Hankemeier Manufacturing Company Has the Following Budgeted Costs for 10,000 Units

Question 1

Knapple Company has a variable cost percentage of 35% on a product that sells for $25 per unit. Fixed costs are $40,000. Knapple wants to know how many units must be sold (a) to break even and (b) to earn a profit of $12,000. Ignore income taxes.

Question 2

Baldwin Division earns a contribution margin of $200,000 and has a division margin of $70,000. If Baldwin Division is closed, the firm can eliminate all of the direct division expenses and $110,000 of common expenses. How will closing the division affect the firm's operating income?

Question 3

Hankemeier Manufacturing Company has the following budgeted costs for 10,000 units:

Variable Costs / Fixed Costs
Manufacturing / $100,000 / $75,000
Selling & Administrative / 50,000 / 25,000
Total / $150,000 / $100,000

What is the initial selling price needed to obtain a target profit of $50,000 using the manufacturing cost markup method?

Question 4

Hankemeier Manufacturing Company has the following budgeted costs for 10,000 units:

Variable Costs / Fixed Costs
Manufacturing / $100,000 / $75,000
Selling & Administrative / 50,000 / 25,000
Total / $150,000 / $100,000

Calculate the markup on variable costs needed to break even.

Question 5

Cook River Company management is analyzing the company's standard cost variances for direct materials for the most recent period. The following information was available from company records.

Actual quantity of materials used 24,000 units

Budgeted quantity of materials used 22,000 units

Actual price paid for materials $4 per unit

Budgeted price paid for materials $6 per unit

There were no increases or decreases in inventories during the period.

Calculate the materials quantity variance for the period.

Question 6

Budget preparation requires the development of a variety of forecasts. List some of the forecasts that must be made in developing a comprehensive budget.

Question 7

Assume the local cable company has the following information available about fleet miles and operating costs for its service department:

Fleet Miles / Operating Costs
2008 / 534,000 / $266,000
2009 / 726,000 / $342,800

Using the high-low method, develop a cost-estimating equation for total annual operating costs.

Question 8

If a company has sales of $1,000,000, net income of $120,000, and an asset base of $500,000, what is its return on investment?

Question 9

Jordan Company has two service departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $60,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively. Data on standard service-hours and number of employees are as follows:

Maint. Dept. / Person. Dept. / Dept. X / Dept. Y
Standard service hours used / 200 / 100 / 600 / 300
Number of employees / 5 / 15 / 25 / 20

Using the step method, if Personnel Department costs are allocated first, calculate the cost of Maintenance Department allocation to Department X.

Question 10

Identify and describe the three strategic positions that lead to business success.

Question 11

Cost-Volume-Profit analysis is subject to a number of assumptions. List five assumptions that are necessary to make cost-volume-profit analysis tractable (feasible).

Question 12

Briefly describe a contribution income statement and indicate how it differs from a functional income statement.

Question 13

The Widrick manufactures 10,000 rolls of cable each period. The cable is used as an input for producing several other products that Widrick manufactures. The full manufacturing costs for a batch of 100 rolls of cable are:

Direct materials / $270
Direct labor / 200
Variable manufacturing overhead / 200
Average fixed manufacturing overhead / 250
Total / $920

The fixed manufacturing overhead is comprised of depreciation expenses related to prior investments in facilities and equipment that are used in the manufacturing of the cable. These assets have no other use than for the manufacturing of the cable. An outside supplier has offered to sell Widrick the 10,000 rolls of cable necessary to meet production needs this period for a lump-sum of $75,000. If Widrick accepts this outside supplier's offer, how much better or worse off will the company be?

Question 14

Kyle Company has the following sales forecast for the next quarter: April, 2,000 units; May, 2,400 units; June, 2,800 units. Sales totaled 1,600 units in March. The March ending finished goods inventory was 500 units. End-of-month finished goods inventory levels are planned to be equal to 30 percent of the next month's planned sales. Calculate the number of units of inventory Kyle needs to purchase for April?

