### Ghost Writing Essays

Submit Homew ork for Ch tad9000 gfmcppeopigbdej Advanced Manag Question 1: Score 0/4 Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is \$1,200 and the variable cost per cup of coffee served is \$0. 22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round average cost per cup of coffee to 3 decimal places. Omit the “\$” sign in your response. 2,000 Fixed cost Variable cost Total cost Average cost per cup of coffee served \$ \$ \$ 0. 60 0. 22 0. 82 0. 792 Correct response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is \$1,200 and the variable cost per cup of coffee served is \$0. 22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round average cost per cup of coffee to 3 decimal places.

Omit the “\$” sign in your response. ) Cups of Coffee Served in a Week 2,000 2,100 2,200 1,200 1,200 \$ \$ \$ 1,200 440 1,640 \$ 462 1,662 \$ 484 1,684 \$ Cups of Coffee Served in a Week 2,100 2,200 (0%) \$ 0. 571 (0%) \$ 0. 545 (0%) (0%) 0. 22 (0%) 0. 22 (0%) (0%) \$ 0. 791 (0%) \$ 0. 765 (0%) (0%) \$ 0. 792 (0%) \$ 0. 792 (0%) Fixed cost Variable cost Total cost Average cost per cup of coffee served \$ 0. 82 \$ 0. 791 \$ 0. 765 Total grade: 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? 1/12 + 0. 0? /12 = 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: Average cost per cup of coffee served = Total cost ? cups of coffee served in a week Requirement 2: Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Your Answer: Choice Increases Decreases Remains the same Feedback: The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee. Selected Correct Question 2: Score 0/4 Your response Correct response

Exercise 6-2 Prepare a Cost-Volume-Profit (CVP) Graph [LO2] Karlik Enterprises distributes a single product whose selling price is \$24 and whose variable expense is \$18 per unit. The company’s monthly fixed expense is \$24,000. Requirement 1: Offline: Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units. Requirement 2: Estimate the company’s break-even point in unit sales using your cost-volume-profit graph analysis. Break-even point in sales Total grade: 0. 0? 1/1 = 0% Feedback: The break-even point is the point where the total sales revenue and the total expense lines intersect.

This occurs at sales of 4,000 units. This can be verified as follows: 16. 67 Exercise 6-2 Prepare a Cost-Volume-Profit (CVP) Graph [LO2] Karlik Enterprises distributes a single product whose selling price is \$24 and whose variable expense is \$18 per unit. The company’s monthly fixed expense is \$24,000. Requirement 1: Offline: Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units. Requirement 2: Estimate the company’s break-even point in unit sales using your cost-volume-profit graph analysis. Break-even point in sales 4,000 (0%) units units Question 3: Score 2. /4 Your response Exercise 5-3 High-Low Method [LO3] The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel’s business is highly seasonal, with peaks occurring during the ski season and in the summer. Month January February March April May June July August September Occupancy- Electrical Days Costs 1,736 \$ 4,127 1,904 \$ 4,207 2,356 \$ 5,083 960 \$ 2,857 360 \$ 1,871 744 \$ 2,696 2,108 \$ 4,670 2,406 \$ 5,148 840 \$ 2,691

Correct response Exercise 5-3 High-Low Method [LO3] The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel’s business is highly seasonal, with peaks occurring during the ski season and in the summer. Month January February March April May June July August September Occupancy- Electrical Days Costs 1,736 \$ 4,127 1,904 \$ 4,207 2,356 \$ 5,083 960 \$ 2,857 360 \$ 1,871 744 \$ 2,696 2,108 \$ 4,670 2,406 \$ 5,148 840 \$ 2,691 October November December 24 720 1,364 \$ 1,588 \$ 2,454 \$ 3,529 October November December 124 720 1,364 \$ 1,588 \$ 2,454 \$ 3,529 Requirement 1: Using the high-low method, estimate the variable cost of electricity per occupancy-day and the fixed cost of electricity per month. (Round the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. Omit the “\$” sign in your response. ) Variable cost Fixed cost \$ \$ (50%) per occupancy day (0%) per month Requirement 1: Using the high-low method, estimate the variable cost of electricity per occupancy-day and the fixed cost of electricity per month. Round the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. Omit the “\$” sign in your response. ) Variable cost Fixed cost \$ 1. 56 per occupancy day \$ 1,395 per month 1. 56 1394 Total grade: 1. 0? 1/2 + 0. 0? 1/2 = 50% + 0% Feedback: Occupancy- Electrical Days Costs High activity level 2,406 \$ 5,148 (August) Low activity level 124 1,588 (October) Change 2,282 \$ 3,560 Variable cost = Change in cost ? Change in activity = \$3,560 ? 2,282 occupancy-days = \$1. 56 per occupancy-day Total cost (August) Variable cost element (\$1. 56 per occupancy-day ? ,406 occupancydays) Fixed cost element \$ 5,148 3,753 \$ 1,395 Requirement 2: Which of the following statement(s) is true? (Select all that apply. ) Choice Electrical cost may reflect seasonal factors other than just the variation in occupancy days Fixed cost will not be affected by the number of days in a month Less systematic factors such as frugality of individual guests may also affect electrical costs Total correct answers: 2 Partial Grading Explained Selected Yes No Yes Points +1 +1 Feedback: Electrical costs may reflect seasonal factors other than just the variation in occupancy days.

