Reference no: EM132450499

Problems -

Problem 1 - For Astoria Company, actual sales are $12,458,000, and break-even sales are $6,495,000.

Compute the margin of safety in dollars.

Compute the margin of safety ratio.

Problem 2 - Creative Ideas Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows.

	Capital-Intensive	Labor-Intensive
Direct materials	$4per unit	$4.50per unit
Direct labor	$5per unit	$7.00per unit
Variable overhead	$2per unit	$3.50per unit
Fixed manufacturing costs	$2,070,000	$1,271,000

Creative Ideas' market research department has recommended an introductory unit sales price of $26. The incremental selling expenses are estimated to be $412,000 annually plus $2 for each unit sold, regardless of manufacturing method.

With the class divided into groups, answer the following.

(1) Calculate the estimated break-even point in annual unit sales of the new product if Creative Ideas Company uses the:

(i) Capital-intensive manufacturing method.

(ii) Labor-intensive manufacturing method.

(2) Determine the annual unit sales volume at which Creative Ideas Company would be indifferent between the two manufacturing methods.

Problem 3 - The Rock Company produces basketballs. It incurred the following costs during the year.

Direct materials	$14,500
Direct labor	$25,550
Fixed manufacturing overhead	$12,050
Variable manufacturing overhead	$29,650
Selling costs	$20,500

What are the total product costs for the company under variable costing?

Problem 4 - PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change-related services represent 60% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 40% of its sales and provides a 45% contribution margin ratio. The company's fixed costs are $15,580,000 (that is, $77,900 per service outlet).

Calculate the dollar amount of each type of service that the company must provide in order to break even.

The company has a desired net income of $55,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet?

Problem 5 - Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2017, the company incurred the following costs.

Variable Costs per Unit
Direct materials	$7.80
Direct labor	$3.59
Variable manufacturing overhead	$6.03
Variable selling and administrative expenses	$4.06
Fixed Costs per Year
Fixed manufacturing overhead	$239,200
Fixed selling and administrative expenses	$218,504

Siren Company sells the fishing lures for $26.00. During 2017, the company sold 79,000 lures and produced 92,000 lures.

(1) Assuming the company uses variable costing, calculate Siren's manufacturing cost per unit for 2017.

Problem 6 - For the quarter ended March 31, 2017, Croix Company accumulates the following sales data for its newest guitar, The Edge: $329,100 budget; $338,700 actual.

Prepare a static budget report for the quarter.

Problem 7 - Gundy Company expects to produce 1,216,800 units of Product XX in 2017. Monthly production is expected to range from 76,500 to 126,500 units. Budgeted variable manufacturing costs per unit are direct materials $4, direct labor $8, and overhead $10. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision are $1.

Prepare a flexible manufacturing budget for the relevant range value using 25,000 unit increments.