accounts homework with all solutions

Accounting for Decision Makers

Question #2

The following is budgeted information for the Samantha Corporation:

	Product 1	Product 2
Annual production & sales	60,000	40,000
Projected selling price	$12	$18
Direct Production Cost Information
Materials (per unit)	$2	$4
Direct Labor (per unit)	$3	$6

Additional information:

• Selling & administrative costs (a mixed cost) are budgeted to be $260,000 at the production and sales listed above. The variable component is $2 per unit (same for each product).
• Manufacturing overhead costs (a mixed cost) are budgeted to be $246,000 at the production and sales listed above. The fixed component is $96,000. Each product uses the same amount of variable manufacturing overhead per unit.

Assuming the budgeted sales mix remains intact, how many units of each product does Samantha need to sell in order to break even?

Question #3

Consider the following information, prepared based on a capacity of 100,000 units:

Category	Cost per Unit
Variable manufacturing costs	$12.00
Fixed manufacturing costs	$3.00
Variable selling costs	$5.00
Fixed selling costs	$2.00

Capacity cannot be added in the short run and the firm currently sells the product for $30 per unit.

a) The company is currently producing 90,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $24 per unit. Since the potential customer approached the firm, there will be no variable selling costs incurred. Should the company accept the special order? Why or why not? Be specific.

b) Assume the same facts as in part a, except that the company is producing 100,000 units per month. Should the company accept the special order? Why or why not? Be specific.

Question #4

Assume a company produces and sells the following 3 products. If the company is limited to 4,000 machine hours (MH), how many units of each product should it produce in order to maximize operating income?

Product	A	B	C
Selling price per unit	$150	$200	$140
Variable costs per unit	$60	$80	$60
MH required per unit	5	10	4
Maximum sales (units)	350	400	600