For example, common areas such as the reception area must be lighted for longer periods during the winter than in the summer. This will result in seasonal fluctuations in the fixed electrical costs. Additionally, fixed costs will be affected by the number of days in a month. In other words, costs like the costs of lighting common areas are variable with respect to the number of days in the month, but are fixed with respect to how many rooms are occupied during the month. Other, less systematic, factors may also affect electrical costs such as the frugality of individual guests.

Some guests will turn off lights when they leave a room. Others will not. Question 4: Score 2. 48/4 Your response Exercise 5-4 Contribution Format Income Statement [LO4] The Alpine House, Inc. , is a large retailer of winter sports equipment. An income statement for the company’s Ski Department for a recent quarter is presented below: The Alpine House, Inc. Income Statement—Ski Department For the Quarter Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Net operating income \$ 150,000 90,000 60,000 \$ 30,000 10,000 40,000 \$ 20,000

Correct response Exercise 5-4 Contribution Format Income Statement [LO4] The Alpine House, Inc. , is a large retailer of winter sports equipment. An income statement for the company’s Ski Department for a recent quarter is presented below: The Alpine House, Inc. Income Statement—Ski Department For the Quarter Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Net operating income \$ 150,000 90,000 60,000 \$ 30,000 10,000 40,000 \$ 20,000 Skis sell, on the average, for \$750 per pair. Variable selling expenses are \$50 per pair of skis sold.

The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for \$450 per pair. Requirement 1: Prepare a contribution format income statement for the quarter. (Omit the “\$” sign in your response. ) The Alpine House, Inc. Income Statement—Ski Department For the Quarter Ended March 31 (6%) Variable expenses: Sales Cost of goods sold (6%) Selling expenses (6%) Administrative expenses Contribution margin Skis sell, on the average, for \$750 per pair. Variable selling expenses are \$50 per pair of skis sold.

The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for \$450 per pair. Requirement 1: Prepare a contribution format income statement for the quarter. (Omit the “\$” sign in your response. ) The Alpine House, Inc. Income Statement—Ski Department For the Quarter Ended March 31 Sales \$ \$ (6%) 90000 10000 2000 150000 (6%) \$ \$ 90000 10000 2000 150000 (6%) (6%) (6%) Variable expenses: (6%) 48000 (6%) Cost of goods sold Selling expenses Administrative expenses Contribution margin 102000 48000 102000 (6%)

Fixed expenses: Advertising expenses Administrative expenses Net operating income Fixed expenses: (0%) (6%) 90000 8000 (0%) (6%) \$ 98000 50000 (0%) – (6%) Selling expenses Administrative expenses Net operating income 20,000 8000 (0%) \$ 28,000 20,000 Total grade: 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 0. 0? 1/18 + 0. 0? 1/18 + 1. 0? 1/18 + 1. 0? 1/18 + 0. 0? 1/18 + 1. 0? 1/18 + 0. 0? 1/18 = 6% + 6% + 6% + 6% + 6% + 6% + 6% + 6% + 6% + 6% + 6% + 0% + 0% + 6% + 6% + 0% + 6% + 0% Feedback: Cost of goods sold (200 pairs* ? 450 per pair) Variable selling expenses (200 pairs ? \$50 per pair) Variable administrative expenses (20% ? \$10,000) Fixed selling expenses [\$30,000 – (200 pairs ? \$50 per pair)] Fixed administrative expenses (80% ? \$10,000) *\$150,000 ? \$750 per pair = 200 pairs Your response Requirement 2: For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits? (Omit the “\$” sign in your response. ) Contribution margin per pair E5_4_id4 E5_4_id6 E5_4_id8 E5_4_id13 E5_4_id15 \$ 50 \$ 90,000 10,000 2,000 20,000 8,000

