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988 Chapter 21 Cost Behavior and Cost-Volume-Profit Analysis
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January
February
March
PE 21-14 -low method
ufacturing costs of Fuld Industries for three months of the year are prol-:
r
Total Costs Production
51 7s,000
390,000
490,000
7,500 units
20,000
2
5,000
Using the highJow method, determine (a) the variable cost per unit and (b) the : i:-
fixed cost
.
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PE 21-18 High-low method
The manufacturing costs of Greenburg
are provided below.
April
May
June
Using the high-low method, determine
fixed cost.
Enterprises for the first three months of the I ‘;
Total Costs Production
5210,000 2,000 units
320,000 4,000
225,000 2,500
(a) the variable cost per unit and (b) thc : ‘:
PE 21-2A Contribution margin
United Merchants Company sells 4,000 units at $60 per unit’ Variable costs are S+l
unit, and fixed costs ,i. $4O,OOO. Determine (a) the contribution margin ratio, (b
unit
contribution margin, and (c) income from operations’
Break-even point
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PE21-28 Contribution margin
Gluxman Company sells 10,000 units at $25 pet unit. Variable costs ate $22 per -:’r
and fixed costs aie $20,000. Determine (a) the contribution margin ratio, (b) the —
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contribution margin, and (c) income from operations’
6 Enterprises sells a product for $80 per unit. The variable cost is
whil”e fixed .oit, ur” $20,000. Determine (a) the break-even point in sales
$55 Per u: r-
units anc –
the break-even point if the selling price were increased to $87 per unit.
PE 21-38 Break-even Point
Grobe Inc. sells a product for $50 per unit’ The variable cost is $40 per unit’ while fir’-::
costs are $14,000. Determine (a) the break-even point in sales units and
(b) the brg:’
even point if the selling price were decreased to $45 per unit’
Chapter 21 Cost Behavior and Cost-Volume-profit Analysis
PE 21-4A Target profit
Ivey Inc. sells a product for $100 per unit. The variable cost is fi75 per unit, and fixed
costs are $30,000. Determine (a) the break-even point in sales units and (b) the break-
even point in sales units if the company desires a target profit of $10,000.
PE21-48 Target profit
Hofstra Company sells-a product for $120 per unit. The variable cost is $100 per unit,
and fixed costs are $120,000. Determine (ai the break-even point in sales units and 16jthe break-even point in sales units if the company desires a-target profit of $40,000.
Sales mix and break-even analysis
FWnc. has tixed costs of $420,OO0. The unit selling price, variable cost per unit, and
contribution margin per unit for the company’s t*o prodrr.t, are provided below.
.
989
+i *r”r;rs;;g Exarnple{j r;*eii,;c: Exercises
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s8J.3 EE21-4,, t
e;B.j,:r EE z!-E ,,
G$J”5 8F.21-5 r,)rt
G*J.5 EE 21-5 ,,
Product Price Variable Cost Unit Contribution
SBo
62
The sales mix for products L and M is 60o/o and 4O%o,
even point in units of L and M.
L
M
s100
BO
Unit
520
18
respectively. Determine the break-
PE 21-58 Sales mix and break-even analysis
Golub company has fixed costs of $100,000. The unit selling price, variable cost per unit,
and contribution margin per unit for the company,s two products are provided below.
Product Price Variable Cost Unit Contribution Unit
leverage
rprises reports the followin g data:
Sales
Variable costs
Contribution margin
Fixed costs
lncome from operatlons
Determine Emily Enterprises,s operating leverage.
SS
10
respectively. Determine the break-
s 1 80,000
100,000
s 80,000
30,000
$!p99
X S:O
20
S2s
10
The sales mix for products X and y is 75o/o and 25o/o,
even point in units of X and y.
G*j.$ EE2″t^€, t, ,, , PE 21-68 Operating leverage
lTalker Co. reports the following data:
Sales
Variable costs
Contribution margin
Fixed costs
lncome from operations
Determine Walker Co.,s operating leverage.
s600,000
250,000
53s0,000
1 s0,000
s200,000
Margin of safety
tra lnc. has sales of $910,000, and the break-even point in sares dollars is fi746,2o0.
the company’s margin of safety u” a p.rc.rr1 of current sales.
