Question: For Flynn Company, variable costs are 70%

> If production equals sales, what, if any, is the difference between net income under absorption costing versus under variable costing?

> Provide three examples of management decisions that benefit from CVP analysis.

> R. B. Dillman Company manufactures a high-tech component that passes through two production processing departments, Molding and Assembly. Department managers are partially compensated on the basis of units of products completed and transferred out relati

> Doc Rowan Corporation sells one product, its waterproof hiking boot. It began operations in the current year and had an ending inventory of 8,500 units. The company sold 20,000 units throughout the year. Fixed manufacturing overhead is $5 per unit, and t

> Distinguish between absorption costing and variable costing.

> Pine Company has a degree of operating leverage of 8. Fir Company has a degree of operating leverage of 4. Interpret these measures.

> What is a measure of operating leverage, and how is it calculated?

> What is operating leverage? How does a company increase its operating leverage?

> What is meant by “cost structure?” Explain how a company’s cost structure affects its break-even point

> How is the contribution margin per unit of limited resource computed?

> What is meant by CVP analysis?

> “Cost-volume-profit (CVP) analysis is based entirely on unit costs.” Do you agree? Explain

> At the high and low levels of activity during the month, direct labor hours are 90,000 and 40,000, respectively. The related costs are $165,000 and $100,000. What are the fixed and variable costs at any level of activity?

> Diane Barone was a good friend of yours in high school and is from your home town. While you chose to major in accounting when you both went away to college, she majored in marketing and management. You have recently been promoted to accounting manager f

> How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification?

> “The relevant range is indispensable in cost behavior analysis.” Is this true? Why or why not?

> Contrast the effects of changes in the activity level on total fixed costs and on unit fixed costs.

> The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution marg

> Huang Company’s break-even sales are $500,000. Assuming fixed costs are $180,000, what sales volume is needed to achieve a target net income of $90,000?

> Define the term “margin of safety.” If Revere Company expects to sell 1,250 units of its product at $12 per unit, and break-even sales for the product are $13,200, what is the margin of safety ratio?

> Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $325,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $342,000 of overhead costs are incurred a

> William Mendel & Sons, Inc. is a small manufacturing company in La Jolla that uses activity-based costing. Mendel & Sons accumulates overhead in the following activity cost pools. 1. Hiring personnel. 2. Managing parts inventory. 3. Purchasing. 4. Testin

> Having itemized its costs for the first quarter of next year’s budget, Santana Corporation desires to install an activity-based costing system. First, it identified the activity cost pools in which to accumulate factory overhead. Second, it identified th

> Pure Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client’s consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below

> After graduating, you might decide to start a small business. As discussed in this chapter, owners of any business need to know how to calculate the cost of their products. In fact, many small businesses fail because they don’t accurately calculate their

> The gross earnings of the factory workers for Vargas Company during the month of January are $66,000. The employer’s payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $6,000. Of the total

> Information for Markowis Corporation is given in BE19-7. If the company has fixed costs of $213,000, how many units of each model must the company sell in order to break even?

> Markowis Corporation sells three different models of mosquito “zapper.” Model A12 sells for $50 and has variable costs of $40. Model B22 sells for $100 and has variablecosts of $70. Model C124 sells for $400 and has variable costs of $300. The sales mix

> For Kosko Company actual sales are $1,200,000 and break-even sales are $960,000. Compute (a) the margin of safety in dollars and (b) the margin of safety ratio.

> For Ortega Company, variable costs are 60% of sales, and fixed costs are $210,000. Management’s net income goal is $60,000. Compute the required sales needed to achieve management’s target net income of $60,000. (Use the mathematical equation approach.)

> Dilts Company has a unit selling price of $400, variable costs per unit of $250, and fixed costs of $210,000. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.

> Wesland Corp. had total variable costs of $175,000, total fixed costs of $120,000, and total revenues of $250,000. Compute the required sales in dollars to break even.

> Burns Company incurred the following costs during the year: direct materials $20 per unit; direct labor $14 per unit; variable manufacturing overhead $15 per unit; variable selling and administrative costs $8 per unit; fixed manufacturing overhead $128,0

> Information concerning The Rock Company is provided in BE19-16. What are the total product costs for the company under absorption costing? BE19-16: Direct materials …………………………………………….$14,400 Direct labor …………………………………………………..$25,600 Fixed manufacturing

> The Rock Company produces basketballs. It incurred the following costs during the year. Direct materials …………………………………………….$14,400 Direct labor …………………………………………………..$25,600 Fixed manufacturing overhead ……………………..$12,000 Variable manufacturing overhead …

> Many of you will work for a small business. Some of you will even own your own business. In order to operate a small business, you will need a good understanding of managerial accounting, as well as many other skills. Much information is available to ass

> The degree of operating leverage for Montana Corp. and APK Co. are 1.6 and 5.4, respectively. Both have net incomes of $50,000. Determine their respective contribution margins

> Sam’s Shingle Corporation is considering the purchase of a new automated shingle-cutting machine. The new machine will reduce variable labor costs but will increase depreciation expense. Contribution margin is expected to increase from $200,000 to $240,0

> In Briggs Company, data concerning two products are contribution margin per unit—Product A $12, Product B $15; machine hours required for one unit—Product A 2, Product B 3. Compute the contribution margin per unit of limited resource for each product.

