The University of Texas at Austin
McCombs School of Business
Foundations of Accounting (ACC 310F)
Assignment 2 on MAP and CVP
Once you have completed the assignment below, you must submit your answers using the answer sheet provided in
Canvas; not all answers will be turned in and not all answers will be graded. Once submitted, your answers cannot be
changed, but where appropriate, partial credit will be given. For future reference, you should keep a copy of your
answers (outside of Canvas) as they will not be available to view given the nature of the grading process.
Sound Wave Technologies manufactures and sells portable speakers. Last month, the company produced and sold
12,000 units at a price of $50 each. Related information appears below:
8kb I
Item
Insurance for administrative office
Salary for factory manager
Utilities for factory
Advertising (rent on billboard)
Plastic, circuits and battery
Product delivery costs
Salaries for office staff
Wages for factory cleaning crew
Wages for factory assembly staff
Rent on factory and equipment
Total Cost
$11,500
9,400
28,000
8,000
188,000
36,000
42,000
24,600
141,000
68,000
f
EIIE.it
in
i
84
Total Costs556,500
Required:
a. Identify all costs above as either a product cost (specifically DM, DL or OH) or a period cost (PC).
b. The company uses the cost-plus approach to pricing and wants to achieve an approximate profit of 15 percent.
Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you
recommend to improve its profitability?
c.
If the company had only sold 9,000 units last month, what dollar amount would it report for cost of goods sold as
well as ending inventory in its financial statements? As needed, round your final answer (but not intermediate
steps) to the nearest whole dollar.
d. Identify all costs as either a variable cost (VC) or a fixed cost (FC) then calculate the variable cost per unit
(rounded to the nearest two decimal places) assuming 12,000 units were produced and sold as well as the total
fixed costs. What is the break-even point (rounded to the nearest whole unit)?
Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and
unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $50 per
unit.
e. For next month, the company is considering renting new automated equipment that would reduce the need for
factory labor. If so, the rent on factory and equipment would increase by $18,000, but the wages for the factory
assembly staff costs would decrease by $2 per unit. What is the projected net income under this scenario?
f.
For next month, the company is considering using longer lasting batteries for its speaker; if so, the cost for
materials would increase by $4 per unit. Management projects that its sales (and production) volume would
increase by 4,000 units. What is the projected net income under this scenario?
g. Would you recommend either course of action in part e or part f? Briefly explain.
-- Page 1 of 1 --
1
salesprice
510.00
Product costing
188,000
DL
1411000
1301000
OH
Total Plc 459,000
Cost Behaviour
DM
417,600
138,900
FC
Total Costs 556,500
VC
500
PeriodCosts 97
Total Costs 556,500
Total Cost Unit
556,500 12,000
46.38
6 96
53 33
15
15
Cost
b
We did
not
target
our
meet
Could consinder increasing the
price
since
we
are
in
a less
sales
competitive
environment
Consider changing the
Use
materials
direct
charge less
Consider
for
a
lower
assembly
staff
EEE
for
supplier
a
negotiating
factory
supplier
fee
has
6
4059,000
Cost
Product
of units produced 12,000
C
cost
unit
38.25
Balance sheet
inventory 459,000
inventory u 12,000
Cost of Goods Sold
d
Cost of Inventory
Unit Variable Cost
total VC 4171600
Volume
Q be
12,000
34.80
Of
D
Q be
9,138
Quantity to break
where net income
e
even
0
contribution margain
of
statement
Income
522 80
393,600
206 400
4499
Net income
49,500
with
net
1
would
increase
9 I
by 6 000
f
161000
g go
16,000
161000
8 9880
179,200
40,300
NO
this
does
not
decreases
CPV
REVIEW
pay
off
Net income
1
VC
1 VC FC VC FC Mc 833822
4
t.EE
nunin
ME
4200 360 111.672
6
HE
viii
Catalase
unit
her
ftp.fyy.famargainpe
BJEE.su
6 7
4
thEsta
unit
costs divided
5 923 units
8
Sales
Volume
Units Total
17
If
175
variable Costs
Contributionmargin
Fixed costs
29
Volume
Sales
Fixed costs
Net Income
argin
10
160
160
160
32
5,120
19
3,040
21080
1,280
Sales
15000
VariableCosts
15100
Contributionmargin
Net Income
Units Total
800
volume
Fixed costs
1,750
9888
Net income
Lining
5,075
3,325
Units Total
165000
4.37 65,000
100,000
72500
27500
it
1s
unit
Variable cost
4,613.34
69,200
Fixed costs
42,000
Break even
FC
Price
42000
15
Vcu
4613.34
5
0
