accounting questions

Question 1:

Low company produces four types of products using the same production process. Each product can be process further. The common costs of these four product, up to the split of point are, $200,000, and these costs are allocated based on the quantity produced. Following its information regarding production, prices, and costs for each product:

products	number of units produced	selling price at split off point	Selling price after further processing	Additional costs for further processing
A	500,000	$1.99	$2.95	$350,000
B	250,000	3.99	5.25	300,000
C	125,000	3.50	4.99	200,000
D	50,000	2.99	4.50	100,000

Required:

1. if only one product can be processed further, which product should Low process?

2. If common costs up to the split off point were allocated on the basis of the market would your decision in part (1) be different? briefly explain why or why not.

Question 2: You work as an analyst for a bulletproof glass manufacturer . one of your duty is to study the quality costs of the company. The following is the information for the year ended December 31, 2012:

	2012
Disposal of defective products	$110,000
Warranty replacement	256,000
Warranty repairs	825,000
Training	521,000
Cost incurred to test production equipment	590,000
Amortization of testing equipment	89,000
Inspection	485,000
Statistical process control	59,000
Supplies used in testing	87,000
Product testing	283,000
Systems development	68,000
Quality engineering	145,000
Rework labour	522,000
Total	$ 4,090,000
Sales	$25,300,000

1. Repair the quality cost report with the information collected by the accounting.

Question 3:

GR is the manufacturer of umbrellas. After three years of research and development. The company recently developed a new umbrella for golfers. The unit production costs of that umbrella are as follow:

Raw material $8.50

Direct labour 6.00

Overhead costs---variable 2.00

Overhead costs---fixed 1.00

Selling and administrative expenses---variable 0.50

Selling and administrative expenses---fixed 1.00

All costs are based on an expected level of production and sales of 1,000,000 umbrellas.

Required:

Answer the following independent questions:

1. Calculate the break even price of the new umbrella. Show all your calculations.

2. If GR requires a minimum contribution margin of 25% for all its products, calculate the minimum selling price for the new umbrella. Show all your calculations.

3. If the selling price of the new umbrella is set at $30, calculate the number of umbrellas that must be sold to generate an income of $8,000,000. Show all your calculation, rounding to the nearest whole unit.

4. If the selling price of the new umbrella is set at $25, calculate the number of umbrellas that must be sold to generate an income of 20% on sales. Show all your calculation, rounding to the nearest whole unit.

Question 4:

A company plans to market a new product. It has received a order of 5,000 units from a client. The client is willing to pay $75 per unit. The estimated costs of producing each unit of the new product are:

Direct materials $24

Direct labour 14

Variable overhead 12

Fixed overhead 10

Total $60

The company usually has rate of return on sales of 15%.

Required:

1. In this situation, calculate the target cost for this product.

2. Calculate the target profit.

3. Based on the current cost structure, calculate the total profit.