Question 2

Elroy Rocket is entering his senior year as an accounting major and has a number of options for his summer break. His options for the 3 month break follow:

(1) Work full time at a local accounting firm making $2,900 per month.

(2) Take a summer class which will cost $800 and work half time making $1,100 per month.

(3) Take a class at a cost of $800 and not work at all during the summer.

Elroy's incremental profit or loss if he chooses option 2 over option 1 would be

Round to two decimal places.

Your Answer:

Question 3

Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity ofcopies:

Salaries (fixed) $82,250

Employee benefits (fixed) 10,000

Depreciation of copy machines (fixed) 10,000

Utilities (fixed) 5,000

Paper (variable, 1 cent per copy) 50,000

Toner (variable, 1 cent per copy) 50,000

The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.

Assumingthe following copies were made during the year, 2,910,000 for sales and 2,395,500 for administration, calculate the copy department costs allocated to sales.

Round to two decimal places.

Your Answer:

Question 5

Mama Italiano Sauce is in the process of preparing a production cost budget for May.The actual costs in April were:

Mama Italian Sauce

Production Cost Budget

April 2008

Production - Jars of sauce 20,000

Ingredient cost (variable) $16,000

Labor cost (variable) 9,000

Rent (fixed) 4,000

Depreciation (fixed) 6,000

Other (fixed) 1,000

Total $36,000

Using this information, prepar a budget for May stating the total amount for the May budget.Assume the budget will increase to 23,500 jars of sauce reflecting anticipated sales increase related to a new marketing campaign

Round to two decimal places.

Your Answer:

Question 6

Consider the production cost information for Mama Italiano Sauce given below:

Mama Italian Sauce

Production Cost Budget

April 2008

Production - Jars of sauce 20,000

Ingredient cost (variable) $16,000

Labor cost (variable) 9,000

Rent (fixed) 4,000

Depreciation (fixed) 6,000

Other (fixed) 1,000

Total $36,000

The company is currently producing and sellingjars of sauceThe jars of sauce sell for $4 per jar.The company is considering lowering the price to $3.70 per jar.Suppose this action will increase sales.What is the incremental costs associated with producing an extra 65,750 jars of sauce?

Round to two decimal places.

Question 7

Consider the production cost information for Mama Italiano Sauce given below:

Mama Italiano Sauce

Production Cost Budget

April 2008

Production - Jars of sauce 20,000

Ingredient cost (variable) $16,000

Labor cost (variable) 9,000

Rent (fixed) 4,000

Depreciation (fixed) 6,000

Other (fixed) 1,000

Total $36,000

The company is currently producing and selling 250,000 jars of sauce annually.The jars of sauce sell for $4 per jar.The company is considering lowering the price to $3.65 per jar.Suppose this action will increase sales to 309,000 jars of sauce.What is the incremental revenue associated with the price reduction of sauce? Round to two decimal places.

Your Answer: