Hello. I need an advanced accounting major to review my homework, fix mistakes with explanation (necessary formulas) so I understand the edits. The two homework documents are attached. My answers are in blue. Thank you.

Acct 203DL Assignment 4 - Management Accounting, Cost Behavior, & CVP Questions From chapter 14 1. Briefly describe variable, fixed, and mixed costs. Explain how each change in total as production activity increases. Variable costs are identical for every single unit of activity. Total variable costs chance in direct proportion to chances in activity, equivalent to zero dollars then activity is zero and increasing at a constant amount per unit of activity. Fixed costs are unvarying amount per period of time. The mixed cost curve is flat with a slope of zero. Mixed costs contain a mixed and a variable cost element. They are positive when activity is zero & increase linearly as activity increases. 2. Explain the term \"relevant range\" of production activity. Why is the relevant range an important consideration when estimating total costs? Range of business activity, often related to producing units or servicing customers, over which cost behavior assumptions are valid, i.e. fixed costs and variable costs meet their definitions. It's an important consideration when estimating total costs because it accounts for costs estimates to be incurred beyond normal relevant range (i.e. a time of year when fixed costs increase significantly to accommodate increase in production, sales, etc.) 3. Distinguish between cost estimation and cost prediction. Cost estimation concerns the calculation of previous or current relationships between activity and cost, while cost prediction is the best guess of future costs. Cost estimating equations, developed using past information, are regularly used for predicting future costs 4. Why is a scatter diagram helpful when used in conjunction with other methods of cost estimation? A scatter plot helps select high & low activity levels representative of normal operating conditions 5. Identify two advantages of least-squares regression analysis as a cost estimation technique. Least squares regression analysis uses all available information, rather than just two observations. It can supply us with consistent data on how well the cost estimating equation fits the past time period's cost data. From chapter 15 6. Identify the important assumptions that underlie cost-volume-profit analysis Cost-volume-profit analysis is a technique used to study the associations among the total volume of some independent variables, total costs, total revenues, & profits for the duration of a given time. It is especially helpful in the infant stages of preparing and planning when it gives us a framework for examining planning issues. The important assumptions that underlie cost-volume-profit analysis are: All costs are classified as fixed or variable with unit-level activity cost drivers. The total cost function is linear within the relevant range. The total revenue function is linear within the relevant range. The analysis is for a single products or the sales mix of multiple products is constant. There is only one activity cost driver/ unit or dollar sales volume: 7. Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix. Basic cost-volume-profit is a technique to examine the relationships among total volume of an independent variable, total costs, total revenues, and profits for a time period. There are several limitations with CVA because the calculations assume: 1. All costs are classified as fixed or variable. 2. The total cost function is linear within the relevant range. 3. The total revenue function is linear within the relevant range. 4. The analysis is for a single product, or the sales mix of multiple products is constant. 5. There is only one activity cost driver: unit or dollar sales volume 8. Distinguish between a contribution income statement and a functional income statement. In a contribution income statement, costs are organized by how they behave as variable or fixed, and the contribution margin that covers fixed costs and providing a profit is emphasized. In a functional income statement, costs are organized according to their function, such as manufacturing & selling, as well as administrative. This is the type of income statement most frequently included in corporate annual reports. 9. Explain the term \"contribution margin.\" How is it used in computing the unit break-even point? The unit contribution margin is equal to the difference between the unit selling price and the unit variable costs. To calculate the unit break-even points, the fixed costs are divided by the unit contribution margin. 