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22 - 1 Cost-Volume-Profit Ex. 184 Dots Company 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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23 - 1 Budgetary Planning 21.A manufacturing overhead budget is not needed if the company develops a predeter-mined overhead rate to apply overhead. 22.The manufacturing overhead budget generally has separate sections for variable, mixed, and fixed costs. 23.A production budget should be prepared before the sales budget. 24.The direct materials budget contains both quantity and.
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23 - 1 Budgetary Planning MULTIPLE CHOICE QUESTIONS 37.Why are budgets useful in the planning process? a.They provide management with information about the company's past performance. b.They help communicate goals and provide a basis for evaluation. c.They guarantee the company will be profitable if it meets its objectives. d.They enable the budget committee to earn their paycheck. 38.A.
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23 - 1 Budgetary Planning 137.Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a.Direct labor budget b.Cash budget c.Sales budget d.Budgeted income statement 138.The formula for determining budgeted merchandise purchases is budgeted a.production + desired ending inventory – beginning inventory. b.sales + beginning inventory – desired ending inventory. c.cost of goods.
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22 - 1 Cost-Volume-Profit Ex. 181 In the month of September, Thai Company sold 800 units of product. The average sales price was $30. During the month, fixed costs were $6,000 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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22 - 1 Cost-Volume-Profit aEx. 200 Leoparod Company developed the following unit information for January, 2014, its first month of operations: Per UnitTotal Costs Sales price$20 Variable costs Direct materials5 Direct labor3 Variable manufacturing overhead4 Selling and administrative expenses2 Fixed selling and administrative expenses$31,000 Fixed manufacturing overhead46,000 During January, 16,000 units were produced and 12,000 units were sold. aEx. 200(Cont.) Instructions (a)Prepare an income statement.
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22 - 1 Cost-Volume-Profit BE 167 Bestie Donuts sells boxes of donuts each with a variable cost percentage of 35%. Its fixed costs are $55,250 per year. Instructions Determine the sales dollars Bestie needs to break even per year. BE 168 Sieker Goods Company has a unit selling price of $500, variable cost per unit.
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23 - 1 Budgetary Planning Ex. 177 For each item given, identify the budget in which it will appear. If an item will appear on more than one budget, then indicate as many budgets as are relevant. Budget Code: DMDirect Materials Budget DLDirect Labor Budget PProduction Budget SSales Budget CCash Budget BBSBudgeted Balance Sheet BISBudgeted Income Statement SASelling and Administrative Expense Budget MOHManufacturing.
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23 - 1 Budgetary Planning Ex. 173 Trenton Company has budgeted the following unit sales:        2014                 2015          Quarter  UnitsQuarter  Units 1140,0001125,000 280,000 3100,000 4160,000 The finished goods inventory on hand on December 31, 2013 was 28,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's.
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22 - 1 Cost-Volume-Profit Ex. 196 Lansington Company earned net income of $350,000 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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22 - 1 Cost-Volume-Profit Ex. 175 Lock Company accumulates the following data concerning a mixed cost, using miles as the activity level. Miles DrivenTotal Cost May10,000$16,800 June8,00013,500 July9,00014,400 August7,00012,500 Instructions Compute the variable and fixed cost elements using the high-low method. Ex. 176 Nelson Company gathered the following information on power costs and factory machine usage for the last six months: MonthPower.
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22 - 1 Cost-Volume-Profit aEx. 201 Landon Company developed the following information for 2014: Selling and Administrative Expenses Variable$30,000 Fixed$50,000 Units in beginning inventory-0- Units sold26,000 Direct materials used$65,000 Direct labor$105,000 Units produced30,000 Manufacturing overhead Variable$40,000 Fixed$90,000 Instructions Answer the following questions. (a)What would be the amount of the cost of goods sold under the absorption costing approach? (b)What would be the cost of the ending inventory.
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22 - 1 Cost-Volume-Profit Ex. 177 The Ulney Clinic has the following monthly telephone records and costs: Calls  Costs 2,000$2,400 1,5001,900 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. 178 Determine the missing amounts. ContributionContribution Unit Selling PriceUnit Variable CostsMargin Per UnitMargin Ratio 1.$300$180AB 2.$600C$210D 3.EF$40030% .
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23 - 1 Budgetary Planning 127.Kate Taylor Co. reported the following information for 2014: OctoberNovemberDecember Budgeted sales$460,000$540,000$440,000 Budgeted purchases$240,000$256,000$288,000 •All sales are on credit. •Customer amounts on account are collected 50% in the month of sale and 50% in the following month. •Cost of goods sold is 35% of sales. •Kate Taylor purchases and pays for merchandise.
