1. Fuego Ltd. has provided the following contribution format income statement. All questions concern situations that are within the relevant range.

Sales (3,000 units) $150,000

Variable Expenses 90,000

Contribution Margin 60,000

Fixed Expenses 48,000

Net Operating Income $12,000

a. What is the contribution margin per unit? b. What is the contribution margin ratio? c. If sales increase to 3,050 units, what would be the amount of increase in net operating income? d. If the variable cost per unit increases by $5, spending on advertising increases by $3,000, and unit sales increase by 450 units, what would be the estimated net operating income? e. What is the break-even point in unit sales? f. What is the break-even point in dollar sales?

7. Estimate how many units must be sold to achieve a target profit of $54,000.
8. What is the margin of safety in dollars?
1. What is the margin of safety percentage?
10. What is the degree of operating leverage?
11. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 15% increase in sales?

2. Duber Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $ 120

Units in beginning inventory 0

Units produced 8,900

Units sold 8,400

Units in ending inventory 500

Variable costs per unit:

Direct materials $ 38

Direct labor $ 36

Variable manufacturing overhead $ 6

Variable selling and administrative expense $ 9

Fixed costs: Fixed manufacturing overhead $ 151,300

Fixed selling and administrative expense $ 109,200

1. Calculate the unit product cost under variable costing.
2. Prepare a contribution format income statement for the month using variable costing.
3. Calculate the unit product cost under absorption costing.
4. Prepare an income statement for the month using absorption costing.

3. Leau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs and activity-based costing system appear below:

Factory utilities (total) $ 24,000

Indirect labor (total) $ 3,000

Distribution of Resource Consumption Across Activity Cost Pools:

Processing Setting Up Other

Factory Utilities 30% 40% 30%

Indirect Labor 10% 40% 50%

MHs. Batches

Product S8 2,200 700

Product F1 7,800 300

Total 10,000 1,000

Product S8 Product F1

Sales (Total) $64,000. $68,700

Direct Materials (total) 28,000 19,800

Direct Labor (total) 25,300 36,700

Required:

a. Assign overhead costs to activity cost pools using activity-based costing. b. Calculate activity rates for each activity cost pool using activity-based costing.

c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. d. Calculate the product margins for each product using activity-based costing.

4. Bloom Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:

• The budgeted selling price per unit is $87.
• Budgeted unit sales for January, February, March, and April are 7,100, 8,300, 13,700, and 13,600 units, respectively.
• All sales are on credit.
• The credit sales are collected as follows: 20% in the month of the sale and 80% in the following month.
• Craney wants the ending finished goods inventory to equal 40% of the following month's unit sales.
• Craney wants the ending direct materials inventory to equal 40% of the following month's direct materials production needs.
• Each unit of finished goods requires 5 pounds of material.
• The raw materials cost $1.00 per pound.
• Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month.
• Each unit of finished goods requires 2.7 direct labor-hours.
• The direct labor wage rate is $19.00 per hour.

a. What are the budgeted sales for February? b. What are the expected cash collections for February? c. According to the production budget, how many units should be produced in February? d. If 68,300 pounds of direct materials are needed for production in March, how many pounds of direct materials should be purchased in February? e. What is the estimated cost of direct materials purchases for February? f. If the cost of direct material purchases in January is $43,660, then in February what are the estimated cash disbursements for direct materials purchases?

g. What is the total estimated direct labor cost for February?