Due Saturday, July 24th .

Question #1

Bob Newhart operates a bed and breakfast hotel in Vermont. Depreciation on the hotel is $60,000 per year. Bob employs a maintenance person, George Utley, at an annual salary of $41,000 and a cleaning person, Stephanie Vanderkellen, at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.Required:

(a) Determine the number of rentals and the sales revenue Bob needs to break even using the contribution margin technique.

(b) If the current level of rentals is 4,000, by what percentage can rentals decrease before Bob has to worry about having a net loss?

(c) Bob is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Bobs wife Joanna feels she can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Bob needs to break even if the changes are made.

Question #2 Game World, Inc. has the following information available for October 2020.Unit selling price of video game consoles$ 400Unit variable costs$ 280Total fixed costs$48,000 Units sold 500 Required:

(a) Prepare a CVP income statement that shows both total and per unit amounts.

(b) Compute Game World's breakeven in units.

Question #3 Galaxy Electronics, Inc. sells computers and video game systems. The business is divided into two divisions along product lines. Variable costing income statements for the current 2020 year are presented below:

Computers VG Systems Total Sales $700,000 $300,000 $1,000,000 Variable costs 420,000 210,000 630,000 Contribution margin $280,000 $90,000 370,000 Fixed costs 296,000 Net income $74,000 Required:

(a) Determine the sales mix and contribution margin ratio for each division.

(b) Calculate the companys weighted-average contribution margin ratio.

(c) Calculate the companys break-even point in dollars.

(d) Determine the sales level, in dollars, for each division at the break-even point.

Question #4 Torque Master Tools produced and sold 50,000 Nematic Socket Torque Wrenches and is operating at 70% of plant capacity. Unit information about its product is as follows: Sales price $70 Variable manufacturing cost $45 Fixed manufacturing cost ($500,000 50,000) 10 55 Profit per unit $15 The company received a proposal from a foreign company to buy 10,000 Nematic Socket Torque Wrenches for $50 each. This is a one-time only order and acceptance of this proposal will not affect the companys regular sales. The president of Torque Master Tools, Inc. Andy Granatelli, is reluctant to accept the proposal because he is concerned that the company will lose money on the special order. Required:

Prepare a schedule reflecting an incremental analysis of this proposal and indicate the effect the acceptance of this order might have on the companys income.

Question #5 Larry Emperys Diesel Service, Inc. repairs commercial diesel generators used to power heavy equipment and locomotive motors for the BNSF Railway. The following budgeted cost data is available for 2020: Time Material Charges Charges Technicians wages and benefits $500,000 Parts managers salary and benefits $72,000 Office managers salary and benefits 112,000 18,000 Other overhead 48,000 135,000 Total budgeted costs $660,000 $225,000The company has budgeted for 10,000 hours of technician time during the coming year. It desires a $54 profit margin per hour of labor and a 40% profit margin on parts. It is estimated the total invoice cost of parts and materials in 2020 will be $500,000.

Required:

1.Compute the rate charged per hour of labor.

2. Compute the material loading charge.

3. Larry has received a request from BNSF Railway for an estimate to repair a diesel generator for their Roseville Locomotive #459. Larry estimates that it would take 20 hours of labor and $8,000 of parts. Compute the total estimated bill.