I just need Question 4 answered parts a,b,c must show work, by Monday February 22nd 6 p.m.

Applied Managerial Accounting Midterm (100 Points Total) 1. Name:________________________________ The law firm of Duwe, Cheatem & Howe provides legal services for clients. During the year, corporate clients required 5,000 hours of legal services, while individuals required 3,000 hours. The firm has traditionally used direct labor hours to assign overhead. (25 Points) However, Ms. Duwe believes services to businesses cost more than services to individuals and wishes to adopt activity-based costing. The firm's revenues and costs for the year are shown below: Revenue Expenses: Lawyers' salaries Overhead: Filing Quality control Data entry Total overhead Corporate $150,000 Individual $150,000 Total $300,000 $100,000 50,000 $150,000 10,000 5,000 25,000 $40,000 Mr. Cheatem has kept records of the following data for use in the new activity-based costing system: Overhead Cost Cost Driver Filing Quality control Data entry Number of Clients Number of hours spent Number of pages entered Activity Level Corporate Individual 5 75 1,000 5 25 1,500 REQUIRED: a. Prepare an income statement showing profits by segments using the traditional directhour allocation base. b. Prepare an income statement showing profits by segments using the three cost drivers in the ABC model. a) Income Statement Using Traditional Direct Labor hour allocation Corporate Individual Total 150000 150000 300000 Lawyer's Salaries 100000 50000 150000 Total Overhead 25000 15000 40000 Net Income 25000 85000 110000 Revenue Expenses Working Overhead allocated to corporate = 40000/(5000+3000)x5000 = 25000 Overhead allocated to Individual = 40000/(5000+3000)x3000 = 15000 b) Income Statement Using ABC costing Corporate Individual Total 150000 150000 300000 Lawyer's Salaries 100000 50000 150000 Filling 5000 5000 10000 Quality Control 3750 1250 5000 Data Entry 10000 15000 25000 Net Income 31250 78750 110000 Revenue Expenses Working Filling Overhead allocated to corporate = 10000/(5+5)x5 = 5000 Filling Overhead allocated to Individual = 10000/(5+5)x5 = 5000 Quality Control Overhead allocated to corporate = 5000/(75+25)x75 = 3750 Quality Control Overhead allocated to Individual = 5000/(75+25)x25 = 1250 Data Entry Overhead allocated to corporate = 25000/(1000+1500)x1000 = 10000 Data Entry Overhead allocated to Individual = 25000/(1000+1500)x1500 = 15000 2. CVPsensitivity analysis. Joan's Beauty College is considering introducing a new nail design seminar to run on an annual basis with the following price and cost characteristics: (30 Points) Tuition Variable Costs (polish, supplies, etc.) Fixed Costs (advertising, instructor's salary, insurance, etc.) $320 per Student $20 per Student $60,000 per Year Required: a. What enrollment enables Joan's Beauty College to break even? b. How many students will enable Joan's Beauty College to make an operating profit of $30,000 for the year? c. Assume that the projected enrollment for the year is 600 students for each of the following situations: (1) What will be the operating profit for 600 students? (2) What would be the operating profit if the tuition per student (that is, sales price) decreased by 10 percent? Increased by 20 percent? (3) What would be the operating profit if variable costs per student increased by 10 percent? Decreased by 20 percent? (4) Suppose that fixed costs for the year are 10 percent lower than projected, whereas variable costs per student are 20 percent higher than projected. What would be the operating profit for the year? a. Break-Even Point in Units = Fixed Costs/ Unit Contribution Margin = $60,000/($320 - $20) = $60,000/$300 = 200 Students. b. Target Profit Point in Units = (Fixed Costs + Target Profit) / Unit Contribution Margin = ($60,000 + $30,000)/$300 = 300 Students. c. (1) Profit = [($320 - $20) X 600] - $60,000 = $120,000. (2) 10% price decrease. Now price = $288 Profit = [($288 - $20) X 600] - $60,000 = $100,800. Profit decreases by $19,200 (16%). 20% price increase. Now price = $384 Profit = [($384 - $20) X 600] - $60,000 = $158,400. Profit increases by $38,400 (32%). (3) 10% variable cost increase. Now variable cost = $22 Profit = [($320 - $22) X 600] - $60,000= $118,800. Profit decreased by $1,200 (1%). 20% variable cost decrease. Now variable cost = $16 Profit = [($320 - $16) X 600] - $60,000 = $122,400. Profit increases by $2,400 (2%). (4) Profit = [($320 - $24) X 600] - $54,000 = $123,600. Profit increases by $3,600 (3%). 3. Please answer the following questions. (Provide one to two paragraphs of information for each question.) (15 Points) a. What is meant by cost behavior? Explain how it relates to the following terms: fixed, variable, and mixed cost. b. Describe how analysts estimate cost behavior using regression, account analysis, and engineering methods. 4. Genia Enterprises, Inc. has the capacity to produce 12,000 units per year. Expected operations for the year are (30 Points) Sales (10,000 units @ $20) Manufacturing expenses: Variable Fixed Marketing expenses: Variable Fixed $200,000 $8 per unit $40,000 $3 per unit $20,000 REQUIRED: a. What is the expected level of operating profits? b. Should the company accept a special order for 1,000 units at a selling price of $15 if variable marketing expenses associated with this special order would be $2 per unit? Calculate the incremental profits if the order is accepted. c. Suppose the company received a special order for 3,000 units at a selling price of $15 with no variable marketing expenses. Calculate the impact on operating profits. Note that the expected level of operations for the company is 10,000 units, maximum capacity of production for the company is 12,000 units