20840_1_example-problems-ch.-5-6
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20840_1_example-problems-ch.-5-6

Course Number: MANAGEMENT 503, Spring 2012

College/University: Lahore University of...

Word Count: 6016

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Question 1: Score 0/4 Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban fixed weekly expense of a coffee stand is $1,200 and the variable cost per cu served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of c indicated levels of activity for a coffee stand....

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1: Question Score 0/4 Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban fixed weekly expense of a coffee stand is $1,200 and the variable cost per cu served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of c indicated levels of activity for a coffee stand. (Round average cost per cup of decimal places. Omit the "$" sign in your response.) Cups of Coffee Served in a Week 2,000 2,100 Fixed cost Variable cost Total cost Average cost per cup of coffee served $ $ $ 0.60 0.22 0.82 0.792 2,200 (0%) (0%) (0%) (0%) $ $ $ 0.571 0.22 0.791 0.792 Total grade: 0.01/12 + 0.01/12 + 0.01/12 + 0.01/12 + 0.01/12 + 0.01/12 + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: Average cost per cup of coffee served = Total cost cups of coffee served in a we Requirement 2: Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Your Answer: Choice Increases Decreases Remains the same Feedback: Selected Correct The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee. Question 2: Score 0/4 Your response Exercise 6-2 Prepare a Cost-Volume-Profit (CVP) Graph [LO2] Correct response Exercise 6-2 Prepare a Cost-Volume-Profit (CVP) Graph [LO2] Karlik Enterprises distributes a single product whose selling price is $24 and whose variable Karlik Enterprises distributes a single product whose selling price is $24 and whose variable expense is $18 per unit. The company's monthly fixed expense is $24,000. expense is $18 per unit. The company's monthly fixed expense is $24,000. Requirement 1: Requirement 1: Offline: Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 Offline: Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units. units. Requirement 2: Requirement 2: Estimate the company's break-even point in unit sales using your cost-volume-profit graph Estimate the company's break-even point in unit sales using your cost-volume-profit graph analysis. analysis. Break-even point in sales Total grade: 0.01/1 = 0% Feedback: The break-even point is the point where the total sales revenue and the total expense lines intersect. This occurs at sales of 4,000 units. This can be verified as follows: 16.67 (0%) units Break-even point in sales 4,000 units Question 3: Score 2.6/4 Your response Exercise 5-3 High-Low Method [LO3] The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer. Occ upa ncyMon Day th s January February Electrical Costs 1,736 1,904 $ 4,127 $ 4,207 March April May June July August September October November December 2,356 960 360 744 2,108 2,406 840 124 720 1,364 $ 5,083 $ 2,857 $ 1,871 $ 2,696 $ 4,670 $ 5,148 $ 2,691 $ 1,588 $ 2,454 $ 3,529 Requirement 1: Using the high-low method, estimate the variable cost of electricity per occupancy-day and the fixed cost of electricity per month. (Round the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. Omit the "$" sign in your response.) Variable cost Fixed cost $ $ 1.56 1394 (50%) per occupancy day (0%) per month Total grade: 1.01/2 + 0.01/2 = 50% + 0% Feedback: Occu pancy Days High activity level (August) Low activity level (October) Change Electrical Costs 2,406 124 2,282 $ 5,148 1,588 $ 3,560 Variable cost = Change in cost Change in activity = $3,560 2,282 occupancy-days = $1.56 per occupancy-day Total cost (August) Variable cost element ($1.56 per occupancy-day 2,406 occupancydays) Fixed cost element Requirement 2: Which of the following statement(s) is true? (Select all that apply.) Choice Electrical cost may reflect seasonal factors other than just the variation in occupancy days Fixed cost will not be affected by the number of days in a month Less systematic factors such as frugality of individual guests may also affect electrical costs Total correct answers: 2 Partial Grading Explained Selected Yes No Yes Feedback: Electrical costs may reflect seasonal factors other than just the variation in occupancy days For example, common areas such as the reception area must be lighted for longer period during the winter than in the summer. This will result in seasonal fluctuations in the fixe electrical costs. Additionally, fixed costs will be affected by the number of days in a month. In othe words, costs like the costs of lighting common areas are variable with respect to the numbe of days in the month, but are fixed with respect to how many rooms are occupied during th month. Other, less systematic, factors may also affect electrical costs such as the frugality o individual guests. Some guests will turn off lights when they leave a room. Others will not. Question 4: Score 2.48/4 Your response Exercise 5-4 Contribution Format Income Statement [LO4] The Alpine House, Inc., is a large retailer of winter sports equ for the company's Ski Department for a recent quarter is presen The Alpine House, Inc. Income Statement--Ski Department For the Quarter Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Net operating income $ 30,000 10,000 $ $ 150,00 90,00 60,00 40,00 20,00 Skis sell, on the average, for $750 per pair. Variable selling skis sold. The remaining selling expenses are fixed. The adm variable and 80% fixed. The company does not manufacture it from a supplier for $450 per pair. Requirement 1: Prepare a contribution format income statement for the quarter response.) The Alpine House, Inc. Income Statement--Ski Department For the Quarter Ended March 31 Sales (6%) (6%) (6%) $ 90000 10000 2000 Variable expenses: Cost of goods sold Selling expenses (6 (6%) (6%) (0%) (6%) (6 Administrative expenses Contribution margin (6 Fixed expenses: Advertising expenses Administrative expenses Net operating income 90000 8000 (0 (6 (6%) Total grade: 1.01/18 + 1.01/18 + 1.01/18 + 1.01/18 + 1.0 + 0.01/18 + 1.01/18 + 0.01/18 = 6% + 6% + 6% + 6% + 6% Feedback: Cost of goods sold (200 pairs* $450 per pair) Variable selling expenses (200 pairs $50 per pair) Variable administrative expenses (20% $10,000) Fixed selling expenses [$30,000 (200 pairs $50 per pair)] Fixed administrative expenses (80% $10,000) *$150,000 $750 per pair = 200 pairs $ 90, 10, 2, 20, 8, Your response Requirement 2: Requi For every pair of skis sold during the quarter, what was the contributio For ev fixed expenses and toward earning profits? (Omit the "$" sign in your re fixed e Contribution margin per pair E5_4_id4 E5_4_id6 $ 50 (0%) Contri E5_4_ E5_4_ E5_4_id8 E5_4_id13 E5_4_id15 Total grade: 0.01/1 = 0% Feedback: E5_4_ E5_4_ E5_4_ Since 200 pairs of skis were sold and the contribution margin totaled $48, the contribution of each pair of skis toward covering fixed costs and profits was $240 ($48,000 200 pairs = $240 per pair). Another way to co Selling price per pair Variable expenses: Cost per pair Selling expenses Administrative expenses ($2,000 200 pairs) Contribution margin per pair $ 450 50 10 $ $ Question 5: Score 1.2/4 Your response Harris Company manufactures and sells a single product. Requirement 1: Exercise 5-5 Cost Behavior; Contribution Format Income S A partially completed schedule of the company's total and pe range of 30,000 to 50,000 units produced and sold annually is of the company's total and unit costs below (Round the "total amount and the "cost per unit" to 2 decimal places. O response) : Units Produced and Sold 30,000 Total costs: Variable costs Fixed costs Total costs Cost per unit: $ $ 180,000 $ 300,000 480,000 $ 190000 310000 500000 40,000 (0%) $ (0%) (0%) $ 2000 3200 5200 Variable cost Fixed cost Total cost per unit $ 3.6 6 (0%) $ (0%) (0%) $ 3.8 6.2 10.0 (0%) $ (0%) (0%) $ 4 6.4 6.8 $ 9.6 Total grade: 0.01/15 + 0.01/15 + 0.01/15 + 0.01/15 + 0.0 = 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0 Feedback: The company's variable cost per unit is: Your response Requirement 2: Requi Assume that the company produces and sells 45,000 units during the year $16 per unit. Prepare a contribution format income statement for th Assum amounts as positive values. Omit the "$" sign in your response.)