Reference no: EM13846134

1. Compute the manufacturing product cost per unit for each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcase were assigned to the standard bookcases at $6 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of postmanufacturing activities such as distribution, marketing and customer service. The postmanufacturing costs were $19 per standard bookcase and $15 per unfinished bookcase. Compute the full product costs per unit.

3. Which product costs are reported in the external financial statements? Which costs are used for   management decision making? Explain the difference.

4. What price should Johnston's managers set for unfinished bookcases to earn a unit profit of $16?

Budgeted Cost			Cost
of Activity		Allocation Base	Allocation Rate
$250,000		Number of parts	$0.90
3,500,000		Direct labor hours	15
190,000		Number of finished units	3.7

Lawton produced two types of bookcases in April: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs and other data.

Compute the manufacturing product cost per unit of each type of bookcase. Standard and Unfinished.

	Standard Bookcase	Unfinished Bookcase
Direct materials	29300	28400
Materials handling
Assembling
Finishing		0
Total manufacturing cost
Number of units	3000	3000
Manufacturing cost per unit

Compute the full product costs per unit.

	Standard Bookcase	Unpainted Bookcase
Manufacturing product costs
Postmanufacturing activities
Premanufacturing activities
Full product cost per unit

Sales price per unit unfinished _________

Christi, Inc., is using a cost of quality approach to evaluate design engineering efforts for a new skateboard. Christ's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the 2 year life of the skateboards follow. Also shown are the cost allocation rates for each activity.

	Predicted	Activity Cost
	Reduction in	Allocation Rate
Activity	Activity Units	Per Unit
Inspection of incoming materials	420	$46
Inspection of finished goods	420	18
Number of defective units
discovered in-house	1,000	54
Number of defective units
discovered by customers	400	74
Lost sales to dissatisfied customers	125	98

1. Calculate the predicted quality cost savings from the design engineering work.

2. The predictive quality cost savings from the design work is ______

3. Christi spent $101,000 on design engineering for the new skateboard.  What is the net benefit of this "preventive" activity? The net benefit of "preventive" quality activity is $ ____

Too Sweet sells 2 dozen for every dozen of custard filled donuts. A dozen plain donuts sells for $6. A dozen custard filled donuts sells for $8, with a variable cost of $5.20 per dozen.

Determine Too Sweet's monthly breakeven point in dozens of plain donuts and custard filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.

Compute Too Sweet's margin of safety in dollars for May 2012.

If Too Sweet can increase monthly sales volume by 10%, what will operating income be? (The sales tax remains unchanged.)

The breakeven point is _____ dozen plain donuts and _____ dozen custard filled donuts.

		Plain/doz.	Filled/doz.	Total
Sales revenue
Variable costs
Contribution margin
Fixed costs
Operating income

Compute Too Sweet's margin of safety in dollars for May 2012.

The margin of safety in dollars is ______

If Too Sweet can increase sales revenue by 10%, keeping the sales mix the same, operating income will be _____

Fill in the blanks for each missing balance.

Which company has the lowest breakeven point in sales dollars?

What causes the lowest breakeven point?

(Round the contribution margin per unit to the nearest cent. Enter the ratio as a decimal rounded to two decimal places. Use parenthesis or a minus sign for operating losses.)

	Company
	Up	Down	Left	Right
Sales revenue	$710,000		$608,000
Variable costs		150,100	291,840	164,320
Fixed costs		125,000	139,000
Operating income (loss)	$15,800			$35,680
Units sold	190,000	10,000
Contribution margin per unit	$1.42		$98.80	$13.44
Contribution margin ratio		0.21		0.21

Calculate the breakeven sales dollars for company - Up ____

Calculate the breakeven sales dollars for company - Down ____

Calculate the breakeven sales dollars for company - Left ____

Calculate the breakeven sales dollars for company - Right ____