Case 1: Voltar Company manufactures and sells a specialized cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for the most recent year is given below: Total Per Unit Percent of Sales Sales (21.000 units) $1.260.000 $60 100% Variable expenses 945.000 45 ? % Contribution margin 315.000 $15 ? % Fixed expenses. 240,000 Net operating income 75.000 Management is anxious to increase the company's profit and has asked for an analysis of a number of items. Required: 1. Compute the company's CM ratio and variable expense ratio. 2. Compute the company's break-even point in both unit sales and dollar sales. Use the equation method. 3. Assume that sales increase by S400,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income increase? Use the CM ratio to compute your answer. 4. Refer to the original data. Assume that next year management wants the company to earn a profit of at least $90,000. How many units will have to be sold to meet this target profit? 5. Refer to the original data. Compute the company's margin of safety in both dollar and percentage form. 6. 1. Compute the company's degree of operating leverage at the present level of sales. b. Assume that through a more intense effort by the sales staff, the company's sales increase by 8% next year. By what percentage would you expect net operating income to increase? Use the degree of operating leverage to obtain your answer. c. Verify your answer to (b) by preparing a new contribution format income statement showing an 8% increase in sales. 7. In an effort to increase sales and profits, management is considering the use of a higher-quality speaker. The higher-quality speaker would increase variable costs by S3 per unit, but management could eliminate one quality inspector who is paid a salary of $30,000 per year. The sales manager estimates that the higher-quality speaker would increase annual sales by at least 20%. a. Assuming that changes are made as described above, prepare a projected contribution format income statement for next year. Show data on a total. per unit, and percentage basis. b. Compute the company's new break-even point in both unit sales and dollar sales. Use the formula method. c. Would you recommend that the changes be made? Case 2: Mynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. The fol- lowing information concems operations for Year 2-the coming year and for the first two quarters of Year 3: . The company's single product sells for S8 per unit. Budgeted unit sales for the next six quarters are as follows (all sales are on credit): Year 2 Quarter 2 B0,000 140,000 Year 3 Quarter 2 70,000 80,000 Budgeted unit sales ...... 60,000 50,000 bi Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company's balance sheet showed $65.000 in accounts receivable, all of which will be collected in the first quarter of the year. Bad debts are negligible and can be ignored. The company desires an ending finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 12.000 units on hand. d. Five pounds of raw materials are required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarters production needs. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand The raw material costs $0.80 per pound. Raw material purchases are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2the company's balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year. Required: Prepare the following budgets and schedules for the year, showing both quarterly and total figures 1. A sales budget and a schedule of expected cash collections 2. A production budget 3. A direct materials budget and a schedule of expected cash payments for purchases of materials. Case 3: Harrald's Fish House is a family-owned restaurant that specializes in Scandinavian-style seafood. Data concerning the restaurant's monthly revenues and costs appear below (q refers to the number of meals served): Revenue Cost of ingredients Wages and salaries Utilities. Rent Miscellaneous Formula $16.500 $6.259 $10,400 $800 + $0.209 $2,200 $600 + $0.800 Required: 1. Prepare the restaurant's planning budget for April assuming that 1.900 meals are served. 2. Assume that 1,800 meals were actually served in April. Prepare a flexible budget for this level of activity. 3. The actual results for April appear below. Compute the revenue and spending variances for the restaurant for April Revenue Cost of ingredients Wages and salaries Utilities... Rent... Miscellaneous $27,920 $11,110 $10,130 $1,080 $2,200 $2,240