Print1.EX.20.06.ALGO

Relevant RangeandFixedandVariable Costs

Child Play Inc. manufactures electronic toys within a relevant range of 61,600 to 100,800 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:

Complete the cost schedule below.When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar.

Toys produced61,60079,200100,800Total costs:Total variable costs$19,712d. $fill in the blank 1

j. $fill in the blank 2

Total fixed costs22,176e.fill in the blank 3

k.fill in the blank 4

Total costs$41,888f. $fill in the blank 5

l. $fill in the blank 6

Cost per unit:Variable cost per unita. $fill in the blank 7

g. $fill in the blank 8

m. $fill in the blank 9

Fixed cost per unitb.fill in the blank 10

h.fill in the blank 11

n.fill in the blank 12

Total cost per unitc. $fill in the blank 13

i. $fill in the blank 14

o. $fill in the blank 15

2.EX.20.08.ALGO

High-Low Methodfor a Service Company

Continental Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. Theactivity baseused by Continental Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.

Transportation CostsGross-Ton MilesJanuary$1,028,600373,000February1,146,800417,000March810,500270,000April1,099,500404,000May922,200325,000June1,182,300439,000

Determine thevariable costper gross-ton mile and the totalfixed cost.

Variable cost(Round to two decimal places.)$fill in the blank 1

per gross-ton mileTotal fixed cost$fill in the blank 2

3.EX.20.10.ALGO

Contribution MarginandContribution Margin Ratio

For a recent year,McDonald's (MCD)company-owned restaurants had the following sales and expenses (in millions):

Sales$27,000Food and packaging$(6,760)Payroll(6,800)Occupancy (rent, depreciation, etc.)(8,730)General, selling, and administrative expenses(3,900)$(26,190)Operating income$810

Assume that thevariable costsconsist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a.What is McDonald's contribution margin?Round to the nearest million.(Give answer in millions of dollars.)

$fill in the blank 1

million

b.What is McDonald's contribution margin ratio?

fill in the blank 2

%

c.How much would operating income increase if same-store sales increased by $1,600 million for the coming year, with no change in the contribution margin ratio orfixed costs?Round your answer to the closest million.

$fill in the blank 3

million

4.EX.20.12.ALGO

Break-Even Sales

Anheuser-Busch InBev SA/NV (BUD) reported the following operating information for a recent year:

Sales$4,416,000Cost of goods sold$1,104,000Selling, general, and administrative expenses828,0001,932,000Operating income$2,484,000**Before special items

In addition, assume that Anheuser-Busch InBev sold 46,000 barrels of beer during the year. Assume thatvariable costswere 75% of the cost of goods sold and 50% of selling, general, and administrative expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser-Busch InBev expects pricing, variable costs per barrel, andfixed coststo remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $20,700.

a.Compute the break-even number of barrels for the current year.Round to the nearest whole barrel.

fill in the blank 1

barrels

b.Compute the anticipated break-even number of barrels for the following year.Round to the nearest whole barrel.

fill in the blank 2

barrels

5.PR.20.02B

Break-Even Sales Under Present and Proposed Conditions

Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its income statement is as follows:

Sales$2,880,000Cost of goods sold(1,400,000)Gross profit$1,480,000Expenses:Selling expenses$400,000Administrative expenses387,500Total expenses(787,500)Operating income$692,500

The division of costs between variable and fixed is as follows:

VariableFixedCost of goods sold75%25%Selling expenses60%40%Administrative expenses80%20%

Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increasefixed costsby $212,500 but will not affect the relationship between sales andvariable costs.

Required:

1.Determine the total fixed costs and the total variable costs for the current year.

Total variable costs$fill in the blank 1

Total fixed costs$fill in the blank 2

2.Determine (a) the unit variable cost and (b) theunit contribution marginfor the current year.

Unit variable cost$fill in the blank 3

Unit contribution margin$fill in the blank 4

3.Compute the break-even sales (units) for the current year.

fill in the blank 5

units

4.Compute the break-even sales (units) under the proposed program for the following year.

fill in the blank 6

units

5.Determine the amount of sales (units) that would be necessary under the proposed program to realize the $692,500 of operating income that was earned in the current year.

fill in the blank 7

units

6.Determine the maximum operating income possible with the expanded plant.

$fill in the blank 8

7.If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?

$fill in the blank 9

8.Based on the data given, would you recommend accepting the proposal?

1. In favor of the proposal because of the reduction in break-even point.
2. In favor of the proposal because of the possibility of increasing operating income.
3. In favor of the proposal because of the increase in break-even point.
4. Reject the proposal because if future sales remain at the current level, the operating income will increase.
5. Reject the proposal because the sales necessary to maintain the current operating income would be below the current year sales.

