,000 Indicate which costs are variable, fixed, and mixed, and give the reason for each answer. BE5-2 For Hunt Company, the relevant range of production is 40-80% 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. BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level. January February Miles Driven 8,000 7,500 Total Cost $14,150 13,500 March April Miles Driven 8,500 8,200 Total Cost $15,000 14,490 Compute the variable and fixed-cost elements using the high-low method. Exercises: E6-3, E6-5, E6-7 E6-3 Norton Company reports the following operating results for the month of August: sales $31,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management 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 $20,000. Instructions: Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? E6-5 Hall Company had sales in 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000 and fixed costs totaled $50,000. A new raw material is available that will decrease the variable costs per unit by 25% (or #3.00) however, to process the new raw material, fixed operating costs will increase by $150,000. Management feels that one-half of the declines in the variable costs per unit 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 number of units sold. Instructions: Prepare a projected CVP income statement for 2014 (a) assuming the changes have not been made, and (b) assuming that changes are made as described. E6-7 Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change-related services represent 70% of its sales and provide a contribution margin ration of 20%. Brake repair represents 30% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are $16,000,000 (that is, $80,000 per service outlet). 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 $60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?

This question has not been answered.

Create a free account to get help with this and any other question!

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors