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1. Jennifer’s Stuffed Animals reported the following:

Revenues $2,000

Variable manufacturing costs $ 600

Variable nonmanufacturing costs $ 460

Fixed manufacturing costs $ 300

Fixed nonmanufacturing costs $ 280

Required:

a. Compute contribution margin.

b. Compute gross margin.

c. Compute operating income.

2. Explain the difference between a static budget and a flexible budget. Explain what is meant by a static budget variance and a flexible budget variance.

3. The textbook discusses a five-step decision process. Briefly explain each of the five steps.

4. Jerry’s TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

Sales (1,000 televisions) $ 900,000

Cost of goods sold 400,000

Store manager’s salary per year 70,000

Operating costs per year 157,000

Advertising and promotion per year 15,000

Commissions (4% of sales) 36,000

What was the variable cost per unit sold for 2011?

5. Bicker, Inc., is in the process of evaluating a new product using the following information:

∙ A new transformer has two production runs each year, each with $10,000 in setup costs.

∙ The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.

∙ Direct costs of producing the transformers are $40,000 per run of 5,000 transformers each.

∙ Indirect manufacturing costs charged to each run are $45,000.

∙ Destination charges for each transformer average $1.00.

∙ Customer service expenses average $0.20 per transformer.

∙ The transformers are selling for $25 the first year and will increase by $3 each year thereafter.

∙ Sales units equal production units each year.

What are estimated life-cycle revenues?