Reference no: EM131259032

Managerial Accounting

This exam has 5 sections

Cost Behavior

Brodsky Corp

Mulitple Product Breakeven

Optometry Clinic

Trade-off between fixed and variable costs

1. Assume a local Subway reported the following results for April and May

	August	September
Unit Sales	2,000	2,500
Cost of Food Sold	$   1,000	$         1,250
Wages and Salaries	1,525	1,675
Rent	1,500	1,500
Depreciation	200	200
Utilities	710	770
Supplies	500	625
Miscellaneous	110	140
Total	$   5,545	$         6,160

a. Identify each cost as being fixed, variable or mixed.

b. Determine the equation for total operating costs (Fixed + Unit Variable Cost * # of sandwiches)

c. Predict the total operating costs for 2750 3000 sandwiches

d. Determine the average costs for 2750 3000 sandwichesBrodsky Company

Data for Brodsky Company is as Follows:

Units Sold	100,000
Revenue	$                    1,000,000
Costs
	Fixed	Variable
Raw Material	-	300,000
Direct labor	100,000	200,000
Factory Costs	100,000	-
Selling and Administrative	200,000	-
Total Costs	400,000	500,000
Operating Income	$                      100,000

a. Based on the above information, calculate the break-even units.

b. If Brodsky is subject to an effective income tax rate of 40%, calculate the number of units Brodsky would have to sell to earn an after-tax profit of $100,000.

hint: operating income = Aftertax profit/ (1- tax rate)

Break-even Analysis (Multiple Products)

Monday's Major Retail Outlet is a company that specializes in selling Printers, Monitors and Desktops.

The sales mix is 2:4:4 (i.e. for every 2 Printers sold, 4 Monitors and 4 Desktops are sold).

1) Find the break-even point for each product. The company's annual fixed costs are $28M

2) Additionally, please find the target # of units to reach an operating profit of $14M.

3) Concept question: Which product do you think Monday's sales team will try to promote more and why? (answer in no more than 3 sentences)

	Selling Price Per Unit	Variable Cost Per Unit	Contribution Margin Per unit
Printers	500	300	200
Monitors	200	100	100
Desktops	800	300	500

The sales mix is 2:4:4 (i.e. for every 2 Printers sold, 4 Monitors and 4 Desktops are sold).

1) Find the break-even point for each product. The company's annual fixed costs are $28M

2) Additionally, please find the target # of units to reach an operating profit of $14M.

3) Concept question: Which product do you think Monday's sales team will try to promote more and why? (answer in no more than 3 sentences)

Optometry Clinic

You are evaluating ways to expand an optometry practice and its earnings capacity. Optometrists perform eye exams, prescribe corrective lenses (eyeglasses and contact lenses) and sell corrective lenses. One way to expand the practice is to hire an additional optometrist. The annual cost of the optometrist, including salary, benefits and payroll taxes is $80,000. You estimate that this individual can conduct two exams per hour at an average price to the patient of $45 per exam. The new optometrist will work 40-hour weeks for 48 weeks per year. However, because of scheduling conflicts, patient no shows, training and other downtime, the new optometrist will not be able to conduct, bill and and collect 100% of her available examination time.

From past experience, you know that each eye exam drives additional product sales. Each exam will lead to either an eyeglass sale
with a net profit of $90 (does NOT include the $45 exam fee) or a contact lens sale of $65 of net profit. On average, 60% of exams lead to eyeglass sales, 20% lead to contact lens sales, and 20% lead to no further sales.

Below are additional incremental costs for the new optometrist:

	Annual
Office Occupancy Costs	$     10,000
Leased Equipment	5,000
Office Staff	30,000

What is the minimum level of examinations the new optometrist must perform to pay for herself (break-even)?

Dan Company

Dan Company owns and operates a nationwide chain of pizza stores. The 500 properties Dan chain vary from low-volume, small town, single screen pizza places to high volume, big city pizza restaurants.

Management is considering the purchases of three types of pizza ovens based on baking capacity and cost.. These machines would allow pizza restauarnts to sell freshly better quality pizza. This new feature would be advertised and its intended to increase patronage at the company's pizza places and restaurants.

Annual rental costs and operating costs vary with the size of the ovens. The ovens' capacities and costs are as follows:

	Small	Normal	Big
Annual Capacity	35,000	110,000	200,000
Costs
Annual Oven Rental	6,000	9,000	15,000
Per Pizza Costs
Pizza Ingredients	0.13	0.11	0.09
Dough costs (less dough needed in larger ovens)	0.22	0.14	0.05
Variable Utilities and Energy	0.08	0.08	0.07

Please calculate the break-even (indifference) points between these three sizes.

Concept question: Should management lease the same type of oven and force every chain to use the same oven type? Explain why or why not?

Attachment:- Midterm Exam.rar