Question
PROBLEM 1: The marketing department of X Company proposed a price cut on its leading brand, a product called Vaccine. From the accounting records these
PROBLEM 1: The marketing department of X Company proposed a price cut on its leading brand, a product called
"Vaccine." From the accounting records these are available:
Price per unit
P 92.00
Discount to customers
10%
Direct cost per unit
P 52.60
Variable operating expense per unit P
5.60
Proposed price cut per unit
P 10.00
Estimated sales volume before price cut
1,220 pcs.
A. How much is the estimated contribution margin that will be lost due to price cut, assuming the same pre-price cut
sales volume?
B. For the same X Company, in the immediately preceding number, what is the additional volume required after the
price cut to get the same contribution margin before the price cut? Round off to the nearest whole unit.
PROBLEM 2: Tonykinn Company is contemplating of marketing a new product. Fixed costs will be $800,000 for
production of 75,000 units or less and $1,200,000 if production exceeds 75,000 units The variable cost ratio is 60%
for the first 75,000. Contribution margin percentage will increase to 50% for units in excess of 75,000. If the product
is expected to sell for $25 per unit, how many units must Tonykinn sell to breakeven?
PROBLEM 3: The following information is available for X Co. for its first year of operations:
Sales in units
5,000
Production in units
8,000
Manufacturing costs:
Direct labor
$3 per unit
Direct material
5 per unit
Variable overhead
1 per unit
Fixed overhead
$100,000
Net income (absorption method)
$30,000
Sales price per unit
$40
A. What would X Co. have reported as its income before income taxes if it had used variable costing?
B. What was the total amount of SG&A expense incurred by X Co.?
C. Based on variable costing, what would X Co. show as the value of its ending inventory?
PROBLEM 4: Next month's budgeted sales for TEMP is 18,000 units. Each unit of product TEMP uses 6 kilograms
of raw materials. The production and inventory budgets for June 1992 are as follows:
Opening Inventory
Planned Ending Inventory
Raw materials 21,000 kgs.
24,400 kgs.
Finished goods 15,000 units
11,400 units
During the production process, it is usually found that 10% of production units are scrapped as defective and this loss
occurs after the raw materials have been placed in process. What will the raw material purchases be in June?
PROBLEM 5: JLT Corporation expects to sell 150,000 units during the first quarter of 1998, with an ending inventory
for the quarter of 20,000 units. Variable manufacturing costs are budgeted at P50 per unit, with 70% of total variable
manufacturing costs requiring cash payments during the quarter. Fixed manufacturing costs are budgeted at
P120,000 per quarter, 40% of which are expected to require cash payment during the quarter. In the cash budget,
payments for manufacturing costs during the quarter will total ______
PROBLEM 6: Zebra Corporation has the following activities: creating bills of materials (BOM), studying
manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The
general ledger accounts reveal the following expenditures for manufacturing engineering:
Salaries
$150,000
Equipment
80,000
Supplies
20,000
Total
$250,000
The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the
equipment's time is used for improving processes and sixty-five percent is used for designing tools. The salaries are
for two engineers. One is paid $100,000, while the other earns $50,000. The $100,000 engineer spends 40% of his
time training employees in new processes and 60% of his time on improving processes. The remaining engineer
spends equal time on all activities. Supplies are consumed in the following proportions:
Creating BOMs
25%
Studying capabilities
10%
Improving processes
20%
Training employees
25%
Designing tooling
20%
A. What is the cost assigned to the creating BOMs activity?
B. What is the cost assigned to the improving processes activity?
C. What is the cost assigned to the training employees activity?
D. What is the cost assigned to the designing tooling activity?
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