ACCT 2521 Ch 6 & 11 Bonus Point Quiz

Data concerning Follick Corporation's single product appear below: Selling price per unit | $250.00 Variable expense per unit | $77.50 Fixed expense per month | $149,730 The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.) A. $217,000 B. $284,270 C. $149,730 D. $434,000

A. $217,000 Contribution margin=Sales-Variable cost =250-77.5=$172.5 per unit Contribution margin ratio=Contribution margin/Sales =172.5/250=0.69 Breakeven=Fixed expenses/Contribution margin ratio =(149,730/0.69) =$217,000

Mcmurtry Corporation sells a product for $180 per unit. The product's current sales are 12,900 units and its break-even sales are 11,094 units. The margin of safety as a percentage of sales is closest to: A. 14% B. 16% C. 86% D. 84%

A. 14% Margin of Safety: [(current sales - break even)/current sales] * 100 (12900-11094)/12900] *100 (1806/12900)*100 .14*100 = 14%

An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below: Units | LN | JQ | RQ Selling price per unit | $162.51 | $302.50 | $405.26 Variable cost per unit | $97.76 | $223.12 | $303.42 Minutes on the constraint | 3.50 | 5.40 | 7.60 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.) A. LN, JQ, RQ B. RQ, LN, JQ C. RQ, JQ, LN D. JQ, RQ, LN

A. LN, JQ, RQ Selling price per unit | 162.51 | 302.50 | 405.26 Variable cost per unit | 97.76 | 223.12 | 303.42 Contribution margin per unit (a) | 64.75 | 79.38 | 101.84 Amount of the constrained resource required to produce one unit (b) | 3.50 | 5.40 | 7.60 Contribution margin per unit of the constrained resource (a) / (b) | 18.50 | 14.7 | 13.4 Ranking 1 2 3 A. LN, JQ, RQ

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Units | Per Unit | Percent of Sales Selling price | $150 | 100% Variable expenses | 90 | 60% Contribution margin | $60 | 40% The company is currently selling 6,500 units per month. Fixed expenses are $193,000 per month. The marketing manager believes that a $5,400 increase in the monthly advertising budget would result in a 120 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? A. increase of $1,800 B. increase of $7,200 C. decrease of $5,400 D. decrease of $1,800

A. increase of $1,800 = Additional contribution margin from increased sales - Advertising cost = (120*60) - 5,400 = 7,200 - 5,400 = 1,800 increase

Gallerani Corporation has received a request for a special order of 4,300 units of product A90 for $26.90 each. Product A90's unit product cost is $26.40, determined as follows: Direct materials | $2.55 Direct labor | 7.85 Variable manufacturing overhead | 6.95 Fixed manufacturing overhead | 9.05 Unit product cost | $26.40 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A90 that would increase the variable costs by $3.30 per unit and that would require an investment of $22,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: A. ($34,040) B. $4,875 C. $2,150 D. ($54,610)

B. $4,875 Units | Per unit | Total 4,300 units Incremental revenue | $26.90 | $115,670 Incremental costs | - | - Direct materials | $2.55 | $10,965 Drect labor | $7.85 | $33,755 Variable manufacturing overhead | $6.95 | $29,885 Increase in variable costs | $3.30 | $14,190 Purchase of special tool | - | $22,000 Total Incremental costs | - | $110,795 Annual financial advantage | - | $4,875

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Units | Product X | Product Y | Product Z Units produced | 2,400 | 2,900 | 3,900 Per unit sales value at split-off | $19.00 | $21.00 | $24.00 Added processing costs per unit | $3.00 | $5.00 | $5.00 Per unit sales value if processed further | $25.00 | $25.00 | $30.00 The cost of the joint raw material input is $87,000. Which of the products should be processed beyond the split-off point? Letter | Product X | Product Y | Product Z A. yes yes no B. yes no yes C. no yes no D. no yes yes

B. yes no yes Units | Product X | Product Y | Product Z Units Produced | 2,400 | 2,900 | 3,900 Sales value at split-off | 19 | 21 | 24 Add: Processing cost | 3 | 5 | 5 Sales after processing | 25 | 25 | 30 Profit after processing further | 25-19-3 | 25-21-5 | 30-24-5 Totals | 3 | -1 | 1 Answer | Yes No Yes

Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $23, computed as follows: Direct materials | $8 Direct labor | 8 Variable manufacturing overhead | 1 Fixed manufacturing overhead | 6 Unit product cost | $23 An outside supplier has offered to provide the annual requirement of 4,700 of the parts for only $10 each. The company estimates that 50% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be: A. ($1) per unit on average B. $1 per unit on average C. $10 per unit on average D. ($13) per unit on average

C. $10 per unit on average Relevant cost of making = 8 + 8 + 1 + ( 6 * 50 % ) = $ 20 Relevant cost of buying = $ 10 Financial advantage of buying = ( 20 - 10 ) = $ 10 per unit on average

The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below: Sales | $960,000 Variable expenses | $381,000 Fixed manufacturing expenses | $363,000 Fixed selling and administrative expenses | $243,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $219,000 of the fixed manufacturing expenses and $180,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: A. $(27,000) B. $180,000 C. $27,000 D. $(180,000)

D. $(180,000) Avoidable Fixed manufacturing expenses | 219,000 Avoidable Fixed selling and administrative expenses | 180,000 Contribution margin lost if L07E is discontinued | (579,000) Financial Disadvantage of discontinuing the product | (180,000) Contribution margin lost = Sales - Variable expenses = $960,000 - $381,000 = $579,000

Data concerning Bedwell Enterprises Corporation's single product appear below: Selling price per unit | $230.00 Variable expense per unit | $98.50 Fixed expense per month | $451,190 The unit sales to attain the company's monthly target profit of $33,000 is closest to: (Do not round intermediate calculations.) A. 3,431 B. 2,105 C. 4,916 D. 3,682

D. 3,682 230 - 98.5 = 131.5 451,190 / 131.5 = 3,431.10 33,000 / 131.5 = 250.95 3,431.10 + 250.95 = 3,682.05 = 3,682

Gimmick Company's most recent income statement is shown below: Sales (13,500 units) | $270,000 Less Variable Costs | 189,000 Contribution Margin | $81,000 Less Fixed Costs | 90,000 Operating Loss | ($9,000) What is the company's net operating income (or loss) if the sales volume increases by 20%, fixed expenses increase by $30,000, and variable costs decreases by 5%? A. $(11,460) xB. $(14,450) C. $18,540 xD. $24,450

Sales (16,200 units) | $324000 Less Variable Costs | 179550 Contribution Margin | $ Less Fixed Costs | 120,000 Operating Loss | 13,500 with 20% increase = 16,200 units == 324000 90,000 + 30,000 = 120,000 189,000 with 5% decrease = 9,450 == 179550 324000 226800