Correct response Requirement 2: For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits? (Omit the “\$” sign in your response. ) Contribution margin per pair E5_4_id4 E5_4_id6 E5_4_id8 E5_4_id13 E5_4_id15 \$ 240 (0%) Total grade: 0. 0? 1/1 = 0% Feedback: Since 200 pairs of skis were sold and the contribution margin totaled \$48,000 for the quarter, the contribution of each pair of skis toward covering fixed costs and toward earning of profits was \$240 (\$48,000 ? 200 pairs = \$240 per pair).

Another way to compute the \$240 is: Selling price per pair Variable expenses: Cost per pair Selling expenses \$ 750 \$ 450 50 Administrative expenses (\$2,000 ? 200 pairs) Contribution margin per pair 10 510 \$ 240 Question 5: Score 1. 2/4 Your response Exercise 5-5 Cost Behavior; Contribution Format Income Statement [LO1, LO4] Harris Company manufactures and sells a single product. Requirement 1: A partially completed schedule of the company’s total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given.

Complete the schedule of the company’s total and unit costs below (Round the “total costs” to the nearest dollar amount and the “cost per unit” to 2 decimal places. Omit the “\$” sign in your response) : Units Produced and Sold 30,000 40,000 Total costs: Variable costs Fixed costs Total costs Cost per unit: Variable cost Fixed cost Total cost per unit 50,000 Correct response Exercise 5-5 Cost Behavior; Contribution Format Income Statement [LO1, LO4] Harris Company manufactures and sells a single product.

Requirement 1: A partially completed schedule of the company’s total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given. Complete the schedule of the company’s total and unit costs below (Round the “total costs” to the nearest dollar amount and the “cost per unit” to 2 decimal places. Omit the “\$” sign in your response) : Units Produced and Sold 30,000 40,000 50,000 Total costs: Variable costs Fixed costs Total costs Cost per unit: Variable cost Fixed cost Total cost per unit \$ 180,000 300,000 \$ 480,000 \$ \$ 6 10 16 180,000 \$ 300,000 190000 310000 500000 (0%) (0%) (0%) \$ 200000 320000 (0%) (0%) (0%) \$ 240,000 300,000 \$ 300,000 300,000 \$ 480,000 \$ \$ 520000 \$ 540,000 \$ \$ 6 7. 5 13. 5 \$ 600,000 \$ \$ 6 6 12 \$ 3. 6 6 (0%) \$ (0%) (0%) \$ 3. 8 6. 2 10. 0 (0%) (0%) (0%) \$ 4 6. 4 (0%) (0%) (0%) \$ 9. 6 \$ 6. 8 Total grade: 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? 1/15 + 0. 0? /15 = 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: The company’s variable cost per unit is: Your response Requirement 2: Assume that the company produces and sells 45,000 units during the year at a selling price of \$16 per unit. Prepare a contribution format income statement for the year. (Input all amounts as positive values. Omit the “\$” sign in your response. ) Income Statement For the Year Ended Sales (10%) 720000 (10%) \$ Variable expenses (10%) Contribution margin (10%) Fixed expense (10%) Net operating income (10%) 513000 207000 279000

Correct response Requirement 2: Assume that the company produces and sells 45,000 units during the year at a selling price of \$16 per unit. Prepare a contribution format income statement for the year. (Input all amounts as positive values. Omit the “\$” sign in your response. ) Income Statement For the Year Ended Sales Variable expenses Contribution margin Fixed expense Net operating income (0%) (0%) (0%) (0%) \$ 720000 270,000 450,000 300,000 \$ 150,000 \$ -70000 Total grade: 1. 0? 1/10 + 1. 0? 1/10 + 1. 0? 1/10 + 0. 0? 1/10 + 1. 0? 1/10 + 0. 0? 1/10 + 1. 0? 1/10 + 0. 0? 1/10 + 1. ? 1/10 + 0. 0? 1/10 = 10% + 10% + 10% + 0% + 10% + 0% + 10% + 0% + 10% + 0% Feedback: Sales (45,000 units ? \$16 per unit) = \$720,000 Variable expenses (45,000 units ? \$6 per unit) = \$270,000 Question 6: Score 0. 66/4 Your response Exercise 5-6 High-Low Method [LO2, LO3] The following data relating to units shipped and total shipping expense have been assembled by Archer Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings: Total Units Shipping Shipped Expense 3 \$ 1,800 6 \$ 2,300 4 \$ 1,700 5 \$ 2,000 7 \$ 2,300 8 \$ 2,700 2 \$ 1,200

