Problem 1: Scottsdale Ltd. has the following cost information available for various months of production:

May June July

Unit Sales 20,000 40,000 50,000

Sales Revenues $640,000 $1,280,000 $1,600,000

Expenses (800,000) (900,000) (950,000)

Profit (Loss) ($160,000) $380,000 $650,000

(Note: Round to two decimal places if necessary)

a. Determine the variable cost per unit

b. Determine the fixed cost

c. Estimate the total cost for 60,000 units of production

d. Compute the break-even point in dollars.

e. Scottsdale Ltd. had sales last year of $1,000,000. Determine last years margin of safety in sales dollars.

f. Perform a sensitivity analysis to determine how an increase in sales of $25,000 would impact to Net Income?

Problem 2:

Assume a company has equipment with a book value of $60,000. The Company can sell the equipment through a broker for $90,000 less a 4% commission fee. Alternatively, the Company could lease the equipment to another party for 3 years at a price of $130,000. At the end of the three years, the equipment is expected to have no residual value (book value of $0). If the equipment is leased, the Company will incur estimated expenses of $12,000 over the three years for maintenance, insurance and taxes.

Calculate the differential net income and write a statement explaining why the company should lease or sell.

Problem 3:

Use T-accounts to track the flow of costs through a job-order costing system using the company data provided.

Note: This company applies overhead at a rate of 80% of Direct Labor Costs (Applied OH = 0.80 x Direct Labor Dollars)

Given the following data:

Purchases:		Account Balances	Beginning	Ending
Raw Materials	76,000	Raw Materials	60,000	50,000
Manufacturing Supplies	9,000	Manufacturing Supplies	6,000	5,000
Office Supplies	2,000	Office Supplies	4,000	1,000
Sales	800,000	Work in Process	65,000	47,000
Administrative Salaries	16,000	Finished Goods	36,000	35,000
Direct labor	95,000
Production employees fringe benefits	7,000
Sales Commissions	80,000
Production supervisors salaries	17,000
Plant depreciation	11,000
Office depreciation	12,000
Plant maintenance	10,000
Plant Utilities	18,000
Office utilities	7,000
Office Maintenance	5,000
Production Equipment Rent	6,000
Office Equipment Rent	4,000

A. Calculate the following:

Cost of Goods Manufactured ___________________________________

Cost of Goods Sold ___________________________________________

Applied Overhead ____________________________________________

Amount of Under or Over Applied Overhead ______________________

B. Prepare an Income Statement in Excel using the template given below. Make sure to show all your work including the flow of costs through specific inventory accounts to arrive at Cost of Goods Sold.

Sales
Less: Cost of Goods Sold (COGS)
Gross Profit
Less: Selling, Administrative and General Expenses
1.
2.
3.
4.
5.
6.
7.
Total SGA Expenses (subtotal)
Net Income