Accounting Problems and Solutions 3

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Accounting Problems and Solutions  3

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, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The Blood Bank has just finished its operations for September, which was a particularly busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. As a consequence, the Blood Bank collected and processed over 20% more blood than had been originally planned for the month.

St. Lucia Blood Bank

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500 70

The	St. Lucia Blood Bank
A report prepared by a government official comparing actual costs to budgeted costs for the Blood Bank appears below. (The currency on St. Lucia is the East Caribbean dollar.) Continued support from the government depends on the Blood Bank’s ability to demonstrate control over their costs.
Cost Control Report
For the Month Ended September Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	3
Actual Budget Variance
Liters of blood collected        620	500
Variable costs:
Medical supplies $9,250 $  7,500 $1,750 U
Lab Tests	6	180	6000
Equipment depreciation	2800	2500	300
Rent		1000
Utilities	5	70
Administration	11740	11250	490
Total expense	31540	28750	2790
The managing director of the Blood Bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all of the figures had been submitted by the Blood Bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget.
Required:
1. Prepare a new performance report for September using the flexible budget approach. (Note: Even though some of these costs might be classified as direct costs rather than as overhead, the flexible budget approach can still be used to prepare a flexible budget performance report.)
2. Do you think any of the variances in the report you prepared should be investigated? Why?

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ion and cost data for the two years are:

Year 1 Year 2

Question Details
During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows:
	Year 1 Year 2
Sales (@ $25 per unit)…………………………….. $1,000,000 $1,250,000
Cost of goods sold (@ $18 per unit)………………. 720,000 900,000
Gross Margin………………………………………. 280,000 350,000
Selling and administrative expenses……………… 210,000 230,000
Net operating income……………………………. 70,000 120,000
$2.00 per unit variable: $130,000 fixed each year
The company’s $18 unit product cost is computed as follows:
Direct Materials………………………………………………………$4
Direct Labor………………………………………………………….$7
Variable Manufacturing Overhead……………………………………$1
Fixed Manufacturing Overhead………………………………………$6
Absorption costing unit product cost………………………………..$18
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.	Product
Units produced…………………………………………. 45,000 45,000
Units Sold………………………………………………. 40,000 50,000
1. Prepare a variable costing contribution format income statement for each year.
2. Reconcile the absorption costing and the variable costing net operating income figures for each year.

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Product
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Olongapo Sports Corporation is the distributor in the Philippines of two premium golf balls�the Flight Dynamic and the Sure Shot. Monthly sales, expressed in pesos (P), and the contribution margin ratios for the two products follow:

Flight Dynamic Sure Shot Total

Sales P 150,000 P 250,000 P 400,000

CM ratio 80% 36% ?

Fixed expenses total P183,750 per month.

Requirement 1:

Prepare a contribution format income statement for the company as a whole. (Round your percentage values to one decimal place, e.g., .1234 as 12.3.

Computer the breakeven point for the company based on the current sales mix.

If sales increase by p100,000 a month, by how much would you expect net operating income to increase. What are your assumptions.