AE18-8 Green with Envy provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $2,621 per month Advertising 327 per month Insurance 3,604 per month Weed and feed materials 12 per lawn Direct labor 10 per lawn Fuel 2 per lawn Green with Envy charges $80 per treatment for the average single-family lawn. Determine the company's break-even point in (a) number of lawns serviced per month and (b) dollars. Break-even point in number of lawns Break-even point in dollars $ AE18-10 In the month of March, New Day Spa services 610 clients at an average price of $100. During the month, fixed costs were $17,960 and variable costs were 60% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. Contribution margin in dollars $ Contribution margin per unit $ Contribution margin ratio % Using the contribution margin technique, compute the break-even point in dollars and in units. Break-even point in dollars $ Break-even point in units AE19-2 In the month of June, Angela's Beauty Salon gave 3,570 haircuts, shampoos, and permanents at an average price of $39. During the month, fixed costs were $16,670 and variable costs were 80% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. (Round answers to 0 decimals, e.g. 20,000, except round contribution margin per unit to 2 decimal places, e.g. 5.50.) Contribution margin in dollars $ Contribution margin per unit $ Contribution margin ratio % Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to 0 decimal places, e.g. 2,500.) Break-even point in dollars $ Break-even point in units Compute the margin of safety in dollars and as a ratio. (Round answers to 0 decimal places, e.g. 20,000.) Margin of safety in dollars $ Margin of safety ratio % AE19-3 Ger Company reports the following operating results for the month of August: Sales $310,000 (units 5,000); variable costs $214,200; and fixed costs $70,700. Management is considering three independent courses of action to increase net income. Compute the net income that would result from each of the independent actions below: (Round your answers to 0 decimal places, e.g. 52,500. When computing new selling price round your computation to 2 decimal places, e.g. 66.25 to arrive at the answer.) 1. Increase selling price by 10% with no change in total variable costs. $ 2. Reduce variable costs to 57% of sales. $ 3. Reduce fixed costs by $17,100. $ AE19-9 (a,b) Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data. Pairs of Shoes Pairs of Gloves Range Finder Unit sales price $105 $28 $244 Unit variable costs 59 12 204 Unit contribution margin $46 $16 $40 Sales mix 37% 44% 19% Fixed costs are $620,700. Compute the break-even point in units for the company. (Round computation for weighted-average contribution margin to 2 decimal places, e.g. 31.50 and final answer to 0 decimal places, e.g. 21,500.) Determine the number of units to be sold at the break-even point for each product line. (Round answers to 0 decimal places, e.g. 5,000.) Shoes Gloves Range finders ABE23-3 In Karnes Company it costs $35 per unit ($21 variable and $14 fixed) to make a product that normally sells for $41. A foreign wholesaler offers to buy 4,054 units at $28 each. Karnes will incur special shipping costs of $2 per unit. Assuming that Karnes has excess operating capacity, indicate the net income (loss) Karnes would realize by accepting the special order. (If a box should be blank enter a 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45). Enter all other amounts as positive amounts and subtract where necessary.) Reject Order Accept Order Net Income Increase(Decrease) Revenues $ $ $ Costs-Variable manufacturing Shipping Net Income $ $ $ The special order should be . ABE23-4 Bartley Manufacturing incurs unit costs of $7.97 ($4.95 variable and $3.02 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 14,400 of the assembly part at $5.79 per unit. If the offer is accepted, Bartley will save all variable costs but no fixed costs. Complete the analysis showing the total cost saving, if any, Bartley will realize by buying the part. (If a box should be blank enter a 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).) Make Buy Net Income Increase (Decrease) Variable manufacturing costs $ $ $ Fixed manufacturing costs Purchase price Total annual cost $ $ $ The decision should be to the part. ABE23-6 Felton Company has a factory machine with a book value of $80,443 and a remaining useful life of 5 years. A new machine is available at a cost of $203,040. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $612,240 to $406,900. Complete the analysis showing whether the old machine should be retained or replaced. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).) Retain Equipment Replace Equipment Net 4-Year Income Increase (Decrease) Variable manufacturing costs $ $ $ New machine cost Total $ $ $ The old factory machine should be . ABE23-7 Derby, Inc. manufactures golf clubs in three models. For the year, the Eagle line has a net loss of $3,450 from sales $200,650, variable expenses $174,100, and fixed expenses $30,000. If the Eagle line is eliminated, $15,560 of fixed costs will remain. Complete the analysis showing whether the Eagle line should be eliminated. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45). Enter all other amounts as positive amounts and subtract where necessary.) Continue Eliminate Net Income Increase (Decrease) Sales $ $ $ Variable expense Contribution margin Fixed expenses Net Income $ $ $ The Eagle product line should be . AE20-6 On January 1, 2011 the Batista Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2011. Sales units: First quarter 5,700; second quarter 7,000; third quarter 7,200 Ending raw materials inventory: 50% of the next quarter's production requirements Ending finished goods inventory: 30% of the next quarter's expected sales units Third-quarter production: 7,390 units The ending raw materials and finished goods inventories at December 31, 2010, follow the same percentage relationships to production and sales that occur in 2011. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $6 per pound. Complete the production budget by quarters for the 6-month period ended June 30, 2011. BATISTA COMPANY Production Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Add: Total required units Less: Required production units Complete the direct materials budget by quarters for the 6-month period ended June 30, 2011. BATISTA COMPANY Direct Materials Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Direct materials per unit Total pounds needed for production Add: Total materials required Less: Direct materials purchases $ $ Total cost of direct materials purchases $ $ $ AE20-12 Garza Company expects to have a cash balance of $48,024 on January 1, 2010. Relevant monthly budget data for the first 2 months of 2010 are as follows. Collections from customers: January $88,740, February $156,600. Payments for direct materials: January $52,200, February $73,080. Direct labor: January $31,320, February $46,980. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,924, February $26,100. These costs include depreciation of $1,044 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $15,660, February $20,880. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $10,440 in cash. Garza Company has a line of credit at a local bank that enables it to borrow up to $26,100. The company wants to maintain a minimum monthly cash balance of $20,880. Complete the cash budget for January and February. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 1 for January. If answer is zero, please enter 0, do not leave any fields blank.) GARZA COMPANY Cash Budget For the Months Ending February 28, 2010 January February Beginning cash balance $ $ Add: Receipts Total receipts Total available cash Less: Disbursements Total disbursements Excess (deficiency) of available cash over cash disbursements Financing Ending cash balance $ $ AE20-14 NIU Company's budgeted sales and direct materials purchases are as follows. Budgeted Sales Budgeted D.M. Purchases January $279,400 $41,910 February 307,340 48,895 March 377,190 57,277 NIU's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. NIU's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase. (Round all calculations and answers to 0 decimal places, e.g. 2,510.) Complete the schedule of expected collections from customers for March. NIU COMPANY Expected Collections from Customers March March cash sales $ Collection of March credit sales Collection of February credit sales Collection of January credit sales Total collections $ Complete the schedule of expected payments for direct materials for March. NIU COMPANY Expected Payments for Direct Materials March March cash purchases $ Payment of March credit purchases Payment of February credit purchases Total payments $