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Review Day Exercises Solutions

Autor:   •  May 4, 2015  •  Study Guide  •  2,486 Words (10 Pages)  •  1,135 Views

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REVIEW DAY EXERCISES

CVP Relationships

XYZ Company’s break-even sales level for the year was $40,000.  When the company incurs total variable costs of $50,000 and fixed costs of $30,000, what would the actual profit (loss) before taxes for the year be?

Sales – VC = CM – FC = Profit before taxes

$40,000 – VC = CM - $30,000 = $0  

Therefore, CM = $30,000 and VC = $10,000

>>>>  Ratio of VC to Sales = 1:4  

Therefore, $50,000 is Actual VC * 4 = $200,000 Sales

$200,000 - $50,000 = $150,000 - $30,000 = $120,000 Profit before taxes

CHAPTER 7. A company is releasing two new products.  Financial details are as follows:

                                Product A                        Product B

Selling Price                        $200                                $100

Variable Costs:

        Marketing                        $25                                $25

        Manufacturing                $65                                $15

        CM                                $110                                $60

The fixed costs combined are $15,000,000.  The sales mix is 70% Product A and 30% Product B.  The company’s tax rate is 30%. The company’s goal is to have an after-tax profit of $1,000,000.

Required:

  1. How many units of Product A need to be sold? 172,933 * 70% = 121,053

  1. How many units of Product B need to be sold?  172,933 * 30% = 51,880

Weighted UCM = (110 * 70%) + (60 * 30%) = $95

Combined Units = (15,000,000 + (1,000,000/.70)) / $95 = 172,933

CHAPTER 2.  A company has hired you to help complete the analysis below.  The company allocates overhead to work-in-process as follows: $2.00 of overhead per direct labor dollar.    

Account

$$

Amount

Account

$$

Amount

Work in process – Oct 31st 

$ 1,800

Revenues – October

$27,300

Finished goods – Oct 1st 

$ 4,200

Gross Profit – October

$12,700

October direct labor

$ 3,100

Direct materials used in Oct

$ 8,000

October purchases of raw materials

$ 9,200

Raw materials inventory – Oct 31st 

$ 3,300

Work in process – Oct 1st

Zero

Selling & Admin expenses – October

$ 2,000

...

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