Reference no: EM133068872
Question 1 - Cost-Volume - Profit & Cost?Behaviour?Analysis - Company C?makes calculators that sell for $20 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $9 per unit.
a) Calculate the break-even point in units.
b) Calculate the break-even point in dollars.
c) Calculate the margin of safety, assuming actual sales of $500,000.
d) Calculate the sales required in dollars to earn a net income of $165,000.
e) Company C has a higher operating leverage and if sales are declining what would be the impact on the company's net income?and if the sales are?increasing?what?would be the result on the net income.
Question 2 - Activity?- Based Costing - Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
|
Cost Pool
|
Overhead Costs
|
Cost driver
|
Activity level
|
|
Supervision of direct?labour
|
$320,000
|
Direct?labour?hours
|
800,000
|
|
Machine maintenance
|
$120,000
|
Machine hours
|
960,000
|
|
Facility rent
|
$200,000
|
Square?metres?of area
|
100,000
|
|
Total overhead costs
|
$640,000
|
|
|
The accounting records show the Mossman Job consumed the following resources:
|
Cost driver
|
Actual level
|
|
Direct?labour-hours
|
200
|
|
Machine-hours
|
1,600
|
|
Square?metres?of area
|
50
|
Required -
1. If Gregory Enterprises uses a simple cost system based on direct labour hours?then what amount of indirect costs will be allocated to the Mossman job?
2. What is the activity rate for machine maintenance costs?
3. If Gregory Enterprises uses an ABC?system?then what amount of indirect costs will be allocated to the Mossman job?
4. When selling prices are based on costs assigned using the single cost driver, direct labour?hours, then would the Mossman job be overbilled or?underbilled?
5. What are the benefits of?ABC?