PE21-7AG*J, $ EE2’1-7 t’ , ,t
Detennine
Chapter22 Budgeting 1 045
oBi :: PR22-4A Cash budget
T. ,’v{ay deFicfency. The controller of Santa Fe Hctusewares Inc. insrrucrs you to prepare a mctnthly cash bucl-
;,i30 get for the next three months. You are presented with the following budget information:
March April May
Sales 570,000 584,000 592,000
32,000 39,000 42,s00
1 2,000 1 8,000 21,000
20,000
The company expects to sell about 10% of its merchandise for cash. Of sales on
account, 7O’/o are expected to be collected in full in the month following the sale and
the remainder the follou’ing month. Depreciation, insurance, and propefy tax expense
represent $3,000 of the estimated monthly manufacturing costs. The annual insurance
premium is paid in July, and the annual propef-y- taxes are paid in November. Of the
remainder of the manufacturing costs, 80o/o are expected to be paid in the month in which
they are incurred and the balance in the following rnonth.
Current assets as of March 1 include cash of $10,000, n-rarketable securities of $40,000,
and accounts receivable of $75,600 ($6o,Ooo from February sales and $15,600 fromJanu-
ary sales). Sales on account for January and February were $52,000 and $60,000, respec-
tively. Current liabilities as of March 1 include a $12,000, 15o/o, 9O-day note payable due
May 2O and $4,000 of accounts payable incurred in February for manufacturing costs. All
selling and administrative expenses are paicl in cash in the period they are incurred. It
is expected that $1,800 in dividends will be received in March. An estimated income tax
payment of $16,000 u.ill be rnade in April. Santa Fe’s regular quarterly dividend of $3,000
is expected to be declared in April and paid in N{ay. Management desires to maintain a
minimum cash balance of $30,000.
lnstruetions
1. Prepare a monthly cash budget and supporting schedules for Nlarch, April, and May.
). * On the basis of the cash budget prepared in part (1), what recommendation
should be made to the controller?
BJ.4.,5
1. Budgeied net
come, $44,
800
Budgeted income statement and balance sheet
eFa preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal
year beginning January l, 2013, the following tentative trial balance as of December 37,
2012, is prepared by the Accounting Department of Tahiti Blossom Soap Co.:
Manufacturing costs. . .
Selling and administrative expenses
Capital expenditures . .
Cash ..
Accounts Receivable.
Finished Goods .
Work in Process
Materials
Prepaid Expenses
PIant and Equipment
Accumulated Depreciation-Plant and Equipment
Accounts Payable
Common Stock, $10 par . . . .
Retained Earnings
51 00,000
1 1 2,300
76,700
24,300
54,1 00
3,400
295,000
q\’ si 40,400
59,000
210,000
256,400
$q!499 s66s,800
Factory output and sales for 2Ol3 are expected to total 160,000 units of product, which
are to be sold at $4.50 per unit. The quantities and costs of the inventories at December 31,
2013, are expected to remain unchanged from the balances at the beginning of the year.
r–
1046 Chapter 22 Budgeting
Budget estimates of manufacturing
summarized as follows:
costs and operating expenses for the year
^re
Estimated Costs and Expenses
Fixed Variable
(Total forYear) (Per Unit Sold)
cy
Cost of goods manufactured and sold:
Direct materials……
Direct labor.
Factory overhead:
Depreciation of plant and equipment…….
Other factory overhead.
Selling expenses:
Sales salaries and commissions. . . . .
Advertising
Miscellaneous selling expense ……
Administrative expenses:
Office and officers salaries
Supplies.
Miscellaneous administrative expense
54s,000
8,000
37,000
55,000
5,000
50.90
0.s5
0.35
0.40
0.20
q% s8,200 0.15
4,000 0.08
3,000 0.12
Balances of accounts receivable, prepaid expenses, and accounts payable at the end
of the year are not expected to differ significantly from the beginning balances. Federal
income tax of $20,000 on 2O’J.3 taxable income will be paid during 2013. Regular quar-
tely cash dividends of $0.10 per share are expected to be declared and paid in March,
June, September, and December on 21,000 shares of common stock outstanding. It is
anticipated that fixed assets will be purchased for $60,000 cash in May.
flnstructions
I r. nr”pare a budgeted income statement for 2013.
I Z. Vrrpure a budgeted balance sheet as of December 31,201.3,with supporting calculations.
GSJ.4.
y’ 3. Total revenue
from sales,
s20,373,si 0
PR 22-18 Forecast sales volume and sales budget
Alert Systems Inc. prepared the following sales budget for the cufrent year:
Alert Systems lnc.
