ACCt221 quiz 3 2017

Question 1(5 points)

Joe's Tuxedos has monthly fixed costs of $15,500. The variable costs of sales are 60%. What is the break-even monthly sales revenue?

Question 1 options:

	$7,200
	$38,750
	$25,834
	$30,000

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Question 2(5 points)

Delta Manufacturing has sales of $2,000,000 with direct materials cost of $388,000, direct labor of $236,000, variable overhead of $100,000, and fixed costs of $300,000. What is Delta's contribution margin rate?

Question 2 options:

	60%
	63.8%
	40%
	36.2%

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Question 3(5 points)

If a company has a 55% contribution margin ratio and has fixed costs of $275,000, how much sales does it need to earn a gross profit of $220,000?

Question 3 options:

	$500,000
	$1,000,000
	$1,100,000
	$900,000

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Question 4(5 points)

Leisure Products management wants to ensure that each product makes a profit. The company produced a hammock that sold 3,600 units at $80 per unit. The variable cost of production was $36 per unit. The fixed costs were $110,000. What was the margin of safety?

Question 4 options:

	$20,000
	$80,000
	$88,000
	$126,000

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Question 5(5 points)

Sports Specialty Inc. produces a bicycle that it normally sells wholesale for $250 per bike. The variable costs of production are $169 and the fixed cost for this product line is $164,000 per month. The company has been selling this product at a rate of 2,000 units per month. The company has received an order for 1,100 bikes at a price of $190 per bike. The order is to ship to a market where the company has no business, so it is believed it will not adversely affect existing business. The company has the capacity to produce the special order. How much will operating profit change if Sports Specialty accepts this order?

Question 5 options:

	increase of $22,000
	decrease of $22,000
	increase of $23,100
	decrease of $23,100

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Question 6(5 points)

Premier Manufacturing makes and distributes a wall clock that is popular with schools and other institutions. Normal monthly sales are 2,600 clocks at an average sale price of $40 per clock. Production of each clock takes 15 minutes of direct labor and has material costs of $15. The direct labor rate is $20 per hour, and overhead is applied at a rate of $38 per direct labor hour. The overhead spending is 60% fixed and 40% variable costs. Premier has been approached by a supplier offering to supply all of the clocks at a finished cost of $25 per clock. Assume that all fixed overhead would remain, but the variable overhead would be eliminated. What would be the change in monthly operating income if Premier buys the clocks instead of making them?

Question 6 options:

	decrease of $3,120
	increase of $3,120
	decrease of $3,750
	increase of $3,750

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Question 7(5 points)

Roscoe Enterprises has sales for a three-month period as follows: May, $250,000; June, $270,000; July, $275,000. All sales are on account, and history has shown that accounts receivable are typically collected 10% in the month of the sale, 60% in the month after the sale, and 30% two months after the sale. What are Roscoe's expected cash collections in the month of July?

Question 7 options:

	$264,500
	$177,000
	$280,000
	$267,500

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Question 8(5 points)

Mega Manufacturing has a budget to sell 100,000 units of a certain product at a selling price of $34 per unit. Variable costs for materials, labor, and overhead are $16 per unit. Fixed cost is $810,000. Actual sales were 110,000 units, and management would like to see actual manufacturing performance compared to a budget adjusted for volume (flexible budget). What would be the adjusted budgeted operating profit?

Question 8 options:

	$1,280,000
	$990,000
	$1,070,000
	$1,170,000

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Question 9(5 points)

A company president wants the chief financial officer to tell him how many sales are required to make a $1,500,000 operating profit. Variable production costs are 60% of sales, and fixed costs are $3,250,000. What are the required sales, rounded to the closest dollar?

Question 9 options:

	$11,875,000
	$7,916,667
	$4,750,000
	$12,500,000

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Question 10(5 points)

Top Dog Company has a budget with sales of 5,000 units and $3,200,000. Variable costs are budgeted at $1,775,000, and fixed overhead is budgeted at $920,000. What is the budgeted manufacturing cost per unit?

Question 10 options:

	$355
	$530
	$640
	$539

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Problems

Question 11(20 points)

Prepare a contribution margin income statement for X-Ray Manufacturing using the following information:

Sales	$4,729,302
Fixed overhead	1,382,842
Direct labor	487,202
Direct materials	678,302
Selling expenses	378,972
Administrative expenses	482,731
Variable overhead	248,528
Interest expense	127,456
Income tax	330,144 X-Ray Manufacturing Contribution Margin Income Statement Sales Amount Variable costs: Item Amount Item Amount Item Amount Total variable costs Amount Contribution margin Amount Item Amount Gross margin Amount Item Amount Item Amount Total selling and administrative expenses Amount Operating income Amount Item Amount Income before taxes Amount Item Amount Income before taxes Amount

Question 12(20 points) Presented below are selected budget data items for Globe Corporation for a three-month period:

	October	November	December
Sales	$908,000	$891,000	$887,000
Direct materials	127,700	124,000	129,000
Direct labor	94,000	95,000	96,400
Variable overhead	67,900	69,250	71,000
Fixed overhead	145,000	145,000	145,000
Selling and Administrative expenses	309,000	310,820	312,600
Fixed loan payments	135,100	135,100	135,100

Sales were $820,000 in August and $865,500 in September. Material usage was $117,100 in August and $121,800 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 35% in the month used and 65% the following month. All other expenses are paid in the month incurred. The cash balance was $42,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus.Prepare a three-month cash budget, including a schedule for cash collections and material payments.

Question 12 options:

October November December Cash Collections: August Amount Amount Amount September Amount Amount Amount October Amount Amount Amount November Amount Amount Amount December Amount Amount Amount Total cash collections Amount Amount Amount October November December Materials Payments: September Amount Amount Amount October Amount Amount Amount November Amount Amount Amount December Amount Amount Amount Total material payments Amount Amount Amount October November December Cash Budget: Beginning cash Amount Amount Amount Cash collections Amount Amount Amount Cash available Amount Amount Amount Cash Payments: Material payments Amount Amount Amount Direct labor Amount Amount Amount Variable overhead Amount Amount Amount Fixed overhead Amount Amount Amount Selling and administrative Amount Amount Amount Fixed loan payments Amount Amount Amount Total payments Amount Amount Amount Ending cash Amount Amount Amount

Question 13(10 points)

Olympic Products Inc. manufactures and distributes barbecue grills. The company normally sells 1,500 of these grills each month for a price of $240 each. The material cost for a grill is $50 and the direct labor is $28. The variable overhead cost is $23 per grill, and the fixed overhead cost is $45,000 per month. A contract manufacturer has approached the company and offered to supply the grills ready to sell for $108 each. The company management believes that if it accepts this offer, Olympic Products will be able to lease unused factory space for $17,000 per month.Perform a make-versus-buy analysis.

	Make	Buy	Change in Income
Materials	Amount	Amount	Amount
Direct labor	Amount	Amount	Amount
Variable overhead	Amount	Amount	Amount
Fixed overhead	Amount	Amount	Amount
Purchase cost	Amount	Amount	Amount
Lease revenue	Amount	Amount	Amount
Total costs	Amount	Amount	Amount
Make or Buy? Explain why. ?	Enter your response here.