Assignment for the Course Cost and Management Accounting II on
chapter one and two (10 Points)
1. Harvey Company produces a single product with the following information available:
Number of unit produced annually
25,000 units
Variable cost per units:
Direct material, direct variable cost and
$10
variable manufacturing overhead
Selling and administrative expense
3
Fixed cost per years:
Manufacturing overhead
$150,000
Selling and administrative expense
100,000
Let’s assume the following additional information for Harvey Company.

20,000 units were sold during the year at a price of $30 each.

There is no beginning inventory.
Required
A. Calculate Unit product cost (inventoriable cost per unit) using both absorption and
variable costing.
B. Compute net operating income using both absorption and variable costing.
2. Tice Company is a medium-sized manufacturer of lamps. During the year a new line called
“Horolin” was made available to Tice's customers. The break-even point for sales of Horolin
is $200,000 with a contribution margin of 40%. Assuming that the profit for the Horolin line
during the year amounted to $100,000, compute total sales during the year.
3. Black Company's sales are $600,000, its fixed expenses are $150,000, and its variable
expenses are 60% of sales. Based on this information, the margin of safety is:
4. Frank Company manufacturers a single product that has a selling price of $20.00 per unit.
Fixed expenses total $45,000 per year, and the company must sell 5,000 units to break even.
If the company has a target profit of $13,500, what is the amount of sales in units .
5. Mason Enterprises has prepared the following budget for the month of July:
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Selling
Variable Unit cost per
unit sales
price per unit
Product A ...............
$10.00
$4.00
15,000
Product B ...............
$15.00
$8.00
20,000
Product C ...............
$18.00
$9.00
5,000
Assuming that total fixed expenses will be $150,000 and the sales mix remains constant, the
break-even point would be closest to:
6. A manufacturer of premium wire strippers has supplied the following data:
Units produced and sold .................................................. 560,000
Sales revenue ................................................................... $4,704,000
Variable manufacturing expense ..................................... 2,436,000
Fixed manufacturing expense ......................................... 1,200,000
Variable selling and administrative expense ................... 616,000
Fixed selling and administrative expense ....................... 272,000
Net operating income ...................................................... $180,000
A. The company's margin of safety in units is closest to:
B. The company's degree of operating leverage is closest to:
7. XYZ Incorporated, which produces and sells a single product, has provided the following
data:
Sales .................................. 2,000 units
Selling price ...................... $60 per unit
Variable expense ............... $40 per unit
Fixed expense .................... $20,000
Consider each of the following questions independently.
I. If the dollar contribution margin per unit is increased by 10% and if total fixed
expense is decreased by 20%, what is the amount of net operating income
II.
If the sales volume decreases by 25% and the variable expense per unit increases
by 15%, what is the amount of net operating income
III.
If the company's fixed expenses increased by $8,000, how many units must be
sold to reach a target net operating income of $36,000:
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IV.
If the company's sales volume in units decreases by 30%, and if it desires a
targeted net operating income of $29,000, then the selling price should be:
8. Moruzzi Corporation is a single-product company that expects the following operating
results for next year:
Sales ........................................................... $320,000
Contribution margin per unit ..................... $0.20
Contribution margin ratio .......................... 25%
Degree of operating leverage .................... 8
How many units would Moruzzi have to sell next year to break-even?
9. Frank Company manufacturers a single product that has a selling price of $20.00 per unit.
Fixed expenses total $45,000 per year, and the company must sell 5,000 units to break even.
If the company has a target profit of $13,500, What is the amount of sales in units
10. Fill in the blanks for each of the following independent cases.
Case
Unit
Unit
Number
Total
Total
Selling
Variable
of Units
Contribution Fixed
Price
Operating
Sold
Margin
Operating
Income
Costs
Costs
$70
$25
D $______ $900,000
F $____
$200,000
(A)
62
15,000
E____
250,000
125,000
250
B_____
30,000
4,500,000
G
900,000
$_______
150
C______
24,000
1,728,000
1,500,000
H______
11. Delphi Company has developed a new product that will be marketed for the first time during
the next fiscal year. Although the Marketing Department estimates that 35,000 units could be
sold at $36 per unit, Delphi's management has allocated only enough manufacturing capacity
to produce a maximum of 25,000 units of the new product annually. The fixed expenses
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associated with the new product are budgeted at $450,000 for the year. The variable expenses
of the new product are $16 per unit.
Required:
A. How many units of the new product must Delphi sell during the next fiscal year in order
to break even on the product?
B. What is the profit Delphi would earn on the new product if all of the manufacturing
capacity allocated by management is used and the product is sold for $36 per unit?
C. What is the degree of operating leverage for the new product if 25,000 units are sold for
$36 per unit?
D. The Marketing Department would like more manufacturing capacity to be devoted to the
new product. What would be the percentage increase in net operating income for the new
product if its unit sales could be expanded by 10% without any increase in fixed expenses
and without any change in the unit selling price and unit variable expense?
E. Delphi's management has stipulated that the new product must earn a profit of at least
$125,000 in the next fiscal year. What unit selling price would achieve this target profit if
all of the manufacturing capacity allocated by management is used and all of the output
can be sold at that selling price?
12. Louisville Corporation produces baseball bats for kids that it sells for $32 each. At capacity,
the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats
are as follows:
Cost per Bat
Total Costs
Direct materials
$12
$ 600,000
Direct manufacturing labor
3
150,000
Variable manufacturing overhead
1
50,000
Fixed manufacturing overhead
5
250,000
Variable selling expenses
2
100,000
Fixed selling expenses
4
200,000
Total costs
$27
$1,350,000
Required: Suppose Louisville is currently producing and selling 40,000 bats. At this level of
production and sales, its fixed costs are the same as given in the preceding table. Ripkin
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Corporation wants to place a one-time special order for 10,000 bats at $25 each. Louisville will
incur no variable selling costs for this special order. Should Louisville accept this one-time
special order? Show your calculations.
13. Benjamin Company produces products C, J, and R from a joint production process. Each
product may be sold at the split-off point or processed further. Joint production costs of
$95,000 per year are allocated to the products based on the relative number of units
produced. Data for Benjamin's operations for last year follow:
Additional sales values and costs if
Processed further
Product
Units
Sales values at
Produced
split-off
Sales values
C
6,000
$75,000
$100,000
J
9,000
$70,000
$115,000
R
4,000
$46,500
$55,000
Required: Which products should be processed beyond the split-off point?
Added costs
$20,000
$36,000
$10,000
14. Awash Co. manufactures and sells trophies for winners of athletic and other events. Its
manufacturing plant has the capacity to produce 16,000 trophies each month; current
monthly production is 12,800 trophies. The company normally charges $115 per trophy. Cost
data for the current level of production are shown below:
Variable costs:
Direct materials .......................... $614,400
Direct labor ................................. $256,000
Selling and administrative .......... $35,840
Fixed costs:
Manufacturing ............................ $294,400
Selling and administrative .......... $94,720
The company has just received a special one-time order for 1,200 trophies at $61 each. For this
particular order, no variable selling and administrative costs would be incurred. This order would
also have no effect on fixed costs.
Required: Should the company accept this special order?
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