$16 p amou Income Statement For the Year Ended Sales (10%) (10%) $ 720000 513000 207000 (10%) (0%) (0%) (0%) (0%) Variable expenses Sales Varia Contribution margin (10%) Fixed expense Net operating income (10%) Contr (10%) $ 279000 -70000 Fixed Net o Total grade: 1.01/10 + 1.01/10 + 1.01/10 + 0.01/10 + 1.01/10 + 0.0 0% + 10% + 0% + 10% + 0% + 10% + 0% Feedback: Sales (45,000 units $16 per unit) = $720,000 Variable expenses (45,000 units $6 per unit) = $270,000 Question 6: Score 0.66/4 Your response Exercise 5-6 High-Low Method [LO2, LO3] The following data relating to units shipped and total shipping expense have been assembled by Archer Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings: Month January February March April May June July Units Shipped Total Shipping Expense 3 6 4 5 7 8 2 $ 1,800 $ 2,300 $ 1,700 $ 2,000 $ 2,300 $ 2,700 $ 1,200 Requirement 1: Using the high-low method, estimate the cost formula for shipping expense where X is the number of units shipped. (Omit the "$" sign in your response.) Y =$ 5 (0%) + $ 5 (0%) X Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Units Shipping Expense Shipped High activity level (June) Low activity level (July) Change Variable cost element: 8 2 6 $ 2,700 1,200 $ 1,500 Fixed cost element: Shipping expense at the high activity level Less variable cost element ($250 per unit 8 units) Total fixed cost The cost formula is $700 per month plus $250 per unit shipped or Y = $700 + $250X, where X is the number of units shipped. Requirement 2: What factors, other than the number of units shipped, are likely to affect the company's total shipping expense? (Select all that apply.) Choice Weight of the units shipped Distance travelled Size of the units shipped Fixed cost Variable cost Total correct answers: 3 Partial Grading Explained Selected No Yes Yes Yes No Points +1 +1 -1 Feedback: The cost of shipping units is likely to depend on the weight and volume of the units and th distance traveled, as well as on the number of units shipped. In addition, higher cost shipping might be necessary to meet a deadline. Question 7: Score 0/4 Your response Exercise 5-7 Cost Behavior; High-Low Method [LO1, LO3] Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 cents per kilometer.(The Singapore dollar is the currency used in Singapore.) Requirement 1: Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places. Omit the "$" sign in your response.) Variable cost per kilometer $ Fixed cost per year $ 5 5 (0%) (0%) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Kilometers Driven High level of activity Low level of activity Change Total Annual Cost* 105,000 $ 70,000 35,000 $ 11,970 9,380 2,590 * 105,000 kilometers $0.114 per kilometer = $11,970 70,000 kilometers $0.134 per kilometer = $9,380 Variable cost per kilometer: Fixed cost per year: Total cost at 105,000 kilometers Less variable portion: 105,000 kilometers $0.074 per kilometer Fixed cost per year $ $ Requirement 2: Express the variable and fixed costs in the f kilometer to 3 decimal places. Omit the "$ Total grade: Your response Requirement 3: If a truck were driven 80,000 kilometers during a year, what total cost would you expect to be incurred? (Omit the "$" sign in your response.) Total annual cost $ 400000 (0%) Total grade: 0.01/1 = 0% Feedback: Fixed cost Variable cost: 80,000 kilometers $0.074 per kilometer Total annual cost $ 4,200 5,920 $ 10,120 Question 8: Score 0/4 Your response Exercise 5-8 High-Low Method; Predicting Cost [LO1, LO3] The Lakeshore Hotel's guest-days of occupancy and custodial supplies expense over the last seven months were: Guest-Days of Occupancy Custodial Supplies Expense 4,000 $ 6,500 $ 8,000 $ 10,500 $ 12,000 $ 9,000 $ 7,500 $ 7,500 8,250 10,500 12,000 13,500 10,750 9,750 Month March April May June July August September Guest-days is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is counted as three guest-days. Requirement 1: Using the high-low method, estimate a cost formula for custodial supplies expense where X is the number of guest-days. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) 5 5 Y = $ (0 + %) $ (0 X %) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Guest-Days High activity level (July) Low activity level (March) Custodial Supplies Expense 12,000 $ 4,000 13,500 7,500 Change 8,000 $ 6,000 Variable cost element: Fixed cost element: Custodial supplies expense at high activity $ 13,500 level Less variable cost element: 12,000 guest-days $0.75 per guest-day Total fixed cost $ 9,000 4,500 The cost formula is $4,500 per month plus $0.75 per guest-day or Y = $4,500 + $0.75X Your response Requirement 2: Using the cost formula you derived above, what amount of custodial supplies expense would you expect to be incurred at an occupancy level of 11,000 guest-days? your response.) Variable cost Fixed cost Total cost $ $ 50 100 150 (0%) (0%) (0%) Total grade: 0.01/3 + 0.01/3 + 0.01/3 = 0% + 0% + 0% Feedback: Variable cost (11,000 guest-days $0.75 per guest-day) = $8,250 Question 9: Score 0/4 Your response Exercise 5-10 High-Low Method; Predicting Cost [LO1, LO3] St. Mark's Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are $32 per occupied bed per day, assuming a 30day month. This $32 figure contains both variable and fixed cost elements. During June, the hospital's occupancy rate was only 60%. A total of $326,700 in operating cost was incurred during the month. Requirement 1: (a) Estimate the variable cost per occupied bed on a daily basis using the high-low method. (Omit the "$" sign in your response.) Variable cost per bed-day $ Total grade: 0.01/1 = 0% Feedback: Difference in cost: 50 (0%) Monthly operating costs at 80% occupancy: 450 beds 80% = 360 beds; 360 beds 30 days $32 per bed-day Monthly operating costs at 60% occupancy (given) Difference in cost Difference in activity: 80% occupancy (450 beds 80% 30 days) 60% occupancy (450 beds 60% 30 days) Difference in activity 10,800 8,100 2,700 Your response (b) Estimate the total fixed operating costs per month using the high-low method. "$" sign in your response.) Fixed operating costs per month $ 50000 (0%) Total grade: 0.01/1 = 0% Feedback: Monthly operating costs at 80% occupancy (above) Less variable costs: 360 beds 30 days $7 per bed-day Fixed operating costs per month Your response Requirement 2: Assume an occupancy rate of 70% per month. What amount of total operating cost would you expect the hospital to incur? (Omit the "$" sign in your response.) Fixed costs Variable costs Total expected costs $ $ 500 50 550 (0%) (0%) (0%) Total grade: 0.01/3 + 0.01/3 + 0.01/3 = 0% + 0% + 0% Feedback: 450 beds 70% = 315 beds occupied: Variable costs: 315 beds 30 days $7 per bed-day = 66,150 Question 10: Score 0.8/4 Your response Exercise 6-1 Preparing a Contribution Format Income Statement [LO1] Whirly Corporation's most recent income statement is shown below: Total Sales (10,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $ Per Unit $ 350,000 $ 35.00 200,000 135,000 15,000 20.00 150,000 $ 15.00 Prepare a new contribution format income statement under each of the following conditions (consider each case independently): Requirement 1: The sales volume increases by 100 units. (Omit the "$" sign in your response.) Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 350000 200000 150000 135000 15000 (0%) (0%) (0%) (20%) (0%) Total grade: 0.01/5 + 0.01/5 + 0.01/5 + 1.01/5 + 0.01/5 = 0% + 0% + 0% + 20% + 0% Feedback: Sales (10,100 $35.00) = $353,500 Variable expenses (10,100 $20.00) = $202,000 You can get the same net operating income using the following approach. Original net operating income Change in contribution margin (100 units $15.00 per unit) New net operating income $ 15,000 1,500 $ 16,500 Your response Requirement 2: The sales volume decreases by 100 units. (Omit the "$" sign in your response.) Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 350000 200000 150000 135000 15000 (0%) (0%) (0%) (20%) (0%) Total grade: 0.01/5 + 0.01/5 + 0.01/5 + 1.01/5 + 0.01/5 = 0% + 0% + 0% + 20% + 0% Feedback: Sales (9,900 $35.00) = $346,500 Sales (9,900 $20.00) = $198,000 You can get the same net operating income using the following approach. Original net operating income Change in contribution margin (-100 units $15.00 per unit) New net operating income $ 15,000 (1,500) $ 13,500 Your response Requirement 3: The sales volume is 9,000 units. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 350000 200000 150000 135000 15000 (0%) (0%) (0%) (20%) (0%) Total grade: 0.01/5 + 0.01/5 + 0.01/5 + 1.01/5 + 0.01/5 = 0% + 0% + 0% + 20% + 0% Feedback: Sales (9,000 $35.00) = $315,000 Variable expenses (9,000 $20.00) = $180,000 Note: This is the company's break-even point Question 11: Score 0/4 Your response Exercise 6-4 Computing and Using the CM Ratio [LO3] Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variable expenses were $120,000, and fixed expenses were $65,000. Requirement 1: What is the company's contribution margin (CM) ratio? response.) Contribution ratio margin 5 (0%) % Total grade: 0.01/1 = 0% Feedback: The company's contribution margin (CM) ratio is: Total sales Total variable expenses = Total contribution margin Total sales = CM ratio $ 200,000 120,000 80,000 $ 200,000 40% Your response Requirement 2: Estimate the change in the company's net operating income if it were to increase its total sales by $1,000.(Omit the "$" sign in your response.) Estimated change in net operating income Total grade: 0.01/1 = 0% Feedback: The change in net operating income from an increase in total sales of $1,000 can be estimated by using the CM ratio as follows: $ 500 (0%) Change in total sales CM ratio = Estimated change in net operating income $ 1,000 40 % $ 400 Question 12: Score 2.66/4 Your response Exercise 6-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO4] Data for Hermann Corporation are shown below: Per unit Selling price Variable expenses Contribution margin $ $ Percent of Sales 90 63 27 100 % 70 % 30 % Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Requirement 1: (a) Calculate the change in net operating income if a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. be indicated by a minus sign. Omit the "$" sign in your response.) 5 0 0 Change in net operating income $ ( 0 % ) Total grade: 0.01/1 = 0% Feedback: The following table shows the effect of the proposed change in monthly advertising budget: Sal es wit h Ad diti ona l Ad Cur vert rent isin g sale Bud s get Sales Variable $ 180,000 126,000 Difference $ 189,000 132,300 $ expenses Contribution margin Fixed expenses Net operating income $ 54,000 30,000 24,000 $ 56,700 35,000 21,700 ($ (b) Your Answer: Choice Selected Yes No Feedback: Assuming no other important factors need to be considered, the increase in the advertisin budget should not be approved because it would lead to a decrease in net operating incom of $2,300. Requirement 2: Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $2 per unit. The marketing manager believes the higherquality product would increase sales by 10% per month. Should the higher-quality components be used? Your Answer: Choice Selected Yes No Feedback: The $2 increase in variable cost will cause the unit contribution margin to decrease from to $25 with the following impact on net operating income: Expected total contribution margin with the higher-quality components: 2,200 units $25 per unit $ Present total contribution margin: 2,000 units $27 per unit Change in total contribution margin $ 55,000 54,000 1,000 Assuming no change in fixed costs and all other factors remain the same, the higher-qua components should be used. Question 13: Score 0/4 Your response Exercise 6-6 Compute the Level of Sales Required to Attain a Target Profit [LO5] Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The company's monthly fixed expense is $50,000. Requirement 1: Using the equation method, solve for the unit sales that are required to earn a target profit of $10,000. Unit sales to earn target profit 5 (0 units %) Total grade: 0.01/1 = 0% Feedback: The equation method yields the required unit sales, Q, as follows: Profit = [Unit CM Q] - Fixed expenses $10,000 = [($120 - $80) Q] - $50,000 $10,000 = [($40) Q] - $50,000 $40 Q = $10,000 + $50,000 Q = $60,000 $40 Q = 1,500 units Your response Requirement 2: Using the formula method, solve for the unit sales that are required to earn a target profit of $15,000. Unit sales to earn target profit Total grade: 0.01/1 = 0% Feedback: The formula approach yields the required unit sales as follows: 50 (0%) unit s Question 14: Score 0/4 Your response Exercise 6-7 Compute the Break-Even Point [LO6] Mauro Products distributes a single product, a woven basket whose selling price is $15 and whose variable expense is $12 per unit. The company's monthly fixed expense is $4,200. Requirement 1: Solve for the company's break-even point in unit sales using the equation method. Break-even point in unit sales Total grade: 0.01/1 = 0% Feedback: The equation method yields the break-even point in unit sales, Q, as follows: Profit = [Unit CM Q] - Fixed expenses $0 = [($15 - $12) Q] - $4,200 $0 = [($3) Q] - $4,200 $3Q = $4,200 Q = $4,200 $3 Q = 1,400 baskets The formula method gives an answer that is identical to the equation method for the breakeven point in unit sales: Fixed Unit sales to break even = expenses Unit CM = $4,200 $3 = 1,400 baskets 500 (0%) baskets Your response Requirement 2: Solve for the company's break-even point in sales dollars using the equation method and the CM ratio. (Omit the "$" sign in your response.) Break-even point in sales $ 500 (0%) Total grade: 0.01/1 = 0% Feedback: The equation method can be used to compute the break-even point in sales dollars as follows: Unit contribution margin CM ratio = Unit selling price $3 = $15 = 0.2 0 Profit = [CM ratio Sales] - Fixed expenses $0 = [0.20 Sales] - $4,200 0.20 Sales = $4,200 Sales = $4,200 0.20 Sales = $21,000 The formula method also gives an answer that is identical to the equation method for the break-even point in dollar sales: Fixed Dollar sales to break even = expenses CM ratio $4,200 = 0.20 = $21,00 15: 0 Question Score 0/4 Your response Exercise 6-8 Compute the Margin of Safety [LO7] Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below: Selling price Variable expenses Fixed expenses Unit sales $ $ 30 per unit 20 per unit 1,000 units per month $ 7,500 per month Requirement 1: Compute the company's margin of safety. (Omit the "$" sign in your response.) Margin of safety $ 500 (0%) Total grade: 0.01/1 = 0% Feedback: To compute the margin of safety, we must first compute the break-even unit sales. Profit =[Unit CM Q] - Fixed expenses $0 =[($30 - $20) Q] - $7,500 $0 =[($10) Q] - $7,500 $10Q =$7,500 Q =$7,500 $10 Q =750 units Sales (at the budgeted volume of 1,000 $ 30,000 units) Less break-even sales (at 750 units) Margin of safety (in dollars) $ 22,500 7,500 Your response Requirement 2: Compute the company's margin of safety as a percentage of its sales. in your response.) Margin of safety as a percentage of sales Total grade: 0.01/1 = 0% 5 (0%) % Feedback: The margin of safety as a percentage of sales is as follows: Margin of safety (in dollars) Sales Margin of safety percentage $ 7,500 25% $ 30,000 Question 16: Score 0.19/4 Your response Exercise 6-9 Compute and Use the Degree of Operating Leverage [LO8] Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amou nt Sales Variable expenses Contribution margin Fixed expenses Percent of Sales $ 80,000 32,000 48,000 38,000 100 % 40 % 60 % Net operating income $ 10,000 Requirement 1: Compute the company's degree of operating leverage. place.) Degree of operating leverage 1000 (0%) Total grade: 0.01/1 = 0% Feedback: The company's degree of operating leverage would be computed as follows: Contribution margin Net operating income Degree of operating leverage $ 48,000 $ 10,000 4.8 Your response Requirement 2: Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (Omit the "%" sign in your response.) Estimated percent change in net operating income Total grade: 0.01/1 = 0% Feedback: A 5% increase in sales should result in a 24% increase in net operating income, computed as follows: 5 Degree of operating leverage Percent increase in sales Estimated percent increase in net operating income 4.8 5 24 Requirement 3: Verify your estimate from requirement (2) a income statement for the company assumin "%" sign in your response.) Sales Variable expenses Contribution margin Fixed expenses Net operating income Original net operating income Percent change in net operating income Total grade: + 14% + 0% + 0% + 0% Question 17: Score 0/4 Your response Exercise 6-10 Compute the Break-Even Point for a Multiproduct Com Exerc Lucido Products markets two computer games: Claimjumper and Makeo Lucido format income statement for a recent month for the two games appear forma page: page: Claimju Makeove mper r Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ $ 30,000 20,000 10,000 $ $ Total 70,000 50,000 20,000 $ 100,000 Sales 70,000 Variab 30,000 Contri 24,000 Fixed 6,000 op Net incom Requirement 1: Requi Compute the overall contribution margin (CM) ratio for the company. Comp in your response.) in you Overall CM ratio 5 (0%) % Overa Total grade: 0.01/1 = 0% Feedback: The overall contribution margin ratio can be computed as follows: Your response Requirement 2: Requi Compute the overall break-even point for the company in sales dollars. Comp in your response.) in you Overall breakeven $ 500 (0%) Overa Total grade: 0.01/1 = 0% Feedback: The overall break-even point in sales dollars can be computed as follows: Your response Requirement 3: Verify the overall break-even point for the company by const income statement showing the appropriate levels of sales for th answers to the nearest dollar amount. Do not round your in cells blank - be certain to enter "0" wherever required. Om your response.) Claimj Makeo umper ver Original dollar sales Sales at breakeven $ $ 50 2 Total (0%) (0%) $ $ 500 10 (0%) (0%) $ $ 5 Claimju Makeove mper r Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 50 20 30 Total 500 30 470 (0%) $ (0%) (0%) $ (0%) $ (0%) (0%) 5000 400 4600 500 $ 4100 Total grade: 0.01/17 + 0.01/17 + 0.01/17 + 0.01/17 + 0.0 + 0.01/17 + 0.01/17 = 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: Claimjumper variable expenses: ($24,000/$30,000) $20,000 = Makeover variable expenses: ($56,000/$70,000) $50,000 = $4 Question 18: Score 1/4 Your response Exercise 6-11 Using a Contribution Format Income Statement [LO1, LO4] Miller Company's most recent contribution format income statement is shown below: Total Sales (20,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $ Per Unit $ 300,000 180,000 120,000 70,000 50,000 $ $ 15.00 9.00 6.00 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Round your per unit values to 2 decimal places. Omit the "$" sign in your response.) (a) The number of units sold increases by 15%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ Per Unit 300000 180000 120000 70000 50000 (0%) $ 15 (0%) (0%) $ (13%) (0%) Total grade: 0.01/8 + 1.01/8 + 0.01/8 + 1.01/8 + 0.01/8 + 1.01/8 + 1.01/8 + 0.01/8 = Feedback: Sales (20,000 units 1.15 = 23,000 units) Your response (b) The selling price decreases by $1.50 per unit, and the number of units sold increases by 25%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 300000 180000 120000 70000 50000 Per Unit (0%) $ (0%) (0%) $ (13%) (0%) 6 15 Total grade: 0.01/8 + 0.01/8 + 0.01/8 + 1.01/8 + 0.01/8 + 0.01/8 + 1.01/8 + 0.01/8 = Feedback: Sales (20,000 units 1.25 = 25,000 units) Your response (c) The selling price increases by $1.50 per unit, fixed expenses increase by $20,000, and the number of units sold decreases by 5%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 300000 180000 120000 70000 50000 Per Unit (0%) $ (0%) (0%) $ (0%) (0%) 6 15 Total grade: 0.01/8 + 0.01/8 + 0.01/8 + 1.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 = Feedback: Sales (20,000 units 0.95 = 19,000 units) Your response (d) The selling price increases by 12%, variable expenses increase by 60 cents per unit, and the number of units sold decreases by 10%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 300000 180000 120000 70000 50000 Per Unit (0%) $ (0%) (0%) $ (13%) (0%) 15 9 6 Total grade: 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 1.01/8 + 0.01/8 = Feedback: Sales (20,000 units 0.90 = 18,000 units) Question 19: Score 0/4 Your response Exercise 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7] Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Sales Variable expenses Contribution margin Fixed expenses Net operating income $ Per Unit $ 450,000 $ 30 180,000 216,000 54,000 12 270,000 $ 18 Requirement 1: What is the monthly break-even point in units sold and in sales dollars? in your response.) Monthly breakeven point Sales $ 5 50000 (0%) units (0%) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Profit = Unit CM Q - Fixed expenses $0Q = ($30 - $12) Q - $216,000 $0Q = ($18) Q - $216,000 $18Q = $216,000 Q = $216,000 $18 Q = 12,000 units, or at $30 per unit, $360,000 Your response Requirement 2: Without resorting to computations, what is the total contribution margin at the break-even point? (Omit the "$" sign in your response.) Total contribution margin at the break-even $ point Total grade: 0.01/1 = 0% Feedback: The contribution margin is $216,000 because the contribution margin is equal to the fixed expenses at the break-even point. 500 Your response Requirement 3: How many units would have to be sold each month to earn a target profit of $90,000? Use the formula method. Units sold 500 (0%) units Total grade: 0.01/1 = 0% Feedback: Your response Requirement 4: Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. (Omit the "$" and "%" signs in your response.) Dollars Margin of safety $ 50 Percentage (0%) 5 (0%) % Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Margin of safety in dollar terms: Margin of safety in percentage terms: Your response Requirement 5: What is the company's CM ratio? If sales increase by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? (Omit the "$" and "%" signs in your response.) CM ratio Increase in net operating income $ 5 500 (0%) (0 %) % Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: The CM ratio is 60%. Expected total contribution margin: ($500,000 $ 300,000 60%) Present total contribution margin: ($450,000 60%) Increase in contribution margin $ 270,000 Given that the company's fixed expenses will not change, monthly net operating income will also increase by $30,000. Alternative solution: $50,000 incremental sales 60% CM ratio = $30,000 Question 20: Score 0/4 Your response Exercise 6-13 Target Profit and Break-Even Analysis [LO3, LO4, LO5, LO6] Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company's fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year. Requirement 1: What are the variable expenses per unit? (Omit the "$" sign in your response.) Variable expenses per unit $ 40 (0 %) Total grade: 0.01/1 = 0% Feedback: Variable expenses: $40 (100% 30%) = $28. Your response Requirement 2: Use the equation method for the following: (a) What is the break-even point in units and sales dollars? response.) Break-even point in units Break-even point in sales dollars $ 40 400 (0%) units (0%) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Selling price Variable expenses Contribution margin $ 40 100 % 28 $ 12 70 % 30 % Profit =Unit CM Q - Fixed expenses $0 =$12 Q - $180,000 $12Q =$180,000 Q =$180,000 $12 Q =15,000 units In sales dollars: 15,000 units $40 