Correct response Exercise 5-6 High-Low Method [LO2, LO3] The following data relating to units shipped and total shipping expense have been assembled by Archer Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings: Units Shipped 3 6 4 5 7 8 2 Total Shipping Expense \$ 1,800 \$ 2,300 \$ 1,700 \$ 2,000 \$ 2,300 \$ 2,700 \$ 1,200 Month January February March April May June July Month January February March April May June July Requirement 1: Using the high-low method, estimate the cost formula for shipping expense where X is the number of units shipped. Omit the “\$” sign in your response. ) Y = \$ 5 Requirement 1: Using the high-low method, estimate the cost formula for shipping expense where X is the number of units shipped. (Omit the “\$” sign in your response. ) Y = \$ 700 + \$ 250 X (0%) + \$ 5 (0%) X Total grade: 0. 0? 1/2 + 0. 0? 1/2 = 0% + 0% Feedback: Units Shipping Shipped Expense High activity level 8 \$ 2,700 (June) Low activity level 2 1,200 (July) Change 6 \$ 1,500 Variable cost element: Fixed cost element: Shipping expense at the high activity level Less variable cost element (\$250 per unit ? 8 units) Total fixed cost \$ 2,700 2,000 \$ 700

The cost formula is \$700 per month plus \$250 per unit shipped or Y = \$700 + \$250X, where X is the number of units shipped. Requirement 2: What factors, other than the number of units shipped, are likely to affect the company’s total shipping expense? (Select all that apply. ) Choice Weight of the units shipped Distance travelled Size of the units shipped Fixed cost Variable cost Total correct answers: 3 Partial Grading Explained Selected No Yes Yes Yes No Points +1 +1 -1 Feedback: The cost of shipping units is likely to depend on the weight and volume of the units and the distance traveled, as well as on the number of units shipped.

In addition, higher cost shipping might be necessary to meet a deadline. Question 7: Score 0/4 Your response Exercise 5-7 Cost Behavior; High-Low Method [LO1, LO3] Hoi Chong Transport, Ltd. , operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11. 4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13. 4 cents per kilometer. (The Singapore dollar is the currency used in Singapore. Requirement 1: Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places. Omit the “\$” sign in your response. ) Variable cost per kilometer Fixed cost per year \$ \$ (0%) (0%) Correct response Exercise 5-7 Cost Behavior; High-Low Method [LO1, LO3] Hoi Chong Transport, Ltd. , operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11. cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13. 4 cents per kilometer. (The Singapore dollar is the currency used in Singapore. ) Requirement 1: Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places. Omit the “\$” sign in your response. ) Variable cost per kilometer Fixed cost per year \$ 0. 074 \$ 4,200 5 5 Total grade: 0. 0? 1/2 + 0. 0? 1/2 = 0% + 0% Feedback: Total Kilometers Annual

Correct response Exercise 5-8 High-Low Method; Predicting Cost [LO1, LO3] The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expense over the last seven months were: GuestDays of Occupancy 4,000 6,500 8,000 10,500 12,000 9,000 7,500 Custodial Supplies Expense \$ 7,500 \$ 8,250 \$ 10,500 \$ 12,000 \$ 13,500 \$ 10,750 \$ 9,750 Month March April May June July August September Month March April May June July August September Guest-days is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is counted as three guest-days. Guest-days is a measure of the overall activity at the hotel.

Mark’s Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital’s beds are occupied by patients. At this level of occupancy, the hospital’s operating costs are \$32 per occupied bed per day, assuming a 30-day month. This \$32 figure contains both variable and fixed cost elements. During June, the hospital’s occupancy rate was only 60%. A total of \$326,700 in operating cost was incurred during the month. Requirement 1: (a) Estimate the variable cost per occupied bed on a daily basis using the high-low method. (Omit the “\$” sign in your response. Variable cost per bedday Total grade: 0. 0? 1/1 = 0% Feedback: Difference in cost: Monthly operating costs at 80% occupancy: 450 beds ? 80% = 360 beds; 360 beds ? 30 days ? \$32 per bed-day Monthly operating costs at 60% occupancy (given) Difference in cost \$ 50 Correct response Exercise 5-10 High-Low Method; Predicting Cost [LO1, LO3] St. Mark’s Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital’s beds are occupied by patients. At this level of occupancy, the hospital’s operating costs are \$32 per occupied bed per day, assuming a 30-day month.