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23 - 1 Budgetary Planning 117.The projection of financial position at the end of the budget period is found on the a.budgeted income statement. b.cash budget. c.budgeted balance sheet. d.sales budget. 118.What is the proper preparation sequencing of the following budgets? 1.Budgeted Balance Sheet 2.Sales Budget 3.Selling and Administrative Budget 4.Budgeted Income Statement a.1, 2, 3, 4 b.2, 3, 1, 4 c.2, 3, 4,.
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23 - 1 Budgetary Planning Ex. 176 Salt Company is preparing its direct labor budget for 2014 from the following production budget based on a calendar year: Quarter Units 180,000 240,000 360,000 4100,000 Each unit requires 1.5 hours of direct labor. The union contract provides for a 20% increase in wage rate to $12 per hour on October 1. Instructions Prepare.
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22 - 1 Cost-Volume-Profit MATCHING 216.Match the items in the two columns below by entering the appropriate code letter in the space provided.               A.Activity index              G.              Break-even point               B.Variable costs              H.              Contribution margin               C.Fixed costs              I.              Margin of safety               D.High-low method              J.              Contribution margin ratio               E.Relevant range              aK.              Variable costing               F.Mixed costs             .
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22 - 1 Cost-Volume-Profit Ex. 183 The income statement for Hyland Company for 2014 appears below. HYLAND COMPANY Income Statement For the Year Ended December 31, 2014 —————————————————————————————————————————— Sales revenue (40,000 units)....................................$1,000,000 Variable expenses............................................     700,000 Contribution margin...........................................300,000 Fixed expenses..............................................     345,000 Net income (loss).............................................$    (45,000) Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers: 1.What was.
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22 - 1 Cost-Volume-Profit SHORT-ANSWER ESSAY QUESTIONS S-A E  217 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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22 - 1 Cost-Volume-Profit Ex. 191 Kohler Company 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$550,000 Variable selling expense10% of sales price Variable administrative expense$2.00 per unit Fixed selling expense$500,000 Fixed administrative expense$300,000 For the year ended December 31, 2014, Kohler Company produced.
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23 - 1 Budgetary Planning 77.The production budget shows expected unit sales are 100,000. The required production units are 104,000. What are the beginning and desired ending finished goods units, respectively? Beginning UnitsEnding Units a.10,0006,000 b.6,00010,000 c.4,00010,000 d.10,0004,000 78.The production budget shows that expected unit sales are 80,000. The total required units are 90,000. What are the required.
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22 - 1 Cost-Volume-Profit S-A E  221(Ethics) Zeller Company requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line. Jean Lamb 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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23 - 1 Budgetary Planning 11.The longer the budget period, the more reliable the estimates of future outcomes. 12.The budget committee has the responsibility for coordinating the preparation of the budget. 13.The budget is developed within the framework of a sales forecast. 14.Budgeting and long-range planning are two terms that describe the same process. 15.Long-range plans.
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22 - 1 Cost-Volume-Profit Ex. 173 Sam Hammonel is considering opening a Kwik Oil Change Center. He estimates that the following costs will be incurred during his first year of operations: Rent $8,200, Depreciation on equipment $8,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require.
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23 - 1 Budgetary Planning TRUE-FALSE STATEMENTS 1.Budgets are statements of management's plans stated in financial terms. 2.A benefit of budgeting is that it provides definite objectives for evaluating performance. 3.A budget can be a means of communicating a company's objectives to external parties. 4.A budget can be used as a basis for evaluating performance. 5.A well-developed.
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23 - 1 Budgetary Planning BRIEF EXERCISES BE 159 Loyd Company manufactures sweaters. The budgeted units to be produced and sold are below: Expected ProductionExpected Sales August6,2005,800 September5,6007,800 It takes 24 yards of yarn to produce a sweater. The company's policy is to maintain yarn at the end of each month equal to 5% of next month's production.
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22 - 1 Cost-Volume-Profit Ex. 187 ANC Company has the following information available for September 2014. Unit selling price of video game consoles$     400 Unit variable costs$     280 Total fixed costs$54,000 Units sold500 Instructions (a)Prepare a CVP income statement that shows both total and per unit amounts. (b)Compute ANC's breakeven in units. Ex. 188 In the month of June, Nadine's Beauty.
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23 - 1 Budgetary Planning BE 164 Weston Company budgeted the following information for 2014: MayJuneJuly Budgeted purchases$104,000$110,000$102,000      Cost of goods sold is 40% of sales. Accounts payable is used only for inventory acquisitions.      Weston purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month.      Selling and.
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23 - 1 Budgetary Planning 107.A company determined that the budgeted cost of producing a product is $32 per unit. On June 1, there were 80,000 units on hand, the sales department budgeted sales of 300,000 units in June, and the company desires to have 120,000 units on hand on June 30..
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22 - 1 Cost-Volume-Profit Ex. 179 Quinay Company reports the following results for the month of November: Sales revenue (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.
