3) MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $25 per hour and that there were no beginning inventories. The following information was available for 2016, based on an expected production level of 371,429 units for the year:

Activity Cost Driver	Budgeted Costs for 2016			Cost Driver Used as Allocation Base	Cost Allocation Rate
Materials handling	$	3,200,000		Number of parts used	$	4.25	per part
Milling and grinding		9,000,000		Number of machine hours		12.50	per hour
Assembly and inspection		5,200,000		Direct labor hours worked		5.50	per hour
Testing		1,300,000		Number of units tested		3.50	per unit

The following production, costs, and activities occurred during the month of August:

Units Produced/Tested	Direct Materials Costs	Number of Parts Used	Machine Hours	Direct Labor Hours
54,000	$3,700,000	270,000	97,000	150,000

Required:

a. Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc. (Round "Cost per unit" to 2 decimal places.)

b. Which of the following are the advantages of the ABC approach relative to using a single predetermined overhead application rate based on direct labor hours. (Note: You do not have to calculate the overhead that would be applied for the month of August using this alternative method.) (Select all that apply.)

ABC does not help in decision-making.

ABC systems produce more accurate financial information.

ABC approach is likely to provide better information to manufacturing managers.

ABC helps in decision-making.

ABC systems produce more accurate product costing information.

4)

Muscle Beach, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here:

	MegaMuscle			PowerGym			ProForce
Selling price per unit	$	143		$	191		$	290
Contribution margin per unit		39			76			60
Monthly sales volumeunits		2,930			1,950			1,090
Fixed expenses per month			Total of $326,100

a. Calculate the contribution margin ratio of each product. (Round your answers to 1 decimal place.)

b. Calculate the firm's overall contribution margin ratio. (Round your answer to 1 decimal place.)

c. Calculate the firm's monthly break-even point in sales dollars. (Round your intermediate calculations to 1 decimal place.)

e-2. Would you recommend the elimination of the ProForce model

	Yes
	No

f1. Assume the same facts as in requirement e-1. Assume also that the sales volume for the PowerGym model will increase by 500 units per month if the ProForce model is eliminated. What would be the effect on operating income.

f-2. Would you recommend eliminating the ProForce model?

	Yes
	No

5)

Presented here is the income statement for Big Shot, Inc., for the month of May:

Sales	$	61,500
Cost of goods sold		52,700
Gross profit	$	8,800
Operating expenses		14,300
Operating loss	$	(5,500	)

Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 20%.

Required:

a. Rearrange the preceding income statement to the contribution margin format.

b. If sales increase by 15%, what will be the firm's operating income (or loss)? (Do not round intermediate calculations.)

c. Calculate the amount of revenue required for Big Shot, Inc., to break-even.

6 a) Monterey Co. makes and sells a single product. The current selling price is $15 per unit. Variable expenses are $9 per unit, and fixed expenses total $34,300 per month. (Unless otherwise stated, consider each requirement separately.)

Required:

a. Calculate the break-even point expressed in terms of total sales dollars and sales volume. (Do not round intermediate calculations.)

Break-even sales
Break-even volume		units

6b. Calculate the margin of safety and the margin of safety ratio. Assume current sales are $100,750. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

Margin of safety
Margin of safety of ratio		%

c. Calculate the monthly operating income (or loss) at a sales volume of 5,050 units per month. (Do not round intermediate calculations.

d. Calculate monthly operating income (or loss) if a $2 per unit reduction in selling price results in a volume increase to 8,000 units per month. (Do not round intermediate calculations.

e. What questions would have to be answered about the cost-volume-profit analysis simplifying assumptions before adopting the price cut strategy of part d? (Select all that apply.) Does the increase in volume move fixed expenses into a new relevant range? Does the increase in volume move variable expenses into a new relevant range? Are variable expenses really linear? Are fixed expenses really linear? f. Calculate the monthly operating income (or loss) that would result from a $1 per unit price increase and a $6,000 per month increase in advertising expenses, both relative to the original data. Assume a sales volume of 5,050 units per month. (Do not round intermediate calculations.) 7) Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. g-1. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.85 per unit, assuming a sales volume of 5,050 units per month. (Do not round intermediate calculations.)

g-2. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.85 per unit, assuming a sales volume of 6,450 units per month. (Do not round intermediate calculations. Losses should be indicated by a minus sign.)

h-1. Assuming that the sales volume of 6,450 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss? (Do not round intermediate calculations. Losses should be indicated by a minus sign.

h-2. Which strategy would you recommend

	Plan to change the sales force compensation.
	Plan to increase advertising expenses