Search here for Tutorials

If the Data is different in your question, please send your questions to homeworksolutionsnow@gmail.com. The questions will be answered at the same price.

Week4 BA225 Assignment Application Problem 4


 Application Problems Week 4
Page 209: Brief Exercises 5-1, 5-2, 5-4
BE5-1 Monthly production costs in Dilts Company for two levels of production are as
follows.
Cost 2,000 Units4,000 Units
Indirect labor $10,000 $20,000
Supervisory salaries 5,000 5,000
Maintenance 4,000 6,000
Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.

BE5-2 For Lodes Company, the relevant range of production is 40–80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear.

BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level.
Miles                Total                                        Miles                Total
Driven             Cost                                         Driven Cost
 January           8,000               $14,150           March              8,500               $15,000
 February         7,500               13,500             April                8,200               14,490
Compute the variable- and fixed-cost elements using the high-low method.

Pages 260-261: Exercises 6-2, 6-5, 6-7
E6-2 In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales.

Instructions
(a) Determine the contribution margin in dollars, per unit and as a ratio.
(b) Using the contribution margin technique, compute the break-even point in dollars and in units.
(c) Compute the margin of safety in dollars and as a ratio.

E6-5 Carey Company had sales in 2016 of $1,560,000 on 60,000 units. Variable costs totaled $900,000, and fixed costs totaled $500,000.
 A new raw material is available that will decrease the variable costs per unit by 20% (or $3). However, to process the new raw material, fixed operating costs will increase by $100,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold.

Instructions
Prepare a projected CVP income statement for 2017 (a) assuming the changes have not been made, and (b) assuming that changes are made as described.

E6-7 PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 40% contribution margin ratio. The company’s fixed costs are $15,600,000 (that is, $78,000 per service outlet).

Instructions
(a) Calculate the dollar amount of each type of service that the company must provide in order to break even.

(b) The company has a desired net income of $52,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet? 

TUTORIAL PREVIEW
Cost
2,000 Units
4,000 Units
Reason
Indirect labor

$10,000
$20,000
Variable cost as the cost increases proportionately with increase in output.
Supervisory salaries

5,000
5,000
Fixed cost as the cost does not change with change in output.


File name: Week4 BA225 Assignment Application Problem 4.doc File type: .doc PRICE: $20