> Acorn Corp. had total variable costs of $180,000, total fixed costs of $170,000, and total revenues of $300,000. Compute the required sales in dollars to break even.

> Rice Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $163,800. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.

> Radial Inc. had sales of $2,400,000 for the first quarter of 2014. In making the sales, the company incurred the costs and expenses shown below. Prepare a CVP income statement for the quarter ended March 31, 2014. Variable Fixed Cost of goods sold

> Determine the missing amounts. Unit Selling Price Unit Variable Contribution Contribution Margin Ratio (b) ) (d) Costs Margin per Unit 1. $640 $300 $352 (c) (f) (a) $93 2. 3. (e) $325 25%

> Stiever Corp. has collected the following data concerning its maintenance costs for the past 6 months. Compute the variable- and fixed-cost elements using the high-low method. Units Produced Total Cost July August September 18,000 $32,000 32,000 36

> For Hunt Company, a mixed cost is $15,000 plus $18 per direct labor hour. Diagram the behavior of the cost using increments of 500 hours up to 2,500 hours on the horizontal axis and increments of $15,000 up to $60,000 on the vertical axis.

> For Lodes Company, the relevant range of production is 40–80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear.

> Howser Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced, and 48,000 units are sold. Write a short memo to the chief financial officer explaining w

> Deines Corporation has fixed costs of $480,000. It has a unit selling price of $6, unit variable costs of $4.40, and a target net income of $1,500,000. Compute the required sales in units to achieve its target net income.

> For Stevens Company, actual sales are $1,000,000 and break-even sales are $840,000. Compute (a) the margin of safety in dollars and (b) the margin of safety ratio.

> Mendle and Kiner is an architectural firm that is contemplating the installation of activity-based costing. The following activities are performed daily by staff architects. Classify these activities as value-added or non–value-added: (a) designing and d

> Rich Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non value added. (a) Machine setup. (d) Moving work in process. (b) Design engineering.

> Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools. Expected Use o

> Mordica Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $150,000, $325,000, and $87,500, respectively. The cost driver for each activity and

> Mason Company manufactures four products in a single production facility. The company uses activity-based costing. The following activities have been identified through the company’s activity analysis: (a) inventory control, (b) machine setups, (c) emplo

> Storrer Co. identifies the following activities that pertain to manufacturing overhead: materials handling, machine setups, factory machine maintenance, factory supervision, and quality control. For each activity, identify an appropriate cost driver.

> Kwik Pix is a large digital processing center that serves 130 outlets in grocery stores, service stations, camera and photo shops, and drug stores in 16 nearby towns. Kwik Pix operates 24 hours a day, 6 days a week. Classify each of the following activit

> LRF Printing provides printing services to many different corporate clients. Although LRF bids most jobs, some jobs, particularly new ones, are negotiated on a “cost-plus” basis. Costplus means that the buyer is willing to pay the actual cost plus a retu

> Spin Cycle Company uses three activity pools to apply overhead to its products. Each activity has a cost driver used to allocate the overhead costs to the product. The activities and related overhead costs are as follows: product design $40,000; machinin

> Trammell, Inc. operates 20 injection molding machines in the production of tool boxes of four different sizes, named the Apprentice, the Handyman, the Journeyman, and the Professional. Classify each of the following costs as unit-level, batch-level, prod

> At December 31, balances in Manufacturing Overhead are Shimeca Company— debit $1,200, Garcia Company—credit $900. Prepare the adjusting entry for each company at December 31, assuming the adjustment is made to cost of goods sold.

> Preprah Engineering Contractors incurred service salaries and wages of $32,000 ($24,000 direct and $8,000 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor. Record the entries to assign service salaries an

> In March, Stinson Company completes Jobs 10 and 11. Job 10 cost $20,000 and Job 11 $30,000. On March 31, Job 10 is sold to the customer for $35,000 in cash. Journalize the entries for the completion of the two jobs and the sale of Job 10.

> During the first quarter, Roland Company incurs the following direct labor costs: January $40,000, February $30,000, and March $50,000. For each month, prepare the entry to assign overhead to production using a predetermined rate of 80% of direct labor c

> Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate f

> Data pertaining to job cost sheets for Knox Company are given in BE15-3 and BE15-4. Prepare the job cost sheets for each of the three jobs. (Note: You may omit the column for Manufacturing Overhead.) Data given in BE15-3: In January, Knox Company requis

> Factory labor data for Knox Company is given in BE15-2. During January, time tickets show that the factory labor of $6,000 was used as follows: Job 1 $2,200, Job 2 $1,600, Job 3 $1,400, and general factory use $800. Prepare a summary journal entry toreco

> In January, Knox Company requisitions raw materials for production as follows: Job 1 $900, Job 2 $1,400, Job 3 $700, and general factory use $600. Prepare a summary journal entry to record raw materials used.

