a)The president of the Cohen Company is reviewing the firm's most recent financial results and is alarmed by the disappointing profit performance. Based on the budget, the company planned to sell 50,000 units at a price of $10 with variable costs of $6 per unit. The actual accounting records show that 52,000 units were sold at a price of $9 with variable costs of $7 per unit. The president had been watching sales units and was pleased that they were above the budgeted amount. He does not understand why profit was not up accordingly. Identify the following variances for the president: contribution margin, sales volume, selling price, and variable cost.

b)The president of Knapp Company, has been concerned about the declining profitability of the business. Recently, he received a report showing the actual contribution margin earned in 2016 compared with the amount planned and is troubled with the results. The report is summarized below.

Budgeted

New Cars

Used Cars

Total

Sales - number of cars

200

300

500

Sales - dollars

$3,000,000

$3,600,000

$6,600,000

Cost of goods sold

2,400,000

3,000,000

5,400,000

Contribution margin

$600,000

$600,000

$1,200,000

Actual

New Cars

Used Cars

Total

Sales - number of cars

190

320

510

Sales - dollars

$2,812,000

$3,808,000

$6,620,000

Cost of goods sold

2,337,000

3,200,000

5,537,000

Contribution margin

$475,000

$608,000

$1,083,000

The CGS consists of variable costs only since this is retail business. knapp's initial reaction to the contribution margin report was "Something has to be wrong because I have been following sales closely and I knew we were selling more cars than expected when the budget was prepared. How can our contribution margin possibly be off $117,000 from the amount budgeted?

Compute the following variances for the firm's 2016 financial performance:

1. Selling price variance for new cars, used cars, and total cars.
2. Selling volume variance for new cars, used cars, and total cars.
3. Selling mix variance for new cars, used cars, and total cars.
4. CGS variance (Variable cost variances) for new cars, used cars, and total cars.

(Budgeting)

1. How is a budget used for (a) Planning and (b) Control?
2. Why is it important to distinguish between fixed and variable costs in preparing a manufacturing overhead budget.
3. Horizons Electronics, Inc manufactures two different types of coils used in electric motors. In the fall off the current year, Erica Becker, the controller, compiled the following data.

Sales forecast for 20x0:

Product

Unit

Price

Light Coil

60,000

$65

Heavy Coil

40,000

$95

Raw material prices and inventory levels:

Raw Material

Expected Inventory Jan1,20x0

Desired inventory Dec 31,20x0

Purchase Price

Sheet metal

32,000 lbs

36,000 lbs

$8.00

Copper wire

29,000 lbs

32,000 lbs

$5.00

Platform

6,000 units

7,000 units

$3.00

Use of raw materials

Raw Material

Light Coil

Heavy Coil

Sheet metal

4 lbs per unit

5 lbs per unit

Copper wire

2 lbs per unit

3 lbs per unit

Platform

0

1 Unit

Direct-labor requirements and rates

Product

Hours per unit

Rate per unit

Light Coil

2

$15

Heavy Coil

3

$20

Overhead is applied at the rate of $2 per direct labor hour

Finished-goods inventories (in units)

Product

Desired Dec 31,20x0

Expected Jan 1, 20x0

Light Coil

20,000

25,000

Heavy Coil

8,000

9,000

Required:

Prepare the following budgets for 20x0.

1.Sales budget ( in dollars)

2.Production budget (in units)

3.Raw materials purchases budget ( in quantities)

4.Raw materials purchases budget ( in dollars)

5.Direct labor budget ( in dollars)

6.Budgeted finished goods inventory on Dec 31,20x0 ( in dollars)

(CVP) -

1. Barbara's Towel sells tree items: bath towels, hand towels, and wash cloths in a 3:2:1 mix. Each bath towel sells for $4.00 and costs $1.60; each hand towel sells for $2.80 and costs $0.70; and each wash towel sells for $1.40 and costs $0.45. The shop's annual fixed expenses are $48,165, and tax rate is 30%. How many bath towels will be soldfor the shop to make $35,000 in after tax rate profits?

