For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable This cost per unit increase may be due to _____________ costs because the level of activity at Jinan is _______________.
A) fixed, decreasing
B) fixed, increasing
C) variable, decreasing
D) variable, increasing
Flexible Budget and Variances for Depreciation Somson SuperKlean Service’s master budget includes $258,000 for equipment depreciation. The master budget was prepared for an annual vol- ume of 103,200 chargeable hours. This volume is expected to occur uniformly throughout the year. During September, Somson performed 8,170 chargeable hours, and the firm recorded $20,500 of depreciation expense. Required
Determine the flexible-budget amount for equipment depreciation in September.
Compute the spending variance for the depreciation expense on equipment.
Calculate the production-volume variance for the depreciation expense. What is the interpretation of this variance?
List possible reasons for the spending variance.
Is Chewing Gum the “Right” Thing to Do?
Form groups of three or four people, and appoint one member as the spokesperson who will communicate your findings to the class when called on by the instructor. Then discuss the following scenario:
In the United States the right to chew gum is taken for granted. Although it is often against the rules to chew gum in a high school classroom, church, and so on, it is legal to do so on the street. If you possess or chew gum on a street in Singapore, you can be arrested. Chewing gum has been made illegal in Singapore because those in power believe it creates a mess on pavements and feel that people cannot be trusted to dispose of their gum properly and thus should have no right to use it.
1. What makes chewing gum acceptable in the United States and unacceptable in Singapore?
2. Why can you chew gum on the street but not in a church?
3. How can you use ethical principles to decide when gum chewing is ethical or unethical and if and when it should be made illegal?
The break-even point in unit sales is found by dividing total fixed expenses by:
A) the contribution margin ratio.
B) the variable expenses per unit.
C) the sales price per unit.
D) the contribution margin per unit.
Moosehead timber company owns 10,000 acres of timberland purchased in 2011 at a cost of $1,500 per acre. At the time of purchase, the land without the timber was valued at $500 per acre. In 2012, Moosehead built fire lanes and roads, with a life of 30 years at a cost of $90,000. Every year Moosehead sprays to prevent disease at a cost of $5,000 per year and spends $10,000 to maintain the fire lanes and roads. During 2013, Moosehead logged and sold 800,000 board feet of timber, of an estimated 4,000,000 board feet. In 2014 Moosehead planted new seedlings to replace the trees cut at a cost of $100,000.
Determine the cost of the timber sold related to depletion for 2013.
1. Sesame Company wants to earn a before-tax profit of $2,750,000. How many clocks must the company sell to achieve that profit?
2. Sesame Company estimates that spending an additional $425,000 on advertising will result in an additional 50,000 clocks being sold. Should the company incur this extra fixed cost?
3. Sesame Company estimates that reducing a clock’s selling price to $37.50 will result in an additional 90,000 clocks per year being sold. Should the company reduce the clock’s selling price?
Dennis Rathke wants Rathke Company to use CVP analysis to study the effects of changes in costs and volume on the company. Rathke has heard that certain assumptions must be valid in order for CVP analysis to be useful.
Instructions
Prepare a memo to Dennis Rathke concerning the assumptions that underlie CVP analysis.
(CVP) Bill’s Cabinets sells a product for $360 per unit. The company’s variable cost per unit is $60 for direct material, $50 per unit for direct labor, and $34 per unit for overhead. Annual fixed production overhead is $74,800, and fixed selling and administrative overhead is $50,480.
a. What is the contribution margin per unit?
b. What is the contribution margin ratio?
c. What is the break-even point in units?
d. Using the contribution margin ratio, what is the break-even point in sales dollars?
e. If Bill’s Cabinets wants to earn a pre-tax profit of $51,840, how many units must the company sell?
Define and give examples of the following terms: cost pool, cost object, and cost allocation (or distribution).
For the coming year, Favre Products Inc. anticipates a unit selling price of $160, a unit variable cost of $90, and fixed costs of $1,400,000.
Instructions
1. Compute the anticipated break-even sales (units).
2. Compute the sales (units) required to realize income from operations of $525,000.
3. Construct a cost-volume-profit chart, assuming maximum sales of 50,000 units within the relevant range.
4. Determine the probable income (loss) from operations if sales total 30,000 units.
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