Menlo Company distributes a single product. The companys sales and expenses for last month follow:

	Total	Per Unit
Sales	$ 314,000	$ 20
Variable expenses	219,800	14
Contribution margin	94,200	$ 6
Fixed expenses	77,400
Net operating income	$ 16,800

Required:

1. What is the monthly break-even point in unit sales and in dollar sales?

2. Without resorting to computations, what is the total contribution margin at the break-even point?

3-a. How many units would have to be sold each month to attain a target profit of $34,800?

3-b. Verify your answer by preparing a contribution format income statement at the target sales level.

4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

5. What is the companys CM ratio? If the company can sell more units thereby increasing sales by $90,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

3.

Delph Company uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that 55,000 machine-hours would be required for the periods estimated level of production. It also estimated $960,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $4.00 per machine-hour.

Because Delph has two manufacturing departmentsMolding and Fabricationit is considering replacing its plantwide overhead rate with departmental rates that would also be based on machine-hours. The company gathered the following information to enable calculating departmental overhead rates:

	Molding	Fabrication	Total
Machine-hours	21,000	34,000	55,000
Fixed manufacturing overhead cost	$ 760,000	$ 200,000	$ 960,000
Variable manufacturing overhead cost per machine-hour	$ 4.00	$ 2.00

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobsJob D-70 and Job C-200. It provided the following information related to those two jobs:

Job D-70	Molding	Fabrication	Total
Direct materials cost	$ 370,000	$ 320,000	$ 690,000
Direct labor cost	$ 200,000	$ 140,000	$ 340,000
Machine-hours	14,000	7,000	21,000

Job C-200	Molding	Fabrication	Total
Direct materials cost	$ 280,000	$ 280,000	$ 560,000
Direct labor cost	$ 160,000	$ 220,000	$ 380,000
Machine-hours	7,000	27,000	34,000

Delph had no underapplied or overapplied manufacturing overhead during the year.

Required:

1. Assume Delph uses plantwide predetermined overhead rates based on machine-hours.

Compute the plantwide predetermined overhead rate.

Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?

What is Delphs cost of goods sold for the year?

4.

Royal Lawncare Company produces and sells two packaged productsWeedban and Greengrow. Revenue and cost information relating to the products follow:

	Product
	Weedban	Greengrow
Selling price per unit	$ 10.00	$ 39.00
Variable expenses per unit	$ 2.50	$ 11.00
Traceable fixed expenses per year	$ 129,000	$ 31,000

Last year the company produced and sold 39,500 units of Weedban and 24,000 units of Greengrow. Its annual common fixed expenses are $114,000.

Required:

Prepare a contribution format income statement segmented by product lines.

6.

The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

	Total	Dirt Bikes	Mountain Bikes	Racing Bikes
Sales	$ 925,000	$ 264,000	$ 406,000	$ 255,000
Variable manufacturing and selling expenses	479,000	117,000	205,000	157,000
Contribution margin	446,000	147,000	201,000	98,000
Fixed expenses:
Advertising, traceable	68,500	8,100	40,200	20,200
Depreciation of special equipment	43,900	20,800	7,200	15,900
Salaries of product-line managers	114,600	40,900	38,400	35,300
Allocated common fixed expenses*	185,000	52,800	81,200	51,000
Total fixed expenses	412,000	122,600	167,000	122,400
Net operating income (loss)	$ 34,000	$ 24,400	$ 34,000	$ (24,400)

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

Silver Company makes a product that is very popular as a Mothers Day gift. Thus, peak sales occur in May of each year, as shown in the companys sales budget for the second quarter given below:

	April	May	June	Total
Budgeted sales (all on account)	$ 350,000	$ 550,000	$ 190,000	$ 1,090,000

From past experience, the company has learned that 25% of a months sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $280,000, and March sales totaled $310,000.

Required:

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

What is the accounts receivable balance on June 30th?