Choose the correct answer.

6.PR.20.05A.ALGO

Sales Mixand Break-Even Sales

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

ProductsUnit Selling PriceUnit Variable CostSales MixLaptops$1,000$50040%Tablets60030060%

The estimatedfixed costsfor the current year are $3,192,000.

Required:

1.Determine the estimated units of sales of the overall (total) product, E, necessary to reach thebreak-even pointfor the current year.

fill in the blank 1

units

2.Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

Laptopsfill in the blank 2

unitsTabletsfill in the blank 3

units

3.Assume that the sales mix was 60% laptops and 40% tablets. Compare the break-even point with that in part (1). Why is it so different?

fill in the blank 4

units

The break-even point is

in this scenario than in part (1) because the sales mix is

toward the product with the higher

of product.

7.EX.22.03.ALGO

Static BudgetversusFlexible Budget

The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:

Hagerstown Company

Machining Department

Monthly Production BudgetWages$401,000Utilities21,000Depreciation35,000Total$457,000

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

Amount SpentUnits ProducedMay$430,00070,000June406,00063,000July388,00057,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been significantly less than the monthly staticbudgetof 457,000. However, the plant manager believes that the budget should not remain fixed for every month but should "flex" or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

Wages per hour$21.00Utility cost per direct labor hour$1.10Direct labor hours per unit0.25Planned monthly unit production76,000

a.Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

Hagerstown CompanyMachining Department BudgetFor the Three Months Ending July 31MayJuneJulyUnits of production70,00063,00057,000

$

fill in the blank 235ffff8b04c045_2

$

fill in the blank 235ffff8b04c045_3

$

fill in the blank 235ffff8b04c045_4

fill in the blank 235ffff8b04c045_6

fill in the blank 235ffff8b04c045_7

fill in the blank 235ffff8b04c045_8

fill in the blank 235ffff8b04c045_10

fill in the blank 235ffff8b04c045_11

fill in the blank 235ffff8b04c045_12

Total$

fill in the blank 235ffff8b04c045_13

$

fill in the blank 235ffff8b04c045_14

$

fill in the blank 235ffff8b04c045_15

Supporting calculations:Units of production70,00063,00057,000Hours per unitx

fill in the blank 235ffff8b04c045_16

x

fill in the blank 235ffff8b04c045_17

x

fill in the blank 235ffff8b04c045_18

Total hours of productionfill in the blank 235ffff8b04c045_19

fill in the blank 235ffff8b04c045_20

fill in the blank 235ffff8b04c045_21

Wages per hourx $

fill in the blank 235ffff8b04c045_22

x $

fill in the blank 235ffff8b04c045_23

x $

fill in the blank 235ffff8b04c045_24

Total wages$

fill in the blank 235ffff8b04c045_25

$

fill in the blank 235ffff8b04c045_26

$

fill in the blank 235ffff8b04c045_27

Total hours of productionfill in the blank 235ffff8b04c045_28

fill in the blank 235ffff8b04c045_29

fill in the blank 235ffff8b04c045_30

Utility costs per hourx $

fill in the blank 235ffff8b04c045_31

x $

fill in the blank 235ffff8b04c045_32

x $

fill in the blank 235ffff8b04c045_33

Total utilities$

fill in the blank 235ffff8b04c045_34

$

fill in the blank 235ffff8b04c045_35

$

fill in the blank 235ffff8b04c045_36

b.Compare the flexible budget with the actual expenditures for the first three months.

MayJuneJulyTotal flexible budget$fill in the blank d3ac52089041068_1

$fill in the blank d3ac52089041068_2

$fill in the blank d3ac52089041068_3

Actual costfill in the blank d3ac52089041068_4

fill in the blank d3ac52089041068_5

fill in the blank d3ac52089041068_6

Excess of actual cost over budget$fill in the blank d3ac52089041068_7

$fill in the blank d3ac52089041068_8

$fill in the blank d3ac52089041068_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.

The department is spending more than would be expected.