Classify the total costs of each of the following as variable, fixed, mixed, or step. Sales volume is the cost driver.

Question 15
a. Salary of machine operator who is paid based on number of units produced on the machine
b. Keyboards purchased from a subcontract supplier in a computer assembly plant
c. Property taxes
d. Salaries of quality inspectors when each inspector can evaluate a maximum of 500 units per day
e. Annual salary for the vice president of manufacturing
f. Electric power in a factory
g. Raw materials used in production
h. Water consumed by the plant, which is based on a flat fee plus actual consumption
i. Overhead costs in the factory for incidental components such as small screws and rivets.
j. Fire insurance on factory building

Question 16

Jackson Company has two service departments (S1 and S2) and two producing departments (P1 and P2). Department S1 costs are allocated on the basis of number of employees, and Department S2 costs are allocated on the basis of space occupied expressed in square feet. Data on direct department costs, number of employees, and space occupied are as follows:

S1 / S2 / P1 / P2
Direct dept. costs / $15,000 / $22,000 / $55,000 / $60,000
Number of employees / 20 / 10 / 40 / 50
Space occupied / 2,000 / 1,000 / 3,000 / 5,000

If Jackson uses the direct method, What is the ratio representing the portion of Department S2 allocated to P2?

Question 17

Describe zero-based budgeting.

Question 18

Jiork, Inc. had a contribution margin of $23,000 on sales of $40,000 and had fixed costs of $14,000. Calculate its break-even point in sales dollars.

Question 19

Briefly explain the nature of the ethical dilemmas that managers and accountants confront, giving examples.

Question 20

Jacksonville Products Co. has predicted the following costs for this year for 150,000 units:

Manufacturing / Selling and
Administrative
Variable / $400,000 / $100,000
Fixed / 600,000 / 300,000
Total / $1,000,000 / $400,000

Calculate the markup on variable costs needed to achieve a target profit of $200,000.

Question 21

Match the following principles of financial accounting to their definitions:

a. / Financial statements are linked within and across time / (1) / Revenue recognition principle
b. / Revenue and expenses are recognized when a cash transaction is completed / (2) / Articulation of financial statements
c. / Revenue is recognized when earned / (3) / Cash basis accounting
d. / Recognizes revenue when earned and expenses when incurred, even if no cash is received or paid / (4) / Accrual accounting

Question 22

The total monthly operating costs of Smoothie Universe are:
$2,000 + $0.30X, where X = 12 ounce servings

Calculate the average cost per serving at each of the following monthly volumes: 1,500; 2,000; 3,000; and 5,000, and determine the monthly volume at which the average cost per serving is $0.50.

Question 23

Eastern Corp. obtained the following information from its accounting records:
Sales = $35,000
Beginning Finished Goods Inventory = $21,000
Ending Finished Goods Inventory = $23,000
Cost of Goods Sold = $20,000
Ending Work-in-Process Inventory = $15,000
Calculate the Cost of Goods Manufactured for the period.

Question 24

Kearns Company had the following functional income statement for the month of November 2006:

Kearns Company
Functional Income Statement
For the Month Ending November 30, 2006
Sales ($20 x 10,000) / $200,000
Cost of goods sold:
Direct materials ($4 x 10,000) / $40,000
Direct labor ($3 x 10,000) / 30,000
Variable factory overhead ($2.50 x 10,000) / 25,000
Fixed factory overhead / 40,000 / – 135,000
Gross profit / $ 65,000
Selling and administrative expenses:
Variable ($0.50 x 10,000) / $ 5,000
Fixed / 30,000 / – 35,000
Net income / $ 30,000

Calculate Kearns Company's break-even sales in units.

Question 25

Nike Inc. has a fiscal year end of May 31. On May 31, 2007, Nike Inc. reported $10,688.3 million in assets and $7,025.4 million in equity. During fiscal 2008, Nike's assets increased by $1,754.4 million while its equity increased by $799.9 million.
What were Nike's total liabilities at May 31, 2007 and May 31, 2008?

