Reference no: EM131772272

Questions -

Q1. The following is Arkadia Corporation's contribution format income statement for last month:

Units produced and sold	20,000
Sales	$1,200,000
Variable expenses	$800,000
Contribution margin	$400,000
Fixed expenses	$300,000
Net operating income	$100,000

The company has no beginning or ending inventories units during the month.

Required:

a. What is the company's sales price and variable cost per unit, and contribution margin ratio?

b. What is the company's break-even in units and sales dollars?

c. If sales increase by 100 units, by how much should net operating income increase?

d. How many units would the company have to sell to attain target profits of $125,000? Assume the original data.

e. What is the company's margin of safety in dollars, assuming the original data selling 20,000 units?

f. What is the company's degree of operating leverage using the original data?

Q2. The Garry Corporation's most recent contribution format income statement is shown below:

	Total	Per Unit
Sales units	15,000
Sales dollars	$225,000	$15.00
Variable expenses	135,000	9.00
Contribution margin	90,000	$6.00
Fixed expenses	35,000
Net Operating income	$55,000

Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

a. The sales volume increases by 10% and the price decreases by $0.50 per unit.

b. The selling price decreases $1.00 per unit, fixed expenses increase by $15,000, and the sales volume decreases by 5%.

c. The selling price increases by 25%, variable expense increases by $0.75 per unit, and the sales volume decreases by 15%.

d. The selling price increases by $1.50 per unit, variable cost increases by $1.00 per unit, fixed expenses    decrease by $15,000, and sales volume decreases by 12%.

Q3. In July, Meers Corporation sold 3,700 units of its only product. Its total sales were $107,300, its total   variable expenses were $66,600, and its total fixed expenses were $34,800.

Required:

a. Construct the company's contribution format income statement for July in good form.

b. Redo the company's contribution format income statement assuming that the company sells 3,400 units.

Q4. The management of Dethlefsen Corporation would like to have a better understanding of the behavior of its inspection costs. The company has provided the following data:

	Direct Labor Hours	Inspection Cost
JAN	5,089	$     33,122
FEB	5,042	$     32,929
MAR	5,026	$     32,870
APR	5,073	$     33,065
MAY	5,029	$     32,906
JUN	5,040	$     32,913
JUL	5,070	$     33,050
AUG	5,027	$     32,875
SEP	4,995	$     32,746

Management believes that inspection cost is a mixed cost that depends on direct labor-hours.

Required:

a. Using the high low method determine the variable cost per unit, the total fixed cost, and express in a formula.            

b. Using the regression analysis determine the variable cost per unit, the total fixed cost, and express in a formula.

Explain what the regression analysis printout for this problem, tells you about the independent and dependent variable, and the fixed cost or intercept.  How good of a predictor is the model and how did you determine this.