8.EX.22.09.ALGO

Direct Materials Purchases Budget

Tobin's Frozen Pizza Inc. has determined from itsproduction budgetthe following estimated production volumes for 12'' and 16'' frozen pizzas for November:

Units12" Pizza16" PizzaBudgeted production volume13,00022,800

There are three direct materials used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:

12" Pizza16" PizzaDirect materials:Dough0.90lb. per unit1.50lbs. per unitTomato0.601.00Cheese0.801.30

In addition, Tobin's has determined the following information about each material:

DoughTomatoCheeseEstimated inventory, November 1650lbs.200lbs.310lbs.Desired inventory, November 30680lbs.190lbs.340lbs.Price per pound$1.30$2.20$3.20

Prepare November's direct materials purchases budget for Tobin's Frozen Pizza Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Tobin's Frozen Pizza Inc.Direct Materials Purchases BudgetFor the Month Ending November 30Direct MaterialsDirect MaterialsDirect MaterialsDoughTomatoCheeseTotalUnits required for production:12" pizzafill in the blank 1

fill in the blank 2

fill in the blank 3

16" pizzafill in the blank 4

fill in the blank 5

fill in the blank 6

fill in the blank 8

fill in the blank 9

fill in the blank 10

Total units availablefill in the blank 11

fill in the blank 12

fill in the blank 13

fill in the blank 15

fill in the blank 16

fill in the blank 17

Total units to be purchasedfill in the blank 18

fill in the blank 19

fill in the blank 20

Unit Pricex $

fill in the blank 21

x $

fill in the blank 22

x $

fill in the blank 23

Total direct materials to be purchased$

fill in the blank 24

$

fill in the blank 25

$

fill in the blank 26

$

fill in the blank 27

9.EX.22.15.ALGO

Cost of Goods Sold Budget

Delaware Chemical Company uses oil to produce two types of plastic products, P1 and P2. Delawarebudgeted23,100 barrels of oil for purchase in June for $72 per barrel. Direct labor budgeted in the chemical process was $216,200 for June. Factory overhead was budgeted at $299,400 during June. The inventories on June 1 were estimated to be:

Oil$15,100P110,200P28,600Work in process12,500

The desired inventories on June 30 were:

Oil$16,600P19,300P28,200Work in process13,000

Use the preceding information to prepare a cost of goods sold budget for June. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Delaware Chemical CompanyCost of Goods Sold BudgetFor the Month Ending June 30

$

fill in the blank 2

$

fill in the blank 4

Direct materials:

$

fill in the blank 6

fill in the blank 8

$

fill in the blank 10

fill in the blank 12

$

fill in the blank 14

fill in the blank 16

fill in the blank 18

fill in the blank 20

$

fill in the blank 22

fill in the blank 24

fill in the blank 26

$

fill in the blank 28

$

fill in the blank 30

$

fill in the blank 32

10.EX.22.18.ALGO

Schedule of Cash Collections of Accounts Receivable

OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 25% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 20% pay their accounts in the month of sale, while the remaining 80% pay their accounts in the month following the month of sale. Projected sales for the next three months are as follows:

October$135,000November169,000December247,000

The Accounts Receivable balance on September 30 was $90,000.

Prepare a schedule of cash collections from sales for October, November, and December. Round all calculations to the nearest whole dollar.

OfficeMart Inc.Schedule of Cash Collections from SalesFor the Three Months Ending December 31OctoberNovemberDecemberReceipts from cash sales:Cash sales$

fill in the blank 1

$

fill in the blank 2

$

fill in the blank 3

September sales on account:Collected in Octoberfill in the blank 4

October sales on account:Collected in Octoberfill in the blank 5

Collected in Novemberfill in the blank 6

November sales on account:Collected in Novemberfill in the blank 7

Collected in Decemberfill in the blank 8

December sales on account:Collected in Decemberfill in the blank 9

Total cash receipts$

fill in the blank 10

$

fill in the blank 11

$

fill in the blank 12

11.PR.22.03B

Budgeted Income Statement and SupportingBudgets

The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for March:

1. Estimated sales for March:Batting helmet1,200 units at $40 per unitFootball helmet6,500 units at $160 per unit
2. Estimated inventories at March 1:Direct materials:Plastic90 lbs.Foam lining80 lbs.Finished products:Batting helmet40 units at $25 per unitFootball helmet240 units at $77 per unit
3. Desired inventories at March 31:Direct materials:Plastic50 lbs.Foam lining65 lbs.Finished products:Batting helmet50 units at $25 per unitFootball helmet220 units at $78 per unit
4. Direct materials used in production:In manufacture of batting helmet:Plastic1.2 lbs. per unit of productFoam lining0.5 lb. per unit of productIn manufacture of football helmet:Plastic3.5 lbs. per unit of productFoam lining1.5 lbs. per unit of product
5. Anticipated cost of purchases and beginning and ending inventory of direct materials:Plastic$6 per lb.Foam lining$4 per lb.
6. Direct labor requirements:Batting helmet:Molding Department0.2 hr. at $20 per hr.Assembly Department0.5 hr. at $14 per hr.Football helmet:Molding Department0.5 hr. at $20 per hr.Assembly Department1.8 hrs. at $14 per hr.
7. Estimated factory overhead costs for March:Indirect factory wages$86,000Depreciation of plant and equipment12,000Power and light4,000Insurance and property tax2,300
8. Estimated operating expenses for March:Sales salaries expense$184,300Advertising expense87,200Office salaries expense32,400Depreciation expenseoffice equipment3,800Telephone expenseselling5,800Telephone expenseadministrative1,200Travel expenseselling9,000Office supplies expense1,100Miscellaneous administrative expense1,000
9. Estimated other revenue and expense for March:Interest revenue$940Interest expense872
10. Estimated tax rate: 30%

Required:

1.Prepare asales budgetfor March. Enter all amounts as positive numbers.