per unit = $600,000 Your response (b) What sales level in units and in sales dollars is required to earn an annual profit of $60,000? (Omit the "$" sign in your response.) Sales level in units Sales level in dollars $ 50 5000 (0%) units (0%) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Profit =[Unit CM Q] - Fixed expenses $60,000 =[$12 Q] - $180,000 $12Q =$60,000 + $180,000 $12Q =$240,000 Q =$240,000 $12 Q =20,000 units In sales dollars: 20,000 units $40 per unit = $800,000 Your response (c) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit. What is the company's new break-even point in units and sales dollars? (Omit the "$" sign in your response.) New break-even point in units New break-even point in sales dollars $ 50 5000 (0%) units (0%) Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: The company's new cost/revenue relation will be: Selling price Variable expenses ($28 $4) Contribution margin $ 40 100 % 24 $ 16 60 % 40 % Profit =[Unit CM Q] - Fixed expenses $0 =[($40 - $24) Q] - $180,000 $16Q =$180,000 Q =$180,000 $16 Q =11,250 units In sales dollars: 11,250 units $40 per unit = $450,000 Question 21: Score 0.25/4 Your response Exercise 6-14 Missing Data; Basic CVP Concepts [LO1, LO9] Fill in the missing amounts in each of the eight case situations below. Ea independent of the others. (Hint: One way to find the missing amounts would be t contribution format income statement for each case, enter the known data, and the the missing items.) Requirement 1: Assume that only one product is being sold in each of the four following case (Omit the "$" sign in your response.) Case #1 Case #2 Case #3 Units Sold Sales Variable Expenses Contribution Margin Fixed expenses Net Operating Income (Loss) Contribution Margin per Unit $ 5000 Case #4 (0%) 100,000 $ 250000 15,000 $ 180,000 $ 120,000 60,000 50,000 (0%) (0%) $ 12000 10,000 110000 (0%) 40,000 32,000 8,000 10 $ 25000 70,000 130,000 12,000 5 Total grade: 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01 Feedback: Case #1 Number of units sold Sales Variable Expenses Contribution margin Fixed Expenses Case #2 15,000 * 120,000 * 60,000 50,000 * $ $ 8 4 4,000 60,000 40,000 32,000 8,000 $ 180,000 * $ 12 $ 100,000 Net operating income $ 10,000 Case #3 Number of units sold Sales Variable Expenses Contribution margin Fixed Expenses $ 200,000 Case #4 10,000 * $ 20 7 $ 13 * 70,000 * 130,000 118,000 6,000 $ 300,000 210,000 90,000 100,000 Net operating income * Given $ 12,000 * $ (10,000 Your response Requirement 2: Assume that more than one product is being sold in each of the fou situations: (Omit the "$" and "%" signs in your response.) Case #1 Sales Variable Expenses Contribution Margin Fixed expenses Net Operating $ Income (Loss) Average Contribution Margin Ratio 70000 Case #2 $ Case #3 500,000 $ 400,000 260,000 140,000 100,000 $ 13500 $ 200000 (0%) 100,000 (0%) 7,000 20 % (0%) (0%) % $ 40 Total grade: 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + 0.01/8 + Feedback: Case #1 Sales Variable Expenses Contribution margin Fixed Expenses Net operating income $ $ 500,000 * 400,000 100,000 93,000 7,000 * $ Case #2 100 % 80 20 %* $ 400,000 260,000 140,000 100,000 40,000 Case #3 Sales Variable Expenses Contribution margin Fixed Expenses Net operating $ 250,000 100,000 150,000 130,000 * $ 20,000 * Case #4 100 % 40 60 %* $ 600,000 * 420,000 * 180,000 185,000 $ (5,000 )* income * Given Question 22: Score 1/4 Exercise 6-15 Operating Leverage [LO4, L Magic Realm, Inc., has developed a new f games last year at a selling price of $20 per $182,000 per year, and variable costs are $6 a printing contractor. Variable costs consist m Requirement 1: (a) Sales Variable expenses Contribution margin Fixed expenses Net operating income(loss) Your response (b) Compute the degree of operating leverage. (Round your answer to 1 decimal place.) Degree of operating leverage Total grade: 0.01/1 = 0% Feedback: The degree of operating leverage is: 50 (0%) Your response Requirement 2: Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over last year). (a) Compute the expected percentage increase in net operating income for next year. the "%" sign in your response.) Expected percentage increase in net operating income Total grade: 0.01/1 = 0% Feedback: Sales of 18,000 games represent a 20% increase over last year's sales. Because the degree of operating leverage is 7.5, net operating income should increase by 7.5 times as much, or by 150% (7.5 20%). 5 Your response (b) Compute the expected total dollar net operating income(loss) for next year. prepare an income statement; use the degree of operating leverage to compute your answer. Omit the "$" sign in your response.) 50 Total expected net operating income(loss) $ 000 (0%) Total grade: 0.01/1 = 0% Feedback: The expected total dollar amount of net operating income for next year would be: Last year's net operating income(loss) Expected increase in net operating income next year (150% $28,000) Total expected net operating income(loss) Question 23: Score 0/4 Your response Exercise 6-16 Target Profit and Break-Even Analysis [LO4, LO5, LO6 Exerc Outback Outfitters sells recreational equipment. One of the company's Outba camp stove, sells for $50 per unit. Variable expenses are $32 per stove, camp associated with the stove total $108,000 per month. associ Requirement 1: Requi Compute the break-even point in number of stoves and in total sales dolla Comp sign in your response.) sign in Number of stoves Total sales $ 50 50000 (0%) (0%) Numb Total s Total grade: 0.01/2 + 0.01/2 = 0% + 0% Feedback: Profit = [Unit CM Q] - Fixed expenses $0 = [($50 - $32) Q] - $108,000 $0 = [($18) Q] - $108,000 $18Q = $180,000 Q = $180,000 $18 Q= 6,000 stoves, or at $50 per stove, $300,000 in sales Requirement 2: If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.) Your Answer: Choice Selected Correct Lower Higher Feedback: An increase in variable expenses as a percentage of the selling break-even point. If variable expenses increase as a percentage margin will decrease as a percentage of sales. With a lower have to be sold to generate enough contribution margin to cove Your response Requirement 3: At present, the company is selling 8,000 stoves per month. Th that a 10% reduction in the selling price would result in a 25% stoves. Prepare two contribution format income statements, conditions, and one as operations would appear after the propo and per unit data on your statements. (Omit the "$" sign in yo Present: 8,000 stoves Total Sales Variable expenses Contribu tion margin Fixed expenses Net operatin g income $0 0 Proposed: Per Unit 50000 50 (0% Total $ 500 Pe (0%) 30 $ 0 (0% ) 30000 $ 5000 (0% (0%) 47000 ( 0%) 0 3000 (0% (0% ) 5000 $ 470 4700 (0%) (0 5000 (0%) 46500 (0% $0 4650 (0% ) (0 Total grade: 0.01/17 + 0.01/17 + 0.01/17 + 0.01/17 + 0.0 + 0.01/17 + 0.01/17 = 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: Proposed: 8,000 stoves 1.25 = 10,000 stoves Sales: $50 0.9 = $45 As shown above, a 25% increase in volume is not enough to off selling price; thus, net operating income decreases. Your response Requirement 4: Requi At present, the company is selling 8,000 stoves per month. The sales ma At pre that a 10% reduction in the selling price would result in a 25% increasea i that stoves. How many stoves would have to be sold at the new selling price t stoves net operating income of $35,000 per month? net op Number of Stoves Total grade: 0.01/1 = 0% Feedback: 50 (0%) Numb Profit = Unit CM Q - Fixed expenses $35,000 = ($45 - $32) Q - $108,000 $35,000 = ($13) Q - $108,000 $13 Q = $143,000 Q = $143,000 $13 Q = $11,000 stoves Question 24: Score 0/4 Your resp Exercise 6-18 Multiproduct Break-Even Analysis [LO9] Olongapo Sports Corporation is the distributor in the Philippin --the Flight Dynamic and the Sure Shot. Monthly sales, exp contribution margin ratios for the two products follow: Product Flight Dynami c Sales CM ratio Sure Shot P 150,000 80% Total P 250,000 36% P 400,000 ? Fixed expenses total P183,750 per