BA225 Managerial Accounting: Week 4 Assignments (BE5-1, BE5-2, BE5-4, E6-3, E6-5, E6-7)
BA225 Managerial Accounting Week 4 Problems BE5-1 Monthly production costs Pesavento Company for two levels of production as follows: Cost 2,000 Units 4,000 Units Indirect Labor 10,000 20,000 Supervisor Salaries 5,000 5,000 Maintenance 4,000 7,000 Indicate which costs are variable, fixed, and mixed, and give reason for each answer. BE5-2 For Lodes Company, the relevant range of production in 40-80% of capacity. At 40% capacity, a variable cost is $4,000 and fixed cost is $6,000. Diagram the behavior of each cost within relevant range assuming the behavior is linear. BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using miles as activity level. Miles Driven Total Cost January 8,000 14,150 February 7,500 13,600 March 8,500 15,000 April 8,200 14,490 Compute the variable-and fixed- cost elements using the high-low method. E6-3 Norton Company reports the following operating results for month of August: Sales $310,000 (units 5,000); variable cost $210,000; and fixed cost $75,000. Management is considering the following independent courses of acton to increase net income. 1. Increase selling price by 10% with no change in total variable costs or sales volume. 2. Reduce variable costs to 58% of sales. 3. Reduced fixed costs by $20,000 Instructions: Compute the net income to be earned under each alternative. Which course of action will produce the highest next income? E6-5 Hall Company had sales in 2014 of $1,500,000 on 60,000 units. Variable cost totaled $720,000, and fixed cost totaled $500,000. A raw material is available that will decrease the variable costs per unit by 25% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $150,000. Management feels that one-half of declines in the variable cost per unit should be passed on to customers in the form of sales price reduction. The marketing department expects that this sales price reduction will result in 5% increase in number units sold. Instruction Prepare a projected CVP income statement of 2014 (a) assuming the changes have not been made, and (b) assuming that changes are made as described. E6-7 Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair: oil change-related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are $16,000,000 (that is $80,000 per service outlet). Instruction: (a) Calculate the dollar amount of each type of service that the company must provide in order to break even. (b) The company has a desired net income of $60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?
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