Gold Medal Athletic Co.

Sales Budget

For the Month Ending March 31Unit Sales

VolumeUnit Selling

PriceTotal SalesBatting helmetfill in the blank 1

$fill in the blank 2

$fill in the blank 3

Football helmetfill in the blank 4

fill in the blank 5

fill in the blank 6

Total revenue from sales$fill in the blank 7

2.Prepare aproduction budgetfor March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co.

Production Budget

For the Month Ending March 31UnitsBatting helmetFootball helmet

fill in the blank 9

fill in the blank 10

fill in the blank 12

fill in the blank 13

fill in the blank 15

fill in the blank 16

fill in the blank 18

fill in the blank 19

fill in the blank 21

fill in the blank 22

3.Prepare adirect materials purchases budgetfor March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co.

Direct Materials Purchases Budget

For the Month Ending March 31PlasticFoam LiningTotalUnits required for production:Batting helmetfill in the blank 23

fill in the blank 24

Football helmetfill in the blank 25

fill in the blank 26

Desired units of inventory, March 31fill in the blank 27

fill in the blank 28

Total units availablefill in the blank 29

fill in the blank 30

Estimated units of inventory, March 1fill in the blank 31

fill in the blank 32

Total units to be purchasedfill in the blank 33

fill in the blank 34

Unit price$fill in the blank 35

$fill in the blank 36

Total direct materials to be purchased$fill in the blank 37

$fill in the blank 38

$fill in the blank 39

4.Prepare adirect labor cost budgetfor March. Enter all amounts as positive numbers.

Gold Medal Athletic Co.

Direct Labor Cost Budget

For the Month Ending March 31Molding

DepartmentAssembly

DepartmentTotalHours required for production:Batting helmetfill in the blank 40

fill in the blank 41

Football helmetfill in the blank 42

fill in the blank 43

Totalfill in the blank 44

fill in the blank 45

Hourly rate$fill in the blank 46

$fill in the blank 47

Total direct labor cost$fill in the blank 48

$fill in the blank 49

$fill in the blank 50

5.Prepare afactory overhead cost budgetfor March.

Gold Medal Athletic Co.

Factory Overhead Cost Budget

For the Month Ending March 31

$fill in the blank 52

fill in the blank 54

fill in the blank 56

fill in the blank 58

Total factory overhead cost$fill in the blank 59

6.Prepare acost of goods sold budgetfor March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co.

Cost of Goods Sold Budget

For the Month Ending March 31

$fill in the blank 61

$fill in the blank 63

Direct materials:

$fill in the blank 65

fill in the blank 67

Cost of direct materials available for use$fill in the blank 68

fill in the blank 70

Cost of direct materials placed in production$fill in the blank 71

fill in the blank 73

fill in the blank 75

Total manufacturing costsfill in the blank 76

Total work in process during period$fill in the blank 77

fill in the blank 79

Cost of goods manufacturedfill in the blank 80

Cost of finished goods available for sale$fill in the blank 81

fill in the blank 83

Cost of goods sold$fill in the blank 84

7.Prepare a selling and administrative expenses budget for March.

Gold Medal Athletic Co.

Selling and Administrative Expenses Budget

For the Month Ending March 31Selling expenses:

$fill in the blank 86

fill in the blank 88

fill in the blank 90

fill in the blank 92

Total selling expenses$fill in the blank 93

Administrative expenses:

$fill in the blank 95

fill in the blank 97

fill in the blank 99

fill in the blank 101

fill in the blank 103

Total administrative expensesfill in the blank 104

Total operating expenses$fill in the blank 105

8.Prepare a budgeted income statement for March.

Gold Medal Athletic Co.

Budgeted Income Statement

For the Month Ending March 31

$fill in the blank 107

fill in the blank 109

$fill in the blank 111

Operating expenses:

$fill in the blank 113

fill in the blank 115

Total operating expensesfill in the blank 116

Operating income$fill in the blank 117

Other revenue and expense:

$fill in the blank 119

fill in the blank 121

fill in the blank 122

Income before income tax$fill in the blank 123

fill in the blank 125

Net income$fill in the blank 126