Sales Variable expenses Contribution margin Fixed expenses Net operating income Current sales \$180,000 126,000 54,000 30,000 \$ 24,000 Difference \$ 9,000 6,300 2,700 5,000 (\$ 2,300 ) (b) Should the advertising budget be increased as suggested in requirement 1(a) above? Your Answer: Choic e Yes No Feedback: Assuming no other important factors need to be considered, the increase in the Selecte d advertising budget should not be approved because it would lead to a decrease in net operating income of \$2,300. Requirement 2: Refer to the original data.

Management is considering using higher-quality components that would increase the variable cost by \$2 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the higher-quality components be used? Your Answer: Choic e Yes No Feedback: The \$2 increase in variable cost will cause the unit contribution margin to decrease from \$27 to \$25 with the following impact on net operating income: Expected total contribution margin with the higher-quality components: 2,200 units ? \$25 per unit Present total contribution margin: 2,000 units ? 27 per unit Change in total contribution margin Selecte d \$ 55,000 54,000 \$ 1,000 Assuming no change in fixed costs and all other factors remain the same, the higherquality components should be used. Question 13: Score 0/4 Your response Exercise 6-6 Compute the Level of Sales Required to Attain a Target Profit [LO5] Lin Corporation has a single product whose selling price is \$120 and whose variable expense is \$80 per unit. The company’s monthly fixed expense is \$50,000. Requirement 1: Using the equation method, solve for the unit sales that are required to earn a target profit of \$10,000.

Unit sales to earn target profit 5 Correct response Exercise 6-6 Compute the Level of Sales Required to Attain a Target Profit [LO5] Lin Corporation has a single product whose selling price is \$120 and whose variable expense is \$80 per unit. The company’s monthly fixed expense is \$50,000. Requirement 1: Using the equation method, solve for the unit sales that are required to earn a target profit of \$10,000. Unit sales to earn target profit 1,500 units (0%) units Total grade: 0. 0? 1/1 = 0% Feedback: The equation method yields the required unit sales, Q, as follows: Profit = [Unit CM ? Q] ? Fixed expenses \$10,000 = [(\$120 ? 80) ? Q] ? \$50,000 \$10,000 \$40 ? Q Q Q = [(\$40) ? Q] ? \$50,000 = \$10,000 + \$50,000 = \$60,000 ? \$40 = 1,500 units Your response Correct response Requirement 2: Using the formula method, solve for the unit sales that are required to earn a target profit of \$15,000. Unit sales to earn target profit 1,625 units Requirement 2: Using the formula method, solve for the unit sales that are required to earn a target profit of \$15,000. Unit sales to earn target profit 50 (0%) units Total grade: 0. 0? 1/1 = 0% Feedback: The formula approach yields the required unit sales as follows: Question 14: Score 0/4

Your response Exercise 6-7 Compute the Break-Even Point [LO6] Mauro Products distributes a single product, a woven basket whose selling price is \$15 and whose variable expense is \$12 per unit. The company’s monthly fixed expense is \$4,200. Requirement 1: Solve for the company’s break-even point in unit sales using the equation method. Break-even point in unit sales 500 Correct response Exercise 6-7 Compute the Break-Even Point [LO6] Mauro Products distributes a single product, a woven basket whose selling price is \$15 and whose variable expense is \$12 per unit. The company’s monthly fixed expense is \$4,200.

Requirement 1: Solve for the company’s break-even point in unit sales using the equation method. Break-even point in unit sales 1,400 baskets (0%) baskets Total grade: 0. 0? 1/1 = 0% Feedback: The equation method yields the break-even point in unit sales, Q, as follows: Profit = [Unit CM ? Q] ? Fixed expenses \$0 = [(\$15 ? \$12) ? Q] ? \$4,200 \$0 = [(\$3) ? Q] ? \$4,200 \$3Q = \$4,200 Q = \$4,200 ? \$3 Q = 1,400 baskets The formula method gives an answer that is identical to the equation method for the breakeven point in unit sales: Fixed Unit sales to break even = expenses Unit CM \$4,200 = \$3 = 1,400 baskets