month. Requirement 1: Prepare a contribution format income statement for the compa percentage values to one decimal place, e.g., .1234 as 12.3. O in your response.) Flight Sure Shot Dynamic Amount Sales Variable expenses Contribution P margin Fixed expenses Net operating P 500000 250000 250000 % (0% ) (0% ) (0% ) Amount 50 50 50 % Am 500000 250000 250000 (0%) P (0%) (0%) P income Total grade: 0.01/20 + 0.01/20 + 0.01/20 + 0.01/20 + 0.0 + 0.01/20 + 0.01/20 + 0.01/20 + 0.01/20 + 0.01/20 = 0% Feedback: Total contribution margin percentage: (P210,000 P400,000) = Your response Requirement 2: Requi Compute the break-even point for the company based on the currentComp sales answer to the nearest peso amount. Omit the "P" sign in your respons answe Break-even point P 50 (0%) Break Total grade: 0.01/1 = 0% Feedback: The break-even point for the company as a whole be: Your response Requirement 3: Requi If sales increase by P100,000 a month, by how much would you expect ne If sale to increase? (Round your answer to the nearest peso amount. Omit the to incr response.) respon Expected increase in net operating income Total grade: 0.01/1 = 0% Feedback: P100,000 52.5% CM ratio = P52,500 Assuming no change in fixed expenses, all of this additional contribution should drop to the bottom line as increased net operating income. P 500 (0%) Expec The additional contribution margin from the additional sales is computed a This answer assumes no change in selling prices, variable costs per un or sales mix. Question 25: Score 0/4 Your response Problem 6-19 Basics of CVP Analysis [LO1, LO3, LO4, LO6, LO8] Probl Feather Friends, Inc., distributes a high-quality wooden birdhouse that sel Feathe Variable costs are $8 per unit, and fixed costs total $180,000 per year. Variab Requirement 1: Requi What is the product's CM ratio? (Omit the "%" sign in your response.) What CM ratio 5 (0%) % CM ra Total grade: 0.01/1 = 0% Feedback: Sales price Variable expenses Contribution margin $ 20 100 % 8 $ 12 40 % 60 % Your response Requirement 2: Requi Use the CM ratio to determine the break-even point in sales dollars. Use th your response.) your r Break-even point in sales $ 50 (0%) Break Total grade: 0.01/1 = 0% Feedback: Your response Requirement 3: Requi Due to an increase in demand, the company estimates that sales will in Due to during the next year. By how much should net operating income inc during decrease) assuming that fixed costs do not change? (Omit the "$" sign in decrea Increase in net operating income Total grade: 0.01/1 = 0% Feedback: $ 5000 (0 %) Increa $75,000 increased sales 0.60 CM ratio = $45,000 increased contribution the fixed costs will not change, net operating income should also increase Your response Requirement 4: Assume that the operating results for last year were: Requi Assum Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 400,000 160,000 240,000 180,000 $ 60,000 Sales Variab Fixed Contri Net op (a) Compute the degree of operating leverage at the current level of sales (a) C Degree of operating leverage Total grade: 0.01/1 = 0% Feedback: 50 (0%) Degre Your response (b) The president expects sales to increase by 20% next year. By what pe (b) T net operating income increase? (Omit the "%" sign in your respons n Increase in net operating income Total grade: 0.01/1 = 0% Feedback: 5 (0%) % Increa 4 20% = 80% increase in net operating income. In dollars, this increase w $60,000 = $48,000. Your response Requirement 5: Refer to the original data. Assume that the company sold 18, manager is convinced that a 10% reduction in the selling pri increase in advertising, would cause annual sales in units to inc (a) Prepare two contribution format income statements, one year's operations and one showing the results of operation Show both total and per unit data on your statements. ( response.) Last Year: 18,000 units Amount Per Unit Amount Sales Variable expenses Contribution margin Fixed expenses Net operating income $ $ 500000 200000 300000 50000 295000 Proposed: 24,000 units (0%) $ (0%) (0%) $ (0%) (0%) 50 20 30 (0%) $ (0%) (0%) $ Total grade: 0.01/16 + 0.01/16 + 0.01/16 + 0.01/16 + 0.0 + 0.01/16 = 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: 18,000 units + 6,000 units = 24,000 units $20 0.9 = $18 (b) Your Answer: Choice Selected Correct Yes No Feedback: No, the changes should not be made. Your response Requirement 6: Requi Refer to the original data. Assume again that the company sold 18,000 u Refer president does not want to change the selling price. Instead, he wants to presid commission by $1 per unit. He thinks that this move, combined with comm advertising, would increase annual sales by 25%. By how much co advert increased with profits remaining unchanged? (Do not prepare an incom increa the incremental analysis approach. Omit the "$" sign in your respons the in The amount by which advertising can be increased Total grade: 0.01/1 = 0% Feedback: Expected total contribution margin: 18,000 units 1.25 $11 per unit* Present total contribution margin: 18,000 units $12 per unit Incremental contribution margin, and the amount by which advertising can be increased with net operating income remaining unchanged *$20 ($8 + $1) = $11 $ 50000 (0%) The am

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Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 13SHORT-RUN DECISION MAKING:RELEVANT COSTINGDISCUSSION QUESTIONS1. Tactical decisions are short run in nature;they involve choosing among alternativeswith an immediate or limited end in view.Strategicdecisionsinvolveselectingstrategies
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 3ACTIVITY COST BEHAVIORQUESTIONS FOR WRITING AND DISCUSSION1. Knowledge of cost behavior allows a manager to assess changes in costs that resultfrom changes in activity. This allows a manager to assess the effects of choices thatchange activi
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 3ACTIVITY COST BEHAVIORQUESTIONS FOR WRITING AND DISCUSSION1. Knowledge of cost behavior allows a manager to assess changes in costs that resultfrom changes in activity. This allows a manager to assess the effects of choices thatchange activi
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 3ACTIVITY COST BEHAVIORQUESTIONS FOR WRITING AND DISCUSSION1. Knowledge of cost behavior allows a manager to assess changes in costs that resultfrom changes in activity. This allows a manager to assess the effects of choices thatchange activi
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 3ACTIVITY COST BEHAVIORQUESTIONS FOR WRITING AND DISCUSSION1. Knowledge of cost behavior allows a manager to assess changes in costs that resultfrom changes in activity. This allows a manager to assess the effects of choices thatchange activi
Lahore University of Management Sciences - MANAGEMENT - 503
Cornerstones of Managerial Accounting, 3rd editionMowen/Hansen/HeitgerChapter 8Learning ObjectivesLO1. Explain the difference between absorption and variable costing.Absorption costing treats fixed factory overhead as a product cost. Unit productcos
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 9INVENTORIES: ADDITIONAL VALUATION ISSUESTRUE-FALSEConceptualAnswerT F F T F T T F F T F T F T F F T F T TNo.1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20DescriptionWhen to use lower-of-cost-or-market. Lower-of-cost
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 17INVESTMENTSTRUE-FALSE-ConceptualAnswerF T F F T F T F T T F T F T F T F T F TNo.1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.DescriptionExamples of debt securities. Definition of trading securities. Available-for
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER3RECEIVABLESQuestionno.7a.b.c.d.e.f.g.h.i.j.k.l.m.n.o.p.AccountsReceivableReceivablesfromEmployees(partofnontradereceivables)currentassetsAdvancestoSuppliersCurrentassetsAccountsReceivableCustomersAccountswithCreditBalancesCur
Lahore University of Management Sciences - MANAGEMENT - 503