(Round 'basket" ANS to nearest unit)

1. Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows.

Selling price

$ 40 per unit

Variable manufacturing costs

$20 per unit

Variable selling and administrative expenses

$6 per unit

Fixed manufacturing overhead

$208,000 per year

Fixed selling and administrative expenses

$324,000 per year

How many units need to be sold to earn an annual operating income equal to 10% of sales?

1. The Zee Company has three product lines of belts: X, Y and Z with contribution margin margins of $15, $10 and $5 respectively. The president foresees sales of 100,000 units in the coming period, consisting of 10,000 units of X, 50,000 units of Y and 40,000 units of Z. The company's fixed costs for the period are S 510,000.

Required

a)What is the company's BEP in units, assuming that the given sales mix is maintained.

b)If the sales mix is maintained, what is the total contribution when 100,000 units are sold? What is the operating income?

c)What would operating income be if 10,000 units of X, 40,000 units of Y and 50,000 units of Z were sold? What is the new breakeven point units if these relationship persist in the next period?

1. 'Gross margin is less useful concept than contribution margin in CVP analysis.' Do you agree? Explain.

(Standard Costing)

Part of your Company's accounting data base was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Hint: It is helpful to solve for the unknowns in the order indicated by the letters in the following table)

Direct Labor

Direct Material

Standard Price or rate per unit of input

E

$8 per pound

Standard Quantity per unit of input

F

C

Actual quantity used per unit of output

3.5 Hours

A

Actual price or rate per unit of input

$21 per Hour

$7 per pound

Actual output

10,000 units

10,000 units

Direct material price variance

-------

$30,000 F

Direct material quantity variance

-------

B

Total of Direct material variances

--------

$10,000 F

Direct labor rate variance

D

---------

Direct labor efficiency variance

$100,000 F

---------

Total of Direct labor variances

$65,000 F

--------

(Decision Making)

1. The ABC Company manufactures slippers and sells them at $10 a pair. Variable

manufacturing costs are $4.50 a pair, and allocated fixed manufacturing costs are

$1.50 a pair. The company has enough idle capacity available to accept a one-time-

only special order of 20,000 pairs of slippers at $6 a pair. Woody will not incur any

marketing cost as a result of the special order. What would the effect on operating

income be if the special order could be accepted without affecting normal sales.

1. The Johnson Company has some obsolete Inventory that cost $60,000 and can be

sold today for $20,000. If it is processed further, the inventory can be sold for

$70,000, but additional costs of $46,000 are required for the work. What is the

incremental effect of further processing for Johnson?

1. You recently heard a business manager make the following comment 'quantitative analysis may be alright for some businesses, but I rather make decisions based on intuition and years of experience'. Do you agree? Explain.

1. Define Joint products, Joint product costs, and split off points for joint products

1. Kawa Company manufactures motorcycles and purchases a major component from another firm. The Company has a significant amount of idle capacity. kawa has been purchasing the component for $270. The controller has said that the component could be produced internally at the following costs:

Direct Materials$150

Direct Labor75

V.MOH25

F.MOH50

Total$300

Required:

a)Identify the following for the company

i.Unavoidable costs

ii.Relevant and differential costs

b)Based on your analysis, should Kawa continue to purchase the equipment?

(Variable Costing)

A.How can variable costing net income and absorption costing be reconciled for a given accounting period absorption costing?

B.Fredrick manufacturing company provides the following information concerning its 2016 operations.

Number of units produced

45,000

Budgeted production units

45,000

Selling price per unit

$30

Variable Costs:

Direct labor

$6

Direct Material

$7

MOH

$3

Selling and Admin

$2

Fixed Costs:

MOH

$180,000

Selling & admin

$116,000

Units sold

33,000

There was no beginning inventory for the firm

1. an absorption costing income statement for the Fredrick manufacturing company.

1. variable costing income statement for the Fredrick manufacturing company