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18 - 1 Cost-Volume-Profit 151.Chung, Inc. sells 100,000 wrenches for $18 per unit. Fixed costs are $525,000 and net income is $375,000. What should be reported as variable expenses in the CVP income statement? a.$810,000 b.$900,000 c.$1,425,000 d.$1,275,000 152.Sweet Manufacturing is planning to sell 400,000 hammers for $3 per unit. The contribution margin ratio is 20%..
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18 - 1 Cost-Volume-Profit Ex. 180 Werth & Garza Manufacturing's sales slumped badly in 2013 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: net sales $2,125,000; total costs and expenses $2,500,000; and net loss $375,000. Costs and expenses.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 101.Which cost is charged to the product under variable costing? a.Variable manufacturing overhead b.Fixed manufacturing overhead c.Variable administrative expenses d.Fixed administrative expenses a102.Variable costing a.is used for external reporting purposes. b.is required under GAAP. c.treats fixed manufacturing overhead as a period cost. d.is also known as full costing. a103.Sprinkle Co. sells its product for $20.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 41.Hinge Manufacturing’s cost of goods sold is $420,000 variable and $240,000 fixed. The company’s selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company’s sales is $1,480,000, what is its net income? a.$160,000 b.$760,000 c.$820,000 d.$880,000 42.Woolford’s CVP income statement included sales of 4,000 units, a selling.
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18 - 1 Cost-Volume-Profit Ex. 170 Corris Co. accumulates the following data concerning a mixed cost, using miles as the activity level. Miles DrivenTotal Cost January10,000$17,000 February8,00013,500 March9,00014,400 April7,00012,500 Instructions Compute the variable and fixed cost elements using the high-low method. Ex. 171 Moresan Co. gathered the following information on power costs and factory machine usage for the last six months: MonthPower.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 146 An investment banker is analyzing two companies that specialize in the production and sale of gourmet cappuccino and chai mixes. Roasted Beans Co. uses a labor-intensive approach and Monat Industries uses a mechanized system. Variable costing income statements for the two companies are shown.
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18 - 1 Cost-Volume-Profit Ex. 174 Henderson Farms reports the following results for the month of November: Sales (10,000 units)$600,000 Variable costs  420,000 Contribution margin180,000 Fixed costs  110,000 Net income$  70,000 Management is considering the following independent courses of action to increase net income. 1.Increase selling price by 5% with no change in total variable costs. 2.Reduce variable costs to.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 11.The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio. 12.When a company has limited resources, management must decide which products to make and sell in order to maximize net income. 13.When a company has limited resources to manufacture products, it should.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 143 Oscar Corporation produces and sells three products. Unit data concerning each product is shown below.        Product           X      Y      Z  Selling price$200$300$250 Direct labor costs457560 Other variable costs110130106 Ex  143(cont.) The company has 2,000 hours of labor available to build inventory in anticipation of the company's peak season..
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues CHAPTER 19 COST-VOLUME-PROFIT ANALYSIS: ADDITIONAL ISSUES TRUE-FALSE STATEMENTS 1.The CVP income statement classifies costs as variable or fixed and computes a contribution margin. 2.In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses. 3.When a company is in its early stages of operation, its primary goal is.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 141 Hewitt Co. has 4,000 machine hours available to produce either Product 22 or Product 44. The cost accounting department developed the following unit information for each product: Product 22Product 44 Sales price$25$50 Direct materials68 Direct labor32 Variable manufacturing overhead45 Fixed manufacturing overhead35 Machine time required15 minutes60 minutes Instructions Management wants to know which.
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18 - 1 Cost-Volume-Profit BRIEF Exercises BE 157 Dollywood Corporation accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost Miles Driven Total Cost January 10,000 $15,000 March 9,000 $12,500 February 8,000 $14,500 April 7,500 $12,000 Instructions Compute the variable and fixed cost elements using the high-low method. BE 158 Sandel Company makes 2 products, footballs and baseballs. Additional information follows: FootballsBaseballs Units4,0002,500 Sales$60,000 $25,000 Variable costs36,0007,000 Fixed costs   .
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18 - 1 Cost-Volume-Profit 141.Danny’s Lawn Equipment has actual sales of $800,000 and a break-even point of $600,000. How much is its margin of safety ratio? a.25% b.33% c.67% d.75% 142.The following monthly data are available for Seasons Company which produces only one product:  Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses,.
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18 - 1 Cost-Volume-Profit Ex. 179 Webber, Inc. developed the following information for its product: Per Unit Sales price$90 Variable cost  63 Contribution margin$27 Total fixed costs$1,080,000 Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers. 1.How many units must be sold to break even? 2.What is the total sales that must.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 81.Cost structure a.refers to the relative proportion of fixed versus variable costs that a company incurs. b.generally has little impact on profitability. c.cannot be significantly changed by companies. d.refers to the relative proportion of operating versus nonoperating costs that a company incurs. 82.Outsourcing production will a.reduce fixed costs and increase variable.