> You are the management accountant for Williams Company. Your company does custom carpentry work and uses a job order cost system. Williams sends detailed job cost sheets to its customers, along with an invoice. The job cost sheets show the date materials

> During January, its first month of operations, Knox Company accumulated the following manufacturing costs: raw materials $4,000 on account, factory labor $6,000 of which $5,200 relates to factory wages payable and $800 relates to payroll taxes payable, a

> Determine the missing amounts. Unit Selling Unit Variable Contribution Contribution Margin per Unit (a) $300 $330 Price Costs Margin Ratio $180 (c) (f) 1. $250 $500 (e) (b) (d) 2. 3. 30%

> Eye Spy Corporation manufactures and sells three different types of binoculars. They are referred to as Good, Better, and Best binoculars. Grinding and polishing time is limited. More time is required to grind and polish the lenses used in the Better and

> Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below. The company’s total fixed costs to produce the filtration systems are $165,480. (a) Determine the sale

> Queensland Company reports the following operating results for the month of April. Management is considering the following course of action to increase net income: Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. M

> Presto Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $18 per unit. (a) Compute the break-even point in dollars using the contribution margin (CM) ratio. (b) Com

> Flynn Industries has three activity cost pools and two products. It expects to produce 3,000 units of Product BC113 and 1,500 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following

> The assembly department has the following production data for the cur Materials are entered at the beginning of the process. The ending work in process units are 70% complete as to conversion costs. Compute the equivalent units of production for (a) m

> Kopa Company manufactures CH-21 through two processes: Mixing and Packaging. In July, the following costs were incurred. Units completed at a cost of $21,000 in the Mixing Department are transferred to the Packaging Department. Units completed at a cos

> In March, Kelly Company had the following unit production costs: materials $10 and conversion costs $8. On March 1, it had zero work in process. During March, Kelly transferred out 22,000 units. As of March 31, 4,000 units that were 40% complete as to co

> Many politicians, scientists, economists, and businesspeople have become concerned about the potential implications of global warming. The largest source of the emissions thought to contribute to global warming is from coal-fired power plants. The cost o

> During the current month, Reyes Corporation completed Job 310 and Job 312. Job 310 cost $60,000 and Job 312 cost $50,000. Job 312 was sold on account for $90,000. Journalize the entries for the completion of the two jobs and the sale of Job 312.

> Milner Company is working on two job orders. The job cost sheets showthe following. Prepare the three summary entries to record the assignment of costs to Work in Process from the data on the job cost sheets. Job 201 Job 202 Direct materials $7,200

> During the current month, Tomlin Company incurs the following manufacturing costs. (a) Purchased raw materials of $16,000 on account. (b) Incurred factory labor of $40,000. Of that amount, $31,000 relates to wages payable and $9,000 relates to payroll ta

> What approach should be used to calculate the breakeven point of a company that has many products?

> Describe the features of a CVP income statement that make it more useful for management decision making than the traditional income statement that is prepared for external users.

> Distinguish between a traditional income statement and a CVP income statement.

> (a) What is the major rationale for the use of variable costing? (b) Discuss why variable costing may not be used for financial reporting purposes.

> How does the replacement of manual labor with automated equipment affect a company’s cost structure? What implications does this have for its operating leverage and break-even point?

> In the long run, will net income be higher or lower under variable costing compared to absorption costing?

> (a) Describe the philosophy and approach of just-in time processing. (b) Identify the major elements of JIT processing.

> Ger Corporation manufactures two products with the following characteristics. If Ger’s machine hours are limited to 2,000 per month, determine which product it should produce. Contribution Margin Machine Hours per Unit $42 $35 Req

> How does a company decide whether to use a job order or a process cost system?

> What is the relevance of the classification of levels of activity to ABC?

> In what ways is the application of ABC to service industries the same as its application to manufacturing companies?

> Matt Litkee is confused about under- and overapplied manufacturing overhead. Define the terms for Matt, and indicate the balance in the manufacturing overhead account applicable to each term.

> Under what conditions is ABC generally the superior overhead costing system?

> How can the agreement of Work in Process Inventory and job cost sheets be verified?

> Peggy Turnbull asks your help in constructing a CVP graph. Explain to Peggy (a) how the break-even point is plotted, and (b) how the level of activity and dollar sales at the break-even point are determined.

> What is the theory of constraints? Provide some examples of possible constraints for a manufacturer.

> Explain the purpose and use of a “materials requisition slip” as used in a job order cost system.

> Adam Antal is confused. He does not understand why rent on his apartment is a fixed cost and rent on a Hertz rental truck is a mixed cost. Explain the difference to Adam.