1. The company Beta Corp. has the following profit & loss account.

Sales 21.500

Direct materials 10.000

Labor 3.600

Depreciation 1.000

Utilities 751

Rental cost 951

Commisions 430

Transportation cost 430

EBIT 4.338

The CEO of the company has hired you as consultant to support him in his management decisions regarding prices and volumes. As you want to make a proper analysis so decide to make a revised income statement that employs a contribution margin format that will be useful in CVP analysis. For this purpose, you ask for additional information which is the split of the accounts:

Labor 3.600

Direct 2700

Plant manager 100

Sales & Admin 800

Control 0 Depreciation 1000

Direct machinery 700

Indirect installations 200

Office furniture 100

control 0

Utilities 751

Plant 601

Offices 150

Control 0

Rental cost 951

Office 451

Plant 500

Control 0

Additional information regarding sales is that the average price per unit for las year was 1. a) Prepare the revised income statement and explain which of the cost lines is direct or indirect costs and why. (25 points) b) Which is the contribution margin of the company? (5 points) c) What number of units must the company sell for break-even (5 points) d) What is the sales figure that the company need to achieve if the want to have an EBIT of 5000? (5 points) e) What would be the EBIT if the company reduces salaries in 12% and increases sales in 10%? (5 points) f) The company receives a proposal of a customer that wants to buy 4000 units at a price discount of 25%. In this case this sale would not affect our traditional customers, they would not notice. Should we accept the order if we do not have capacity constrains? (5 points) g) What are the dangers of using CVP analysis? (5 points) 2.-Would a company producing TV use Job Costing or process Costing? Explain both types of costing. (10 points) 3.- Find below an income statement of company Manufacturing Beta Corp. The data that is shows is related to the month 1. We are about to start the second month, but there is a transportation strike blocking the transportation. We do have enough raw materials to produce during this month, and as the workers live nearby, they can also access the production plant. Our CEO has decided to continue with production, even though we will not be able to sell and deliver until month 3. Please explain in detail which of the cost lines are product cost and which are period cost. Show a forecast of the Income statement for month 2. (35 points)

Month 1 Sales

7.589

Direct materials 2.569

Direct Labor 1.489

Manufacturing Overhead 731

Depreciation 125

Utilities 356

Maintenance 250

'Contribution margin 2.800

% CM 37%

G&A 250

EBIT 2.550