10. How is the break-even equation modified to take into consideration the sales required to earn a desired profit? It's modified to include Target Profit in the calculation/formula. For example: Fixed Costs + Target Profit (profit amount desired)/ Selling Price Per Unit - Variable Cost Per Unit 11. What is \"operating leverage\"? How are profit opportunities and the risk of losses affected by operating leverage? Operating leverage is a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs. A business that makes sales providing a very high gross margin and fewer fixed costs and variable costs has much leverage. The higher the degree of operating of leverage, the greater the potential danger from forecasting risk, where a relatively small error in forecasting sales can be magnified into large errors in cash flow projections Problems Problem 1 The J. Page Furniture Company has the following information available regarding costs at various levels of monthly production: Production volume (units) Direct materials Direct labor Indirect materials Supervisors' salaries Depreciation on plant and equipment Maintenance Utilities Insurance on plant and equipment Property taxes on plant and equipment Total 16,000 Units $ 70,000 66,000 21,000 12,000 10,000 32,000 15,000 1,600 2,000 $229,600 Required a. Identify each of the costs above as being variable, fixed, or mixed. a. Direct Materials - FIXED b. Direct Labor - VARIABLE c. Indirect Materials - FIXED d. Supervisor's Salaries - FIXED 22,000 Units $100,000 90,000 30,000 12,000 10,000 44,000 21,000 1,600 2,000 $310,600 e. f. g. h. i. Depreciation on plant and equipment - FIXED Maintenance - MIXED Utilities - MIXED Insurance on plant and equipment - FIXED Property taxes on plant and equipment - FIXED b. Develop an equation for total monthly production costs using the high-low method of cost estimation, and predict total costs for a monthly production volume of 18,000 units high-low method of cost estimation: Variable cost per unit = difference in total cost / difference in activity Problem 2 The STC Supply manufactures memory cards that sell to wholesalers for $4.00 each. Variable and fixed costs are as follows: Variable Costs per card: Manufacturing Direct materials Direct labor Factory overhead Selling and admin. Total Fixed Costs per Month: $0.60 0.50 0.50 $1.60 0.30 $1.90 Factory overhead Selling and admin. Total $14,000 6,000 $20,000 STC Supply produced and sold 20,000 cards during October 2014. Assume the company had no beginning or ending inventories. Required: a. Prepare a contribution income statement for the month of October. b. Determine STC Supply's monthly break-even point in units. c. Determine the effect on monthly profit of a 1,000 unit increase in monthly sales. d. If STC Supply is subject to an income tax of 40 percent, determine the dollar sales volume required to earn a monthly after-tax profit of $30,000. Problem 3 Assume Paper Mate company is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The estimated manufacturing costs for each method are as follows: Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per year $5.00 $5.00 $4.00 $2,440,000.0 0 $8.00 $12.00 $2.00 $700,000.0 0 Paper Mate's market research department has recommended an introductory unit sales price of $40. The incremental selling costs are predicted to be $500,000 per year, plus $2 per unit sold. Required a. Determine the annual break-even point in units if Paper Mate uses the: i. Capital-intensive manufacturing method ii. Labor-intensive manufacturing method b. Determine the annual unit volume at which paper Mate is indifferent between the two manufacturing methods. c. Management wants to know more about the effect of each alternative on operating leverage. i. Compute operating leverage for each alterative at a volume of 250,000 units. ii. Which alternative has the highest operating leverage? Why? Acct 203DL Cisco Systems, Inc. - Case 3 Ratio Analysis Cisco Systems, Inc. vs. Juniper Networks, Inc. For our final case, we're going to use ratio analysis to compare Cisco Systems, Inc's financial performance and financial health to that of Juniper Networks, Inc., one of its competitors. On the next two pages, I have attached the key financial ratios analyses for each company - Cisco Systems and Juniper Networks. The ratios are listed in the 4 major categories - Profitability, Liquidity, Debt Management, and Asset Management. In our course, we the Debt Management ratios are called Solvency ratios and the Asset Management ratios are called either Efficiency ratios or Turnover ratios. The schedules also have some per share ratios. Required Using the relevant ratios from the attached schedules, please answer the following questions. In answering each question, please explain your reasoning using the relevant ratio(s) from the attached. 