Your response Requirement 2: Solve for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Omit the “\$” sign in your response. ) Break-even point in sales \$ 500 Correct response Requirement 2: Solve for the company’s break-even point in sales dollars using the equation method and the CM ratio. (Omit the “\$” sign in your response. ) Break-even point in sales \$ 21,000 (0%) Total grade: 0. 0? 1/1 = 0% Feedback: The equation method can be used to compute the break-even point in sales dollars as follows: Unit contribution CM ratio = margin Unit selling price \$3 = \$15 0. 20 Profit = [CM ratio ? Sales] ? Fixed expenses \$0 = [0. 20 ? Sales] ? \$4,200 0. 20 ? Sales = \$4,200 Sales = \$4,200 ? 0. 20 Sales = \$21,000 The formula method also gives an answer that is identical to the equation method for the break-even point in dollar sales: Fixed expenses Dollar sales to break even = CM ratio \$4,200 = 0. 20 = \$21,000 Question 15: Score 0/4 Your response Correct response Exercise 6-8 Compute the Margin of Safety [LO7] Molander Corporation is a distributor of a sun umbrella used at resort hotels.

Data concerning the next month’s budget appear below: Selling price Variable expenses Fixed expenses Unit sales \$ 30 per unit \$ 20 per unit \$ 7,500 per month units per 1,000 month Exercise 6-8 Compute the Margin of Safety [LO7] Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below: Selling price Variable expenses Fixed expenses Unit sales \$ 30 per unit \$ 20 per unit \$ 7,500 per month units per 1,000 month Requirement 1: Compute the company’s margin of safety. (Omit the “\$” sign in your response. ) Margin of safety \$ 500

The company’s most recent monthly contribution format income statement follows: Percent Amount of Sales \$ 80,000 100 % 32,000 40 % 48,000 38,000 \$ 10,000 60 % Correct response Exercise 6-9 Compute and Use the Degree of Operating Leverage [LO8] Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Percent Amount of Sales \$ 80,000 100 % 32,000 40 % 48,000 38,000 \$ 10,000 60 % Sales Variable expenses Contribution margin Fixed expenses Net operating income

Sales Variable expenses Contribution margin Fixed expenses Net operating income Requirement 1: Compute the company’s degree of operating leverage. (Round your answer to 1 decimal place. ) Degree of operating leverage 1000 Requirement 1: Compute the company’s degree of operating leverage. (Round your answer to 1 decimal place. ) Degree of operating leverage 4. 8 (0%) Total grade: 0. 0? 1/1 = 0% Feedback: The company’s degree of operating leverage would be computed as follows: Contribution margin ? Net operating income Degree of operating leverage \$ 48,000 \$ 10,000 4. 8

Your response Requirement 2: Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (Omit the “%” sign in your response. ) Estimated percent change in net operating income 5 Correct response Requirement 2: Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (Omit the “%” sign in your response. ) Estimated percent change in net operating income 24 % (0%) % Total grade: 0. 0? 1/1 = 0% Feedback: A 5% increase in sales should result in a 24% increase in net operating income, computed as follows:

Degree of operating leverage ? Percent increase in sales Estimated percent increase in net operating income 4. 8 5% 24 % Your response Requirement 3: Verify your estimate from requirement (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales. (Omit the “\$” and “%” sign in your response. ) Sales Variable expenses Contribution margin Fixed expenses Net operating income Original net operating income Percent change in net operating income \$ Amount (0%) (0%) 48000 (0%) 38000 (14%) 10000 (0%) 5000 (0%) 80000 32000 100

Correct response Requirement 3: Verify your estimate from requirement (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales. (Omit the “\$” and “%” sign in your response. ) Sales Variable expenses Contribution margin Fixed expenses Net operating income Original net operating income Percent change in net operating income Amount \$ 84,000 33,600 50,400 38000 \$ 12,400 \$ 10,000 24 % \$ \$ (0%) % Total grade: 0. 0? 1/7 + 0. 0? 1/7 + 0. 0? 1/7 + 1. 0? 1/7 + 0. 0? 1/7 + 0. 0? /7 + 0. 0? 1/7 = 0% + 0% + 0% + 14% + 0% + 0% + 0% Question 17: Score 0/4 Your response Exercise 6-10 Compute the Break-Even Point for a Multiproduct Company [LO9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears on the following page: Sales Variable expenses Contribution margin Fixed expenses Net operating income Claimjumper \$ 30,000 20,000 \$ 10,000 Makeover \$ 70,000 50,000 \$ 20,000 Total \$ 100,000 70,000 30,000 24,000 \$ 6,000