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23 - 1 Budgetary Planning Ex. 172 Mendez Company has budgeted the following unit sales:    2015  Units January10,000 February8,000 March9,000 April11,000 May15,000 The finished goods units on hand on December 31, 2014, was 1,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $3 per pound. It is the company's policy.
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23 - 1 Budgetary Planning Ex. 171 Destino Manufacturing Company manufactures two products, (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows: Units of Product 2014Regular Deluxe  Total July10,00015,00025,000 August6,00010,00016,000 September9,00014,00023,000 October8,00012,00020,000 It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product..
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23 - 1 Budgetary Planning 57.The budget committee would not normally include the a.research director. b.treasurer. c.sales manager. d.external auditor. 58.The budget committee in a company is often headed by the a.president. b.controller. c.treasurer. d.budget director. 59.Long-range planning a.generally presents more detailed information than an annual budget. b.generally encompasses a longer period of time than an annual budget. c.is usually more accurate than an annual.
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23 - 1 Budgetary Planning 31.The budget itself and the administration of the budget are entirely accounting responsibilities. 32.Financial planning models and statistical and mathematical techniques may be used in forecasting sales. 33.The direct materials budget is derived from the direct materials units required for production plus desired ending direct materials units less beginning.
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23 - 1 Budgetary Planning 87.Which one of the following is not needed in preparing a production budget? a.Budgeted unit sales b.Budgeted raw materials c.Beginning finished goods units d.Ending finished goods units 88.A company budgeted unit sales of 204,000 units for January, 2014 and 240,000 units for February, 2014. The company has a policy of having an.
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22 - 1 Cost-Volume-Profit Ex. 189 Bogle Company has a unit selling price of $500, variable cost per unit of $250, and fixed costs of $260,000. Instructions Compute the break-even point in units and in sales dollars. Ex. 190 Lorax Company makes student book bags that sell for $20 each. For the coming year, management expects.
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22 - 1 Cost-Volume-Profit COMPLETION STATEMENTS               202.Knowledge of cost behavior is important in ______________________ analysis.               203.A _________________ cost remains constant per unit at every level of activity.               204.Unit fixed costs __________________ with the changes in the level of activity.               205.Total fixed costs are ___________ over various levels of activities, whereas total.
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23 - 1 Budgetary Planning 67.Which of the following is not an operating budget? a.Direct labor budget b.Sales budget c.Production budget d.Cash budget 68.Which of the following is not a financial budget? a.Capital expenditure budget b.Cash budget c.Manufacturing overhead budget d.Budgeted balance sheet 69.Which of the following is done to improve the reliability of the sales forecast? a.Employ financial planning models b.Lengthen the planning.
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23 - 1 Budgetary Planning 47.It is important that budgets be accepted by a.division managers. b.department heads. c.supervisors. d.all of these answers are correct. 48.Which of the following statements about budget acceptance in an organization is true? a.The most widely accepted budget by the organization is the one prepared by top management. b.The most widely accepted budget by the.
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23 - 1 Budgetary Planning 147.The primary benefits of budgeting include all of the following except it a.requires only top management to plan ahead and formalize their future goals. b.provides definite objectives for evaluating performance. c.creates an early warning system for potential problems. d.motivates personnel throughout the organization. 148.The responsibility for expressing management's budgeting goals in financial.
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22 - 1 Cost-Volume-Profit Ex. 185 Pearson Manufacturing's sales slumped badly in 2014 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 consisted of.
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23 - 1 Budgetary Planning EXERCISES Ex. 169 Gen Industries has budgeted the following unit sales: 2014  Units April60,000 May100,000 June150,000 July90,000 Of the units budgeted, 40% are sold by the Northern Division at an average price of $15 per unit and the remainder are sold by the Western Division at an average price of $12 per unit. Instructions Prepare separate sales.
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22 - 1 Cost-Volume-Profit Exercises Ex. 172 Lewis Company 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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23 - 1 Budgetary Planning 97.Carmine Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2014 to June 30, 2015: June 30, 2015June 30, 2014 Raw Materials3,000 kilos4,000 kilos Three kilos of raw materials are needed to produce.
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22 - 1 Cost-Volume-Profit Ex. 198 Newman, Inc. earned net income of $100,000 during 2014. The company wants to increase net income by $54,000 during 2015. The company's fixed costs are expected to be $84,000, and variable costs are expected to be 30% of sales. Instructions (a)Determine the required sales to meet the target.
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23 - 1 Budgetary Planning Ex. 174 The following facts are known:          The total pounds needed for production are 2 times the units to be produced.          The desired ending direct materials inventory is 20% of the total pounds needed for production.          The beginning direct materials inventory is equal in number to 10% of.
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22 - 1 Cost-Volume-Profit Ex. 192 Manta's Music, Inc. 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 Manta's Music will have to sell in order to break even. (c)Compute how many CDs Manta's Music.
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