Practice ACC 102 (show how to do these) Problem 1 1 The Company sell a single product which selling price is $50, variable expenses $20 and total fixed expenses $360,000 Required Compute contribution margin ratio, break even in both unit and dollar sales If the company want to have profit for $150,000, how many unit and how many dollars have to be sold to get this target profit Assume that the company now can sell 15,000 units of product prepare the contribution format income statement From required 3, computer margin of safety in dollar and percentage From required 3, computer the degree of operating leverage Problem 1 2 The Company has three products X, Y, and Z, and its fixed costs are $240,000 The sales mix for its products are 2 units of A, 1 units of B, and 3 unit of C Information about the three products follows X Y Z Selling price per unit $50 $30 $40 Variable cost per unit $20 $15 $25 Required Compute contribution margin per composite units Compute break even point in composite units Problem 2 Slim Corp requires a minimum $8,000 cash balance If necessary, loans are taken to meet this requirement at a cost of 1 interest per month Loans are borrowed at the beginning of the month and repay at end of the quarter and the borrowing must be in increment of $1,000 The cash balance on July 1 is $8,400 Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans Required Prepare a cash budget for July, August, and September Problem 3 The Company standard and actual cost incurred during October are in the following Standard Direct material 3 yards $30 Direct labor 1 5 hours $20 Factory overhead 1 5 hours $10 Actual (2,000 unit produced) Direct material 5,800 yards $32 Direct labor 3,200 hours $18 Factory overhead 3,200 hours $11 Required Compute direct material price and quantity variances Computer direct labor rate and efficiency variances Computer factory overhead rate and efficiency variances Problem 4 1 Textel is thinking about having one of its products manufactured by a subcontractor Currently, the cost of manufacturing 1,000 units follows Direct material $45,000 Direct labor 30,000 Factory overhead (30 is variable) 98,000 If Textel can buy 1,000 units from a subcontractor for $100,000, what should Textel do (make or buy) Problem 4 2 Thompson Company had the following results of operations for the past year Sales (16,000 units at $10) $ 160,000 Direct materials and direct labor $96,000 Overhead (20 variable) 16,000 Selling and administrative expenses (all fixed) 32,000 (144,000) Operating income $ 16,000 A foreign company offers to buy 4,000 units at $7 50 per unit In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300 Should Thompson accept or reject this special order (Show your computation) Problem 4 3 Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium The selling price of Exceptional and Premium are $30 and $20, respectively Should Barnes sells as specialty food product or process it further (Show your computation) Problem 4 4 A company inadvertently produced 6,000 defective portable CD players The CD players cost $20 each to be manufactured A salvage company will purchase the defective units as they are for $16 each The production manager reports that the defects can be corrected for $9 per unit, enabling the company to sell them at the regular price of $30 00 The repair operations would not affect other production operations Should the company sells them as defective CD players or repair them (Show your computation)

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Practice ACC 102 (show how to do these) Problem 1.1: The Company sell a single product which selling price is $50, variable expenses $20 and

Practice ACC 102 (show how to do these)

Problem 1.1: The Company sell a single product which selling price is $50, variable expenses $20 and total fixed expenses $360,000.

Required:

Compute contribution margin ratio, break-even in both unit and dollar sales.
If the company want to have profit for $150,000, how many unit and how many dollars have to be sold to get this target profit.
Assume that the company now can sell 15,000 units of product; prepare the contribution format income statement.
From required 3, computer margin of safety in dollar and percentage.
From required 3, computer the degree of operating leverage.

Problem 1.2: The Company has three products X, Y, and Z, and its fixed costs are $240,000. The sales mix for its products are 2 units of A, 1 units of B, and 3 unit of C. Information about the three products follows:

	X	Y	Z
Selling price per unit	$50	$30	$40
Variable cost per unit	$20	$15	$25

Required:

Compute contribution margin per composite units.
Compute break-even point in composite units.

Problem 2: Slim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month. Loans are borrowed at the beginning of the month and repay at end of the quarter and the borrowing must be in increment of $1,000. The cash balance on July 1 is $8,400.

Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively.

Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans.

Required: Prepare a cash budget for July, August, and September.

Problem 3: The Company standard and actual cost incurred during October are in the following:

Standard:

Direct material 3 yards @ $30

Direct labor 1.5 hours @ $20

Factory overhead 1.5 hours @ $10

Actual (2,000 unit produced):

Direct material: 5,800 yards @ $32

Direct labor: 3,200 hours @ $18

Factory overhead: 3,200 hours @ $11

Required:

Compute direct material price and quantity variances.
Computer direct labor rate and efficiency variances.
Computer factory overhead rate and efficiency variances.

Problem 4.1: Textel is thinking about having one of its products manufactured by a subcontractor.

Currently, the cost of manufacturing 1,000 units follows:

Direct material $45,000

Direct labor 30,000

Factory overhead (30% is variable) 98,000

If Textel can buy 1,000 units from a subcontractor for $100,000, what should Textel do (make or buy):

Problem 4.2: Thompson Company had the following results of operations for the past year:

Sales (16,000 units at $10) $ 160,000

Direct materials and direct labor $96,000

Overhead (20% variable) 16,000

Selling and administrative expenses (all fixed) 32,000 (144,000)

Operating income $ 16,000

A foreign company offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300.

Should Thompson accept or reject this special order? (Show your computation)

Problem 4.3: Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively.

Should Barnes sells as specialty food product or process it further? (Show your computation)

Problem 4.4: A company inadvertently produced 6,000 defective portable CD players. The CD players cost $20 each to be manufactured. A salvage company will purchase the defective units as they are for $16 each. The production manager reports that the defects can be corrected for $9 per unit, enabling the company to sell them at the regular price of $30.00. The repair operations would not affect other production operations.

Should the company sells them as defective CD players or repair them? (Show your computation)