SHORT PROBLEMS [*The real exam will have 3 problems*] Q1) The cost accountant for the Friendly Manufacturing Company has provided you with the following information for the month of July: Total Fixed Costs Direct labor Direct materials Manufacturing overhead Marketing costs Administrative costs Selling price Variable costs Per unit $ 27.50 84.75 14.25 5.30 2.90 210.00 $ 120,000 50,000 75,000 Required: Assuming the company produced and sold 5,000 units, and there were no units in inventory on July 1, prepare the following income statements for the month of July (a) Contribution margin income statement. (b) Gross margin income statement. Q2) The Feline Company has been having some difficulties estimating its manufacturing overhead costs. In the past, manufacturing overhead costs have been related to production levels. However, some production managers have indicated that the size of their production lots might also be having an impact on the amount of their monthly manufacturing overhead costs. In order to investigate this possibility, the company collected information on its monthly manufacturing overhead costs, production in units, and average production lot size for 2020. Month 1 2 3 4 5 6 7 8 9 10 11 12 Production (Units) 75,000 90.000 65,000 80,000 55.000 50.000 85,000 105,000 102,000 68,000 75.000 95.000 Manufacturing Overhead Cost s 925,800 843.875 910,125 946,000 879.000 825.000 960.000 1,053,500 1,020,000 905,000 938.000 995,000 Average Monthly Production Lot Size 20 19 24 19 24 IR 22 25 22 24 Regression analysis results of the information presented above are as follows: Simple regression: Equation: $691,741 + $3.0692 x units -square: 0.628 Multiple regression: Equation: $482,172 + $2.4918 x units + $11.770.939 x lot size square: 0.777 Required: (a.) Use the results from the simple regression and estimate next month's manufacturing overhead costs, assuming the company is planning to produce 92.700 units. (finul answer should be rounded to the nearest whole dollar) (b.) Use the results from the multiple regression and estimate the next month's manufacturing costs, assuming the company is planning to produce 92,000 units with an average lot size of 21. (final answer should be rounded to the nearest whole dollar) (c.) Comment on which regression seems to be more appropriate under these circumstances. What additional information would you like to see? Be specific, Q3) Razor Inc. manufactures industrial components. One of its products used as a subcomponent in auto manufacturing is Fluoro2211. The selling price and cost per unit data for 9,000 units of Fluoro2211 are as follows. Per Unit Data Selling Price $150 Direct Materials $20 Direct Labor $15 Variable Manufacturing Overhead $12 Fixed Manufacturing Overhead $30 Variable Selling $3 Fixed Selling and Administrative $10 Total Costs $90 Operating Margin $60 During the next year, sales of Fluoro2211 are expected to be 10,000 units. All costs will remain the same except for fixed manufacturing overhead, which will increase by 20%, and direct materials, which will increase by 10%. The selling price per unit for next year will be $160. a) Based on these data, what would Razor Inc.'s total contribution margin for next year be? b) With the expected increase in fixed manufacturing overhead and direct material costs, the CEO of Razor Inc. is worried about the margin of safety for next year. Calculate the estimated margin of safety in sales dollars for the next year and contrast it with the margin of safety this year. Does the CEO has anything to worry about? Explain. c) Calculate the operating leverage for the company this year. In the next year, if all costs and selling price remain the same and the sales volume increase by 10%, how much would operating profit be next year