Question 26

Packard Company's budgeted sales were 1,000 units at $50 per unit. During 2008 it had actual sales of 900 units at $55 per unit. Budgeted variable costs were $30 per unit. Calculate What is Packard's net sales volume variance.

Question 27

The following forecasted sales pertain to Louis Corporation:

Month / Sales
September / $80,000
October / 100,000
November / 60,000
December / 40,000

Collection pattern:
65 percent in month of sale
35 percent in month following sale

Accounts Receivable (August 31) / $14,000
Finished Goods Inventory (August 31) / 15,000

Louis Corporation has a selling price of $5 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales. Calculate the budgeted beginning balance in units for finished goods inventory on November 1?

Question 28

Explain how budgets provide a basis for performance evaluation.

Question 29

Identify Cooper and Kaplan's four categories of activities and provide a brief description of each category.

Question 30

Identify the three different cost estimation methods discussed in this course and provide a description of the strengths and weaknesses of each.

Question 31

Summertime Clothing Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Fabric purchases and payments are to be made during the month preceding the month of sale. Wages (production-related) are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 25 percent of sales are to be paid in the month following the month of sales. Additionally, a monthly lease payment of $5,000 is paid to Net World for computer services. Sales revenue is forecasted as follows:

Month / Sales
March / $150,000
April / $170,000
May / $230,000
June / $200,000
July / $250,000

Calculate the amount of budgeted cash disbursements for the month of May?

Question 32

Briefly explain the terms (1) contribution margin and (2) contribution margin ratio and why they are useful (two to three sentences each).

Question 33

If net income is $25,000 and operating leverage is 3.00 at the end of the most recent period, a 15% increase in sale will increase net income by what percent and what dollar amount?

Question 34

Differentiate among structural, organizational, and activity cost drivers.

Question 35

Beginning inventory in February consisted of 5,000 units (60 percent converted) and ending inventory consisted of 10,000 units (30 percent converted). In addition, 25,000 units were started during the period. How many equivalent units for conversion costs were in process February using the weighted average method?

Question 36

Compute the missing amounts for Nike Inc. for 2007 and 2008, in the table below:

($ millions) / 2008 / 2007
Total assets / $10,688.3
Contributed capital / $ 2,500.9 / $ 1,963.1
Earned capital / $ 5,324.7
Total Liabilities / $ 4,617.1 / $ 3,662.6
Liabilities and equity / $10,688.3

Question 37

During the most recent fiscal period, Kajing LTD had a contribution margin of $50,000 and operating profit of $20,000 on sales of $80,000.

Calculate Kajing's (a) operating leverage and (b) the amount of its profit for next year assuming sales increase to $96,000.

Question 38

Define strategic cost management and briefly discuss the three themes that make up strategic cost management

Question 39

Briefly explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Question 40

Identify and briefly discuss the three dimensions on which competition takes place.

Question 41

The management of Rose Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Rose's management used 2,500 hours of direct labor. It had budgeted to use 4,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $3.00 per hour of direct labor. Indirect materials was budgeted as $2.00 per hour of direct labor. Actual variable overhead was $15,000.

Calculate Rose's variable overhead spending variance.

Question 42

What is a sunk cost? Under what circumstances are sunk costs relevant to a decision? Construct an example of a sunk cost. Briefly discuss why you think financial reports for investors and managerial reports for managers may or may not differ in their treatment of sunk costs.

Question 43

Question 44

Briefly explain why changes in technology and prices make cost estimation difficult.

Question 45

Orlando Company manufactures a product through a process where all manufacturing costs are added uniformly. Information for October beginning work-in-process follows.

The following costs were incurred during October:

During October, 25,000 units were completed. Also, 2,500 units that were 50 percent complete remained in process at the end of the day on October 31.