1. Over the 5-year period presented, which company was most efficient as generating revenue from its investment in total assets? Cisco 2. Over the 5-year period presented, which company was best able to meet their periodic interest payments related to debt obligations? Cisco 3. Based on the 5-year performance, which company generated the highest return on its total financing, i.e. debt and equity? Juniper 4. Based on the 5-year performance, which company is in the best position to meet its long-term debt obligations and stay in business? Cisco 5. If you were a bank lending officer and each of these companies applied for a $500 million shortterm borrowing (i.e. to be repaid in a less than a year), which company would you be more likely to lend to and why? Would your decision and analysis differ if the company was required to repay the borrowing in 5-years rather than less than a year? Please explain your answer. I would lend to Cisco based on their steadily strong ROE% over the course of 5 years. The quick ratio and current ratio declined slightly but remained strong. Additionally, the INVT continues to increase and move quickly, showing that inventory doesn't sit long on the shelf. A short payment term wouldn't concern me as their AT and APT are healthy numbers as well. 6. Based solely on the attached ratios, which company's common stock would you most likely invest in? Please explain your answer. Juniper? The consistent increase shows potential for long term company growth Note: Assume that the market price per share of the companies' common stock are: a. Cisco Systems, Inc. - $30.98 b. Juniper Networks. Inc. - $29.20 1 2 3 (a)Contribution margin income statement Sales $80000 Less variable cost of goods sold $14000 Gross contribution margin $66000 Less variable cost marketing and administrative expenses $6000 Contribution margin $60000 (b) STC Supply's monthly break-even point in units=Fixed cost/(sales price per unit-variable cost) =$14000/ ($4-1.9) =6667 units (c)# of units to produce the desired profit=(Desired profit in dollars/Contribution margin per unit)+Break Even# of units 7667 units=(x/2.1) +6667 units x=1000*2.1 x=$2100 (d)Target income of $30,000 after 40% tax=Total fixed cost+(Target income/(1-tax rate))/CM per unit Target sales=$14000+ ($30000/(1-40%))/2.1 =30477 units Dollar sales volume required to earn a monthly after-tax profit of $30,000=30477*$4 =$121908 The high-low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level. If the variable cost is a fixed charge per unit and fixed costs remain the same, it is possible to determine the fixed and variable costs by solving the system of equations. Start by dividing the sales by the price per unit to get the number of units produced. Then, add up direct materials and direct labor to get total variable cost. Divide total variable cost by the number of units produced to get average variable cost. Comparing the figures given for two separate period of production, you determine the difference that exists for you to formulate the equation. FOH-represent fixed overhead cost Cost Volume Formula: y = $23,000 + 12x $23000 is fixed cost 12 is variable cost per unit (a)Contribution margin income statement Sales $80000 Less variable cost of goods sold $14000 Gross contribution margin $66000 Less variable cost marketing and administrative expenses $6000 Contribution margin $60000 (b) STC Supply's monthly break-even point in units=Fixed cost/(sales price per unit-variable cost) =$14000/ ($4-1.9) =6667 units (c)# of units to produce the desired profit=(Desired profit in dollars/Contribution margin per unit)+Break Even# of units 7667 units=(x/2.1) +6667 units x=1000*2.1 x=$2100 (d)Target income of $30,000 after 40% tax=Total fixed cost+(Target income/(1-tax rate))/CM per unit Target sales=$14000+ ($30000/(1-40%))/2.1 =30477 units Dollar sales volume required to earn a monthly after-tax profit of $30,000=30477*$4 =$121908 The high-low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level. If the variable cost is a fixed charge per unit and fixed costs remain the same, it is possible to determine the fixed and variable costs by solving the system of equations. Start by dividing the sales by the price per unit to get the number of units produced. Then, add up direct materials and direct labor to get total variable cost. Divide total variable cost by the number of units produced to get average variable cost. Comparing the figures given for two separate period of production, you determine the difference that exists for you to formulate the equation. FOH-represent fixed overhead cost Cost Volume Formula: y = $23,000 + 12x $23000 is fixed cost 12 is variable cost per unit