Chapter9ProfitPlanningSolutionstoQuestions91Abudgetisadetailedquantitativeplanfortheacquisitionanduseoffinancialandotherresourcesoveragiventimeperiod.Budgetary controlinvolvestheuseofbudgetstocontroltheactualactivitiesofafirm.materials,directlabo
Lahore University of Management Sciences - MANAGEMENT - 503
Chapter6CostVolumeProfitRelationshipsSolutionstoQuestions61Thecontributionmargin(CM)ratioistheratioofthetotalcontributionmargintototalsales revenue.Itcanbeusedinavarietyofways.Forexample,thechangeintotalcontributionmargin fromagivenchangeintotalsa
Lahore University of Management Sciences - MANAGEMENT - 503
Chapter 6Cost-Volume-Profit RelationshipsLearning ObjectivesLO1.Explain how changes in activity affect contribution margin and net operating income. LO2.Prepare and interpret a cost-volume-profit (CVP) graph. LO3.Use the contribution margin ratio (CM r
Lahore University of Management Sciences - MANAGEMENT - 503
Chapter6CostVolumeProfitRelationshipsSolutionstoQuestions61 Thecontributionmargin(CM)ratioisthe ratioofthetotalcontributionmargintototalsales revenue.Itcanbeusedinavarietyofways.For example,thechangeintotalcontributionmargin fromagivenchangeintotalsale
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER EIGHT STRATEGY AND THE MASTER BUDGET8-1 Compel strategic planning and facilitate implementation of strategic plans. An organizations strategy, strategic plans, and budgets are interrelated. Preparing budgets compel reviews of an organizations str
Lahore University of Management Sciences - MANAGEMENT - 503
Chapter9ProfitPlanningSolutionstoQuestions91Abudgetisadetailedquantitativeplanfortheacquisitionanduseoffinancialandotherresourcesoveragiventimeperiod.Budgetarycontrolinvolvesusingbudgetstoincreasethelikelihoodthatallpartsofanorganizationareworkin
Lahore University of Management Sciences - MANAGEMENT - 503
Lahore University of Management Sciences - MANAGEMENT - 503
Franchise Accounting177CHAPTER 11 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 11-1: b No revenue is to be reported. Because the franchisor fails to render substantial services to the franchisee as of December 31, 2008. 11-2: c Initial franchise fee Less: Cost
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 12MULTIPLE CHOICE12-1: 12-2: d. This is recorded when the working fund is replenished. c. Sales Cost of goods sold: Purchases Merchandise inventory, end Gross profit Expenses Net income (loss) 12-3: b Sales Cost of goods sold (P70,000 / 140%) Gr
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 13MULTIPLE CHOICE13-1: 13-2: c a Goods available for sale: At billed price (P30,000 + P180,000) At cost (P210,000 / 120%) Balance of Allowance for Overvaluation account before adjustment 13-3: c Inter-company inventory profit (IIP) before closin
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 14MULTIPLE CHOICE 14-1: a Purchase price (8,000 shares x P30) Direct acquisition cost Contingent consideration Acquisition cost 14-2: a Purchase price Direct acquisition cost Acquisition cost Less: Fair value of net assets acquired Goodwill 14-3:
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 15MULTIPLE CHOICE15-1: a Acquisition cost Less: Book value of interest acquired (100%) Difference Allocation: Property and equipment Other assets Long-term debt Goodwill 15-2: c Acquisition cost Less: Book value of interest acquired (P280,000 x
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 16MULTIPLE CHOICE16-1: 16-2: 16-3: d, because no impairment of goodwill is recognized. d, consolidated net income will decrease due to amortization of the allocated difference which is not the goodwill (P60,000 / 10 years). d, computed as follow
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 17MULTIPLE CHOICE17-1: B Consolidated sales Sales Papa Sales San Elimination of inter-company sales Consolidated sales Consolidated cost of goods sold Cost of goods sold Papa Cost of goods sold San Eliminations: Realized profit in beginning inve
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 18MULTIPLE CHOICE18-1: a Equipment at original cost Accumulated depreciation: Time of sale Current depreciation based on Original cost (P500,000/10 years 18-2: b Net income Sol Unrealized gain on sale of computer, Dec. 31 Adjusted net income Min
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 19Multiple Choice19-1: d.Direct exchange rate: December 1 December 31 Decrease in forex rate Forex gain (200,000 yen x P0.08) 1 2.22 yen = 1 2.70 yen = P P P 0.45 0.37 0.08 16,00019-2:c.Forex rate, December 1 Forex rate, December 31 Increase
Lahore University of Management Sciences - MANAGEMENT - 503
CHAPTER 20MULTIPLE CHOICE20-1: b Bad debt expense (S$ 6,000 x P28.20) P169,200 Amortization of patents (S$ 4,000 x P28.20) 112,800 Rent expense (S$ 10,000 x P28.20) 282,000 Total P564,000 Average rate (P28.20) is used to translate all expenses since thi
Lahore University of Management Sciences - ECON - 301
Problem 9-21 Completing a Master BudgetThe following data relate to the operations of Laker Company, a wholesaledistributor:Current assets as of March 31:Cash$8,000Accounts receivable$20,000Inventory$36,000Buildings and equipment,net$120,000A
Lahore University of Management Sciences - ECON - 301
Chapter 9Profit PlanningLearning ObjectivesLO1.LO2.LO3.LO4.LO5.LO6.LO7.LO8.LO9.LO10.Understand why organizations budget and the processes they use to create budgets.Prepare a sales budget, including a schedule of expected cash receipts.Prep
Lahore University of Management Sciences - ECON - 301
Chapter 7 Instructor Homework ProblemsTrue/False Questions1. The production budget is typically prepared prior to the sales budget.T/FMultiple Choice Questions2. Shown below is the sales forecast for Cooper Inc. for the first four months of thecomin
Lahore University of Management Sciences - ECON - 301
CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROLTRUE/FALSE 1. The master budget is one type of flexible budget. Answer: Terms to Learn: 2. False Difficulty: flexible budget 1 Objective: 1The master budget is a static budget.A f
Lahore University of Management Sciences - ECON - 301
Chapter 9Profit PlanningSolutions to Questions9-1 A budget is a detailed plan outlining the acquisition and use of financial and other resources over a given time period. As such, it represents a plan for the future expressed in formal quantitative ter
SUNY Stony Brook - CSE - 373
Computer Science 373 Analysis of AlgorithmsProf. Steven SkienaSpring 2012Daily Homework ProblemsThis is the schedule of daily homework problems for the semester. Each must be turned in at thebeginning of the given class. I will start class by present
SUNY Stony Brook - CSE - 373
Algorithm Homework and Test ProblemsSteven S. Skiena Department of Computer Science State University of New York Stony Brook, NY 11794-4400 skiena@cs.sunysb.edu January 29, 2006All of the midterm and nal exam problems for this semester will be drawn fro
SUNY Stony Brook - CSE - 373
Computer Science 373 Analysis of AlgorithmsProf. Steven SkienaSpring 2012Homework 1 Asymptotics and Data StructuresDue Thursday, February 16, 2012Each of the problems should be solved on a separate sheet of paper to facilitate grading. Limitthe solu
SUNY Stony Brook - CSE - 373
CSE373 Homework 1 Solutions & Hints1 Program Execution Time (11pts) Program A B C D E F G prog1 = 2-to-n.c prog2 = binary-search.c prog3 = fac_time.c prog4 = insert-sort.c prog5 = merge-sort.c prog6 = seq-search.c prog7 = triple.c Theoretical Running Tim
SUNY Stony Brook - CSE - 373
CSE373 Homework 2 Solutions & HintsIn this solution, we assume that the input is S[1.n] if theres no specification about the form ofthe input with a size n.We also assume that Sort(S, i, j, i) will sort S[i], S*i+1+, , S[j] in an increasing order in th
SUNY Stony Brook - CSE - 373
CSE373 Homework 3 Solutions & HintsIn this solution, if the input is (, ), we assume that | = , | = . General principle: wrong algorithm but serious attempt: 50%; correct algorithm without a proof of correctness: 70%; slower algorithm with a proof: 60%.