Correct response Exercise 6-10 Compute the Break-Even Point for a Multiproduct Company [LO9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears on the following page: Sales Variable expenses Contribution margin Fixed expenses Net operating income Claimjumper \$ 30,000 20,000 \$ 10,000 Makeover \$ 70,000 50,000 \$ 20,000 Total \$ 100,000 70,000 30,000 24,000 \$ 6,000 Requirement 1: Compute the overall contribution margin (CM) ratio for the company. (Omit the “%”

Correct response Requirement 3: Verify the overall break-even point for the company by constructing a contribution format income statement showing the appropriate levels of sales for the two products. (Round your answers to the nearest dollar amount. Do not round your interim calculation. Leave no cells blank – be certain to enter “0” wherever required. Omit the “\$” and “%” sign in your response. ) Original dollar sales Sales at break-even Claimjumper 30,000 \$ 24,000 \$ Claimjumper 24,000 \$ 16,000 Makeover \$ \$ 500 10 Total \$ \$ 5000 100 (0%) (0%) (0%) (0%) (0%) (0%) Makeover \$ 70,000 \$ 56,000

Total \$ 100,000 \$ 80,000 Claimjumper Makeover Total Sales Variable expenses Makeover Total 56,000 \$ 80,000 \$ 40,000 56,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income \$ 50 20 (0%) (0%) (0%) \$ 500 30 (0%) (0%) (0%) \$ 5000 400 4600 500 (0%) (0%) (0%) (0%) (0%) Contribution margin Fixed expenses Net operating income \$ 8,000 \$ 16,000 24,000 24,000 0 \$ \$ 30 \$ 470 \$ 4100 Total grade: 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. 0? 1/17 + 0. ? 1/17 + 0. 0? 1/17 = 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% + 0% Feedback: Claimjumper variable expenses: (\$24,000/\$30,000) ? \$20,000 = \$16,000 Makeover variable expenses: (\$56,000/\$70,000) ? \$50,000 = \$40,000 Question 18: Score 1/4 Your response Exercise 6-11 Using a Contribution Format Income Statement [LO1, LO4] Miller Company’s most recent contribution format income statement is shown below: Sales (20,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total \$ 300,000 180,000 120,000 70,000 \$ 50,000 Per Unit \$ 15. 00 9. 00 \$ 6. 00

Correct response Exercise 6-11 Using a Contribution Format Income Statement [LO1, LO4] Miller Company’s most recent contribution format income statement is shown below: Sales (20,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total \$ 300,000 180,000 120,000 70,000 \$ 50,000 Per Unit \$ 15. 00 9. 00 \$ 6. 00 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Round your per unit values to 2 decimal places. Omit the “\$” sign in your response. ) (a) The number of units sold increases by 15%.

Total Sales Variable expenses Contribution margin Fixed expenses Net operating income \$ (0%) (0%) 120000 (0%) 70000 (13%) 50000 (0%) 300000 180000 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Round your per unit values to 2 decimal places. Omit the “\$” sign in your response. ) (a) The number of units sold increases by 15%. Total \$ 345,000 207,000 138,000 70000 Per Unit \$ 15 (13%) 9 (13%) \$ 6 (13%) \$ Sales Variable expenses Contribution margin Fixed expenses Net operating income Per Unit 15 \$ \$ 9 6 \$ 68,000 Total grade: 0. 0? 1/8 + 1. 0? /8 + 0. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 + 1. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 = 0% + 13% + 0% + 13% + 0% + 13% + 13% + 0% Feedback: Sales (20,000 units ? 1. 15 = 23,000 units) Your response (b) The selling price decreases by \$1. 50 per unit, and the number of units sold increases by 25%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income \$ 300000 180000 120000 70000 Correct response The selling price decreases by \$1. 50 per unit, and the number of units sold increases by 25%. Sales Variable expenses Contribution margin Fixed expenses Net operating income Total \$ 337,500 225,000 112,500 70000 b) (0%) (0%) (0%) (13%) (0%) Per Unit \$ 15 (0%) 9 (13%) \$ 6 Per Unit \$ 13. 5 9 (0%) \$ 4. 5 \$ 50000 \$ 42,500 Total grade: 0. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 = 0% + 0% + 0% + 13% + 0% + 0% + 13% + 0% Feedback: Sales (20,000 units ? 1. 25 = 25,000 units) Your response (c) The selling price increases by \$1. 50 per unit, fixed expenses increase by \$20,000, and the number of units sold decreases by 5%. Total Sales Variable expenses Contribution margin Fixed expenses Net operating income \$ 300000 180000 120000 70000