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18 - 1 Cost-Volume-Profit Exercises Ex. 167 Sandburg Manufacturing manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2,000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $300 and $200, respectively.      Costs Incurred      Production in Units   2,0004,000 Production Costs a.Direct.
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18 - 1 Cost-Volume-Profit COMPLETION STATEMENTS               194.Knowledge of cost behavior is important in ______________________ analysis.               195.A _________________ cost remains constant per unit at every level of activity.               196.Unit fixed costs __________________ with the changes in the level of activity.               197.Total fixed costs are ___________ over various levels of activities, whereas total.
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18 - 1 Cost-Volume-Profit Ex. 178 The income statement for Bradford Machine Company for 2012 appears below. BRADFORD MACHINE COMPANY Income Statement For the Year Ended December 31, 2012 —————————————————————————————————————————— Sales (40,000 units)...........................................$1,000,000 Variable expenses............................................     700,000 Contribution margin...........................................300,000 Fixed expenses..............................................     360,000 Net income (loss).............................................$    (60,000) Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers: 1.What.
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18 - 1 Cost-Volume-Profit S-A E  210(Ethics) Hanson, Inc. requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line. Nancy Stephens is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of.
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18 - 1 Cost-Volume-Profit Ex. 168 Bill Braddock is considering opening a Fast ‘n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues aBE  132 Swift Co. produces footballs. It incurred the following costs this year: Direct materials$35,000 Direct labor31,000 Fixed manufacturing overhead22,000 Variable manufacturing overhead38,000 Fixed selling and administrative expenses23,000 Variable selling and administrative expenses14,000 Instructions What are the total product costs for the company under variable costing? aBE  133 Swift Co. produces footballs. It incurred the following.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues aEx. 148 Nimble Corp. manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below: Manufacturing Costs Fixed Overhead$140,000 Variable overhead$3 per unit Direct labor$12 per.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Exercises Ex. 136 Kindle, Inc. manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 12.5% of sales. The income statement for the year ending December 31, 2013, is as follow. KINDLE, INC. Income Statement Year Ending December 31, 2013 Sales$130,000 Cost of.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 145 The following CVP income statements are available for Chantal Corp. and Mantle, Inc. Chantal Corp.Mantle, Inc. Sales revenue$700,000$700,000 Variable costs  350,000  210,000 Contribution margin350,000490,000 Fixed costs  175,000  315,000 Net income$175,000$175,000 Instructions (a)Compute the degree of operating leverage for each company. (b)Assume that sales revenue decreases by 20%. Prepare a CVP income statement for.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 137 Qwik Service has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change-related services represent 75% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 25% of its sales.
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18 - 1 Cost-Volume-Profit Ex. 185 Gordon Manufacturing earned net income of $100,000 during 2012. The company wants to earn net income of $40,000 more during 2013. The company's fixed costs are expected to be $126,000, and variable costs are expected to be 30% of sales. Instructions (a)Determine the required sales to meet the.
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18 - 1 Cost-Volume-Profit BE 162 Salem Bakery sells boxes of donuts each with a variable cost percentage of 35%. Its fixed costs are $54,600 per year. Instructions Determine the sales dollars Salem needs to break even per year. BE 163 Cannon Co. has a unit selling price of $500, variable cost per unit $300,.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues BE  129 Gallery Corporation makes two products, footballs and baseballs. Additional information follows: FootballsBaseballs Units2,0002,500 Sales$60,000$25,000 Variable costs24,00013,750 Fixed costs  10,000    5,250 Net income$26,000$  6,000 Yards of leather per unit1.250.25 Profit per unit$13.00$2.40 Contribution margin per unit$18.00$4.50 Assume that Gallery is able to order an additional 2,500 yards of leather and wishes to maximize its income..
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues BRIEF Exercises BE  126 Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $70 and has variable costs of $45. The sales mix of the.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues MULTIPLE CHOICE QUESTIONS 31.Cost-volume-profit analysis is the study of the effects of a.changes in costs and volume on a company’s profit. b.cost, volume, and profit on the cash budget. c.cost, volume, and profit on various ratios. d.changes in costs and volume on a company’s profitability ratios. 32.The CVP income statement classifies.
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18 - 1 Cost-Volume-Profit MATCHING 205.Match the items in the two columns below by entering the appropriate code letter in the space provided.               A.Activity index              F.              Mixed costs               B.Variable costs              G.              Break-even point               C.Fixed costs              H.              Contribution margin               D.High-low method              I.              Margin of safety               E.Relevant range              J.              Contribution.
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18 - 1 Cost-Volume-Profit Ex. 184 Taveras Industries developed the following information for the product it sells: Sales price$50 per unit Variable cost of goods sold$28 per unit Fixed cost of goods sold$650,000 Variable selling expense10% of sales price Variable administrative expense$2.00 per unit Fixed selling expense$400,000 Fixed administrative expense$300,000 Ex. 184(cont.) For the year ended December 31, 2013, Taveras produced.