SUNY Stony Brook - CSE - 373
CSE373 Homework 4 Solutions & HintsSet Cover Problem (100 pts)In this solution, I (the course TA) will use C.1 Data structures & AlgorithmsData structures: Firstly, in order to make our backtrack program faster, we use a stack to hold thepartial cove
SUNY Stony Brook - CSE - 373
SUNY Stony Brook - CSE - 320
SUNY Stony Brook - CSE - 320
Boolean IdentitiesIn a few instances, the AND operation is represented by a dot () for clarity.x+0x+1x+xx+x()xx+yx + (y + z )x(y + z )(x + y )x + xyx + xyxy + yz + xz============x1x1xy+x(x + y ) + zxy + xzxyxx+yxy + x
SUNY Stony Brook - CSE - 320
SUNY Stony Brook - CSE - 320
CS320 Fall 2012Homework#1Quiz in Lecture Weds Feb 8, 2012There are no make-up quizzes!Problem 1: Using the postulates of Boolean algebra, prove the following formulae:a) x y z + x y z + x yz + xy z + xyz = x y + zb) (A + B ) + A B )(C D + CD) + (AC
SUNY Stony Brook - CSE - 320
CS320 Spring 2012Homework#1 SolutionsProblem 1: Using the postulates of Boolean algebra, prove the following formulae:a) x y z + x y z + x yz + xy z + xyz = x y + zb) (A + B ) + A B )(C D + CD) + (AC ) = A + C + BD (corrected)c) wxy + w xy + x (zw +
SUNY Stony Brook - CSE - 320
CS320 Spring 2012Homework#2Quiz in Lecture Mon. Feb 20, 2012There are no make-up quizzes!Problem 1: Implement a 1-bit ALU for the most signicant bit (see hint), with inputs and outputsas shown. The ALU must perform the operations shown in the table a
SUNY Stony Brook - CSE - 320
CS320 Spring 2012Homework#2Quiz in Lecture Mon. Feb 20, 2012There are no make-up quizzes!Problem 1: Implement a 1-bit ALU for the most signicant bit (see hint), with inputs and outputsas shown. The ALU must perform the operations shown in the table a
SUNY Stony Brook - CSE - 320
CS320 Spring 2012Homework#3Quiz in Lecture Monday March 12, 2012There are no make-up quizzes!Problem 1: Implement the Single Cycle Datapath ALU Control Unit (Figure 4.13 in textbook) usingAND, OR and NOT gates.Problem 2: Implement the Single Cycle D
SUNY Stony Brook - CSE - 320
CS320Spring2012Homework#4QuizinLectureMondayMarch21,2012Therearenomakeupquizzes!Problem1:MulticycledatapathInclasswecoveredtheMIPSmulticycleimplementationalsowhichoperatesforthesamebasicsubsetofMIPSinstruction
SUNY Stony Brook - CSE - 320
CS320Spring2012Homework#4QuizinLectureMondayMarch21,2012Therearenomakeupquizzes!Problem1:MulticycledatapathInclasswecoveredtheMIPSmulticycleimplementationalsowhichoperatesforthesamebasicsubsetofMIPSinstruction
SUNY Stony Brook - CSE - 320
CS320 Fall 2011Homework#5Quiz in Lecture Weds April 25, 2012There are no make-up quizzes!Problem 1: Using a below gure, show the forwarding paths and stalls needed to execute the followinginstructions.addswaddsubaddlwsubbeqadd$2,$4,$6,$3
SUNY Stony Brook - CSE - 320
CSE320Computer Organization andArchitectureSubset of slides prepared byGregory T. Byrd, North Carolina State UniversityIntroduction to the World of Computing Computer: electronic genius? NO! Electronic idiot! Does exactly what we tell it to, nothi
SUNY Stony Brook - CSE - 320
CSE320 Lecture 2Combinatorial Digital LogicDigital Logic is how all instructions and calculations are implemented.o Underlying representation of storage, memory, calculations, etc.o Study to understand how control logic, registers, actually function.
SUNY Stony Brook - CSE - 320
CSE320 Lecture 3Combinatorial Digital Logic - continued2-level Gate NetworksBasic gate networks are implemented in 2-levels.o Imagine a black box, with the input variables entering the box, and the output variables exiting thebox.InputsBlack BoxOu
SUNY Stony Brook - CSE - 320
Building Components:Multiplexors, Demultiplexors, Decoders, EncodersMultiplexorMultiplexors are selectors which, based on the value of the selector bits, the corresponding input isplaced on the output line.Multiplexors come in a variety of sizes, 2-i
SUNY Stony Brook - CSE - 320
Circuit Critical PathEach logic gate has a propogation delay. This is the delay between when the inputs areapplied and the correct logical output is available.The critical path of a circuit is the path between the input values and the output valuewhic
SUNY Stony Brook - CSE - 320
Digital Clock (1/2) The clock period, or cycle time, is the length oftime of the critical path in the circuit. The clock cycle time or clock period is dividedinto two portions:o when the clock is high (1)o when the clock is low (0)1Digital Clock (
SUNY Stony Brook - CSE - 320
BasicMultiplicationBetterMultiplication Multiplierisloadedinlower32bitsofProductregister Aswecalculatethesumofpartialproducts,themultiplierisshiftedoutoftheregister. After32cycles,thefull64bitproductisinProductregisterandtheMultiplierislost.Faster
SUNY Stony Brook - CSE - 320
PerformanceMeasure, Report, and SummarizeMake intelligent choicesSee through the marketing hypeKey to understanding underlying organizationalmotivationWhy is some hardware better than others for different programs?What factors of system performance
SUNY Stony Brook - CSE - 320
CPI in More DetailIf different instruction classes take differentnumbers of cyclesnClock Cycles (CPIi Instruction Count i )i1Weighted average CPInClock CyclesInstruction Count i CPI CPIi Instruction Count i1 Instruction Count Relative frequ
SUNY Stony Brook - CSE - 320
CSE320 Lecture 10CPUs and Instruction Set ArchitecturesCentral Processing Unit (CPU) Brain of the computer Fetches, Decodes, AND Executes instructions The instructions are the CPUs language and commands All CPUs are composed of 3 main componentso C
SUNY Stony Brook - CSE - 320
CSE320 Lecture 11MIPS Instruction Set ArchitectureMIPS Instruction Set DesignA load-store architecture, which means only load and store operations can access memoryProvides at 32 general purpose registers plus 32 separate floating-point registers.A f