Sales Budget
For the Year December3l,2012
(}8,1
/3 E Unit Sales Unit Selling Total Home Alert System:
United States Total .. United States Total .. 18,900
5,400
4,500
28,800
9,s00
3,200
2,700
15,400
52s0 250
250 s800 800 5 4,72s,ooo 1,1 25,000
s 7,200,000
s 7,600,000 2,1 60,000
s12,320,000
s 1 9,520,000
At the end of December 2072, the following unit sales data were reported for the year: Top of Form
1: For problem PE 20-6A, the cost of completed and transferred-out production is:
a. $25,269
2: For problem PE 20-6A, the ending inventory in process is:
a. $765
3: For problem PE 20-7A, the journal entry to record (2) conversion costs is:
a. (Debit) Work in Process—Filling $18,400; (Credit) Factory Overhead—Filling $2,160; (Credit) Wages Payable $2,374
4: For problem PE 20-7A, part b, the balance of Work in Process is:
a. $745
5: For problem PE 21-2A, part a, the contribution margin ratio is:
a. 10%
6: For problem PE 21-2A, part b, the unit contribution margin ratio is:
a. $9.00
7: For problem PE 21-2A, part c, the income from operations is:
a. $20,000
8: For problem PE 21-3A, part a, the break-even point in sales units is:
a. 800
9: For problem PE 21-3A, part b, the break-even point if the selling price were increased to $65 per unit is:
a. 765
10: For problem PE 21-4A, part a, the break-even point in sales units is:
a. 1,500
11: For problem PE 21-4A, part b, the break-even point in sales units if the company desires a target profit of $15,000 is:
a. 3,500
12: For problem PE 21-5A the total break-even point in units is:
a. 8,000
13: For problem PE 21-6A the operating leverage is:
a. 2.8
14: For problem PE 21-7A the margin of safety is:
a. 10%
15: For problem PR 22-5A, part 1, net income is:
a. $45,800
16: For problem PR 22-5A, part 2, Total liabilities and stockholders’ equity is:
a. $561,800
17: For problem PR 22-5A, part 2, the ending Balance, December 31, 2013 is:
a. $294,800
18: Cost behavior refers to the methods used to estimate costs for use in managerial decision making.
a. True
19: Cost behavior refers to the manner in which a cost changes as the related activity changes.
a. True
20: The fixed cost per unit varies with changes in the level of activity.
a. True
21: A production supervisor’s salary that does not vary with the number of units produced is an example of a fixed cost.
a. True
22: Direct materials cost that varies with the number of units produced is an example of a fixed cost of production.
a. True
23: A formal written statement of management’s plans for the future, expressed in financial terms, is called a budget.
a. True
24: Budgets are normally used only by profit-making businesses.
a. True
25: The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals.
a. True
26: When budget goals are set too tight, the budget becomes less effective as a tool for planning and controlling operations.
a. True
27: Process cost systems use job order cost cards to accumulate cost data.
a. True
28: Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.
a. True
29: If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system.
a. True
30: If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system.
a. True Bottom of Form
ma
Product and Area
Volume Price
Sales
Europe .
Asia . ..
Business Alert System:
Europe .
Asia…
Total revenue from sales
800
1,350,000
2,560,000
b. $24,269
c. $23,269
d. None of the above
b. $775
c. $785
d. $795
b. (Debit) Factory Overhead—Filling $4,534; (Credit) Work in process Factory Overhead—Filling $2,160; (Credit) Wages Payable $6,900
c. (Debit) Wages Payable $8,794; (Credit) Factory Overhead—Filling $6,900; (Credit) Work in Process $2,374
d. None of the above
b. $735
c. $725
d. $765
b. 25%
c. 30%
d. 45%
b. $15.00
c. $11.00
d. $12.00
b. $40,000
c. $60,000
d. $80,000
b. 2,500
c. 1,000
d. 900
b. 2,500
c. 625
d. 2,300
b. 2,500
c. 1,300
d. 1,200
b. 1,600
c. 3,300
d. 2,300
b. 20,875
c. 21,875
d. 22,875
b. 1.9
c. 2.2
d. 1.6
b. 14%
c. 18%
d. 24%
b. $44,800
c. $43,800
d. $42,800
b. $563,800
c. $565,800
d. $567,800
b. $284,800
c. $292,800
d. $272,800
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
b. False
