Managerial 13e Ch 03 HW

Managerial 13e Ch 03 HW - Cost Accounting 13 edition...

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Cost Accounting 13 edition CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS Exercises: 17, 18, 22, 23, 24 Problems: 36, 44, 45, 49 NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price per unit VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 3-17 CVP computations. 1a. Sales ($30 per unit × 200,000 units) $6,000,000 Variable costs ($25 per unit × 200,000 units) 5,000,000 Contribution margin $1,000,000 1b. Contribution margin (from above) $1,000,000 Fixed costs 800,000 Operating income $ 200,000 2a. Sales (from above) $6,000,000 Variable costs ($16 per unit × 200,000 units) 3,200,000 Contribution margin $2,800,000 2b. Contribution margin $2,800,000 Fixed costs 2,400,000 Operating income $ 400,000 3. Operating income is expected to increase by $200,000 if Ms. Schoenen’s proposal is accepted. The management would consider other factors before making the final decision. It is likely that product quality would improve as a result of using state of the art equipment. Due to increased automation, probably many workers will have to be laid off. Patel’s management will have to consider the impact of such an action on employee morale. In addition, the proposal increases the company’s fixed costs dramatically. This will increase the company’s operating leverage and risk.
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3-18 CVP analysis, changing revenues and costs. 1a. SP = 8% × $1,000 = $80 per ticket VCU = $35 per ticket CMU = $80 – $35 = $45 per ticket FC = $22,000 a month Q = = = 489 tickets (rounded up) 1b. Q = = = = 712 tickets (rounded up) 2a. SP = $80 per ticket VCU = $29 per ticket CMU = $80 – $29 = $51 per ticket FC = $22,000 a month Q = = = 432 tickets (rounded up) 2b. Q = = = = 628 tickets (rounded up)
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3a. SP = $48 per ticket VCU = $29 per ticket CMU = $48 – $29 = $19 per ticket FC = $22,000 a month Q = = = 1,158 tickets (rounded up) 3b. Q = = = = 1,685 tickets (rounded up) The reduced commission sizably increases the breakeven point and the number of tickets required to yield a target operating income of $10,000: 8% Commission Fixed (Requirement 2) Commission of $48 Breakeven point 432 1,158 Attain OI of $10,000 628 1,685 4a. The $5 delivery fee can be treated as either an extra source of revenue (as done below) or as a cost offset. Either approach increases CMU $5: SP = $53 ($48 + $5) per ticket VCU = $29 per ticket CMU = $53 – $29 = $24 per ticket FC = $22,000 a month Q = = = 917 tickets (rounded up) 4b. Q = =
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= = 1,334 tickets (rounded up) The $5 delivery fee results in a higher contribution margin which reduces both the breakeven point and the tickets sold to attain operating income of $10,000. 3-22 CVP analysis, income taxes. 1.
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This document was uploaded on 11/03/2011 for the course ACCOUNTING 33:010:275 at Rutgers.

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Managerial 13e Ch 03 HW - Cost Accounting 13 edition...

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