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18 - 1 Cost-Volume-Profit 131.Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $80,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $160,000, how many units must be sold to earn income of $80,000? a.120,000 units b.80,000 units c.30,000.
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18 - 1 Cost-Volume-Profit SHORT-ANSWER ESSAY QUESTIONS S-A E  206 A cost-volume-profit graph is frequently used in business meetings because it presents a picture of cost relationships within a company. Briefly describe the type of information and data that you would need in order to prepare a CVP graph. After a CVP graph.
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18 - 1 Cost-Volume-Profit Ex. 172 The Bradshaw Law Office has the following monthly telephone records and costs: Calls  Costs 2,000$2,400 1,5002,000 2,2002,600 2,5002,800 2,3002,700 1,7002,200 Instructions Identify the fixed and variable cost elements using the high-low method. Ex. 173 Determine the missing amounts. ContributionContribution Unit Selling PriceUnit Variable CostsMargin Per UnitMargin Ratio 1.$300$180AB 2.$600C$210D 3.EF$30030% .
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18 - 1 Cost-Volume-Profit Ex. 182 Norton, Inc. has the following information available for September 2013. Unit selling price of video game consoles$     400 Unit variable costs$     280 Total fixed costs$48,000 Units sold500 Instructions (a)Prepare a CVP income statement that shows both total and per unit amounts. (b)Compute Norton's breakeven in units. Ex. 183 In the month of April, Avante Salon.
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18 - 1 Cost-Volume-Profit Ex. 188 Melody Manufacturing produces a hip-hop CD that is sold for $20. The contribution margin ratio is 40%. Fixed expenses total $9,200. Instructions (a)Compute the variable cost per unit. (b)Compute how many CDs Melody Manufacturing will have to sell in order to break even. (c)Compute how many CDs Melody Manufacturing will.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 111.The one primary difference between variable and absorption costing is that under a.variable costing, companies charge the fixed manufacturing overhead as an expense in the current period. b.absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period. c.variable costing, companies charge the variable.
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18 - 1 Cost-Volume-Profit Ex. 187 Erickson, Inc. makes student book bags that sell for $20 each. For the coming year, management expects fixed costs to be $225,000. Variable costs are $15 per unit. Instructions (a)Compute break-even sales in dollars using the mathematical equation. (b)Compute break-even sales using the contribution margin ratio. (c)Compute margin of safety.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 91.A company with a higher contribution margin ratio is a.more sensitive to changes in sales revenue. b.less sensitive to changes in sales revenue. c.either more or less sensitive to changes in sales revenue, depending on other factors. d.likely to have a lower breakeven point. 92.The degree of operating leverage a.does.
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18 - 1 Cost-Volume-Profit Ex. 176 In the month of September, Matlock Industries sold 800 units of product. The average sales price was $30. During the month, fixed costs were $6,300 and variable costs were 70% of sales. Instructions (a)Determine the contribution margin in dollars, per unit, and as a ratio. (b)Using the contribution margin.
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18 - 1 Cost-Volume-Profit Ex. 190 Holder Manufacturing had $125,000 of net income in 2012 when the selling price per unit was $100, the variable costs per unit were $70, and the fixed costs were $475,000. Management expects per unit data and total fixed costs to remain the same in 2013. The.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 21.Variable costing is the approach used for external reporting under generally accepted accounting principles. a22.The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead. a23.Selling and administrative costs are period costs under both absorption and variable costing. a24.Manufacturing cost per unit will be.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues Ex. 139 DeMont Tax Services provides primarily two lines of service: accounting and tax. Accounting-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 40% contribution margin ratio. The company’s fixed.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 71.A shift from low-margin sales to high-margin sales a.may increase net income, even though there is a decline in total units sold. b.will always increase net income. c.will always decrease net income. d.will always decrease units sold. 72.A shift from high-margin sales to low-margin sales a.may decrease net income, even though.
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18 - 1 Cost-Volume-Profit Ex. 192 Kreter, Inc. earned net income of $300,000 last year. This year it wants to earn net income of $450,000. The company's fixed costs are expected to be $300,000, and variable costs are expected to be 70% of sales. Instructions (a)Determine the required sales to meet the target net.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 51.The required sales in units to achieve a target net income is a.(sales + target net income) divided by contribution margin per unit. b.(sales + target net income) divided by contribution margin ratio. c.(fixed cost + target net income) divided by contribution margin per unit. d.(fixed cost + target.
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19 - 1 Cost-Volume-Profit Analysis: Additional Issues 61.In a sales mix situation, at any level of units sold, net income will be higher if a.more higher contribution margin units are sold than lower contribution margin units. b.more lower contribution margin units are sold than higher contribution margin units. c.more fixed expenses are incurred. d.weighted-average unit contribution.
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