Devry ACCT346 Week 5 Assignment

DeVry University

ACCT346 Weekly Assignment

Week 5

Directions: Your assignment this week is to answer the below three questions. Please note that question #1 has 2 parts, part a and part b and question #2 has 3 parts, part a, part b and part c. Please show your work for full credit and use the box provided. Please add more rows or columns to the box if needed.

1. Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000.

1a. How many boxes of chocolates must Palmer's Gourmet Chocolates sell to breakeven?

1b. What are breakeven sales in dollars?

2. Extreme Sports received a special order for 1,000 units of its extreme motorbike at a selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept the order. No additional selling costs will be incurred. Unit costs to make and sell this product are as follows: Direct materials, $100; direct labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10, and variable selling costs, $2.

2a. List the relevant costs.

2b. What will be the change in operating income if Extreme Sports accepts the special order?

2c. Should Extreme Sports accept the special order? Why or why not?

3. Totally Technology manufactures Cameras and Video Recorders. The company's product line income statement follows:

Camera

Video Recorder

Total

Sales revenue

$3,00,000

$1,00,000

$4,00,000

Cost of goods sold

Variable

$75,000

$49,000

$1,24,000

Fixed

$82,000

$28,000

$1,10,000

Total cost of goods sold

$1,57,000

$77,000

$2,34,000

Gross profit

$1,43,000

$23,000

$1,66,000

Marketing and administrative expenses

Variable

$25,000

$28,000

$53,000

Fixed

$32,000

$19,000

$51,000

Total marketing and administrative expenses

$57,000

$47,000

$1,04,000

Operating income (loss)

$86,000

(24,000)

$62,000

Management is considering discontinuing the Video Recorder product line. Accountants for the company estimate that discontinuing the Video Recorder line will decrease fixed cost of goods sold by $10,000 and fixed marketing and administrative expenses by $4,000.

Prepare an analysis supporting your opinion about whether or not the Video Recorder product line should be discontinued.