Practice

Practice Text Exercises Davis University of Phoenix Accounting/561-Principles of Accounting July 1, 2011 Page 82 Question 2-48, Net Sales 75,044 Cost of products 36,438 Selling, general, and administration expense 21,848 Operating cost 16,758 Increase % 26.5% (16,758-13,249)/13.249 The percentage cost increase because the sales increase relates to the operating cost therefore the percentage cost inceases. Question 2-61 1. old(3.10-2.10) *600,000) -580,000= 1*600,000= 600,000-580.000= 20,000 New (3.10-1.10)*600,000}-1,140,000= 2*600,000= 1,200,000-1,140,00=60,000 2. old 580,000/1.00= $580,000 units new 1,140,000/2.00= 570,000 units 3. If the volume decrease to 500,000 so will the profit because of the high fixed cost. 1.00*500,000= 500,0000-580,000= -80,000-20,000= -100,000 (old) 2.00*500,000= 1,000,000-1,140,000= -140,000-60,000= -200,000 (new) 4. 1*700,000=700,000-580,000= 120,000-20,000=100,000 2*700,000= 1,400,000-1,140,000=260,000-60,000= 200,000 There will be 100,000 dollar increase with the old system and 200,000 increase with the new system. 5. The old operation is less risky because of the fixed cost but the new environment brings more profit when the volume is increase but if the volume is decrease at any point then the organization faces a huge loss in profit. Question 3:38 1. For units produce Maintenance cost for fixed is 10,000 and the cost for variable is 10,000+3,500=1350 Number sets fixed cost is 1,000 an variable cost is 6,000-1000= 5,000/5= 1,000 for each set up The month of April is irrelevant because the plant was closed for sometime in that month. 2. Variable cost= 6,000/3,000= 2.00 and fixed cost 12,700 25,500-15,000=10500/16= 656.25 3. In comparison of the two system the cost drivers appears to the best is the cost that refers to the set up. ChAPTER 2 DECISION GUIDELINES | | | | | PHONETRONIX | | | | | COST-VOLUME-PROFIT CVP ANALYSIS | | | | | 2-Jun-11 | | | | | | | | | | | | | | | | Proposal A Proposal B Proposal C | Selling Price | $99.00 | $129.00 | $99.00 | | Variable Cost | $55.00 | $55.00 | $49.00 | | Contribution Margin | $44.00 | $74.00 | $50.00 | | Contribution Ratio | 44.44% | 57.36% | 50.50% | | | | | | | Fixed Cost | $110,00 | $110,000 | $110,000 | | | | | | | Break-even in units | 2,500.00 | 1,487.00 | 2,200.00 | | | | | | | Break-even in dollars | $247,500 | $191,823.00 | $217,800.00 | | | | | | | | | | | | 1. The Break-even points under proposal A is 2,500.00 in units and $247,5000 in dollars. 2. In proposal B the sales price increase, and the contribution margin increase which resulted in less units to be sold to reach the break point. 3. In proposal C the contribution rate was not significantly affected because the contribution rate was not as much as it was in B in comparison to 74.00 to 50.00 and the sale price remain the same.