Correct response (c) The selling price increases by \$1. 50 per unit, fixed expenses increase by \$20,000, and the number of units sold decreases by 5%. Sales Variable expenses Contribution margin Fixed expenses Net operating income Total \$ 313,500 171,000 142,500 90,000 (0%) (0%) (0%) (0%) (0%) \$ \$ Per Unit 15 (0%) 9 (13%) 6 Per Unit \$ 16. 5 \$ 9 7. 5 (0%) \$ 50000 \$ 52,500 Total grade: 0. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 = 0% + 0% + 0% + 13% + 0% + 0% + 0% + 0% Feedback: Sales (20,000 units ? 0. 95 = 19,000 units) Your response (d) The selling price ncreases by 12%, variable expenses increase by 60 cents per unit, and the number of units sold decreases by 10%. Total Sales Variable expenses Contribution margin \$ 300000 180000 120000 Correct response (d) The selling price increases by 12%, variable expenses increase by 60 cents per unit, and the number of units sold decreases by 10%. Sales Variable expenses Contribution margin Fixed expenses Total \$ 302,400 172,800 129,600 70000 (0%) (0%) (0%) \$ \$ Per Unit 15 (0%) 9 (0%) 6 Per Unit \$ 16. 8 \$ 9. 6 7. 2 (0%) Fixed expenses Net operating income 70000 (13%) (0%) Net operating income \$ 59,600 \$ 50000 Total grade: 0. 0? 1/8 + 0. 0? 1/8 + 0. ? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 0. 0? 1/8 + 1. 0? 1/8 + 0. 0? 1/8 = 0% + 0% + 0% + 0% + 0% + 0% + 13% + 0% Feedback: Sales (20,000 units ? 0. 90 = 18,000 units) Question 19: Score 0/4 Your response Exercise 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7] Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total \$ 450,000 180,000 270,000 216,000 \$ 54,000 Per Unit \$ 30 12 \$ 18 Correct response Exercise 6-12 Target Profit and Break-Even Analysis; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7] Menlo Company distributes a single product.

Total grade: 0. 0? 1/1 = 0% Feedback: Your response Requirement 4: Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms. (Omit the “\$” and “%” signs in your response. ) Dollars Margin of safety \$ 50 Correct response Requirement 4: Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms. (Omit the “\$” and “%” signs in your response. ) Margin of safety Dollars \$ 90,000 Percentage 20 % Percentage 5 (0%) (0%) % Total grade: 0. 0? 1/2 + 0. 0? 1/2 = 0% + 0% Feedback: Margin of safety in dollar terms:

Margin of safety in percentage terms: Your response Requirement 5: What is the company’s CM ratio? If sales increase by \$50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? (Omit the “\$” and “%” signs in your response. ) CM ratio Increase in net operating income \$ 5 500 Correct response Requirement 5: What is the company’s CM ratio? If sales increase by \$50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Omit the “\$” and “%” signs in your response. ) CM ratio Increase in net operating income 60 % \$ 30,000 (0%) % (0%) Total grade: 0. 0? 1/2 + 0. 0? 1/2 = 0% + 0% Feedback: The CM ratio is 60%. Expected total contribution margin: (\$500,000 ? 60%) Present total contribution margin: (\$450,000 ? 60%) Increase in contribution margin \$ 300,000 270,000 \$ 30,000 Given that the company’s fixed expenses will not change, monthly net operating income will also increase by \$30,000. Alternative solution: \$50,000 incremental sales ? 60% CM ratio = \$30,000 Question 20: Score 0/4

Your response Exercise 6-13 Target Profit and Break-Even Analysis [LO3, LO4, LO5, LO6] Lindon Company is the exclusive distributor for an automotive product that sells for \$40 per unit and has a CM ratio of 30%. The company’s fixed expenses are \$180,000 per year. The company plans to sell 16,000 units this year. Requirement 1: What are the variable expenses per unit? (Omit the “\$” sign in your response. ) Correct response Exercise 6-13 Target Profit and Break-Even Analysis [LO3, LO4, LO5, LO6] Lindon Company is the exclusive distributor for an automotive product that sells for \$40 per unit and has a CM ratio of 30%.