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Name____________________
Section__________________
Chapter 4
Exercises 1-4
Exercise 4-1
Fixed and variable costs
Exercise 4-2
Cost structure at Microsoft
Exercise 4-3
Contribution margin from the Men's Wearhouse annual report
Exercise 4-4
$540,000
480000
420,000
360,000
300,000
240,000
180, 000
120,000
60,000
30,000
0
Units Produced 3,000 4,000 5,000 6,000
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Name____________________
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Chapter 4
Exercises 5-6Exercise 4-5
High $ 20,000 - low $ =
High machine hours 8,000 - low machine hours =
Change in $ divided by change in machine units= per unit cost
Total cost High Low
Variable costs
Fixed costs
Exercise 4-6
a.
High $ 28,000 - low $ =
High cost - low cost =
Change in $ divided by change in cost units= per unit cost
Total cost High Low
Variable costs
Fixed costs
b.
c.
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Chapter 4
Exercises 7-8Exercise 4-7
a.
$11,000
9,000
7,000
0
$100,000 $150,000 $200,000 $250,000
Sales
b.
Exercise 4-8
a. Account analysis
Variable Cost Estimate
Staff salaries
Production
Variable cost per unit
Fixed Cost Estimate
Depreciation
Share of building cost
b. 60 more employeed in June
c. 10 more employeed in May
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Chapter 4
Exercises 9-10Exercise 4-9
a. Account analysis
Variable Cost Estimate
Cleaning supplies
Production
Variable cost per unit
Fixed Cost Estimate
Rent
Utilities
Depreciation
b. Contribution margin?
Exercise 4-10
Variable Cost Fixed Cost
Material $ 30,000
Direct labor 20,000
Depreciation
Phone
Other Utilities
Supervisory salaries
Equipment repair
Indirect materials
Factory maintenance
Total
Production 1,000 units
Variable cost per unit
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Chapter 4
Exercises 11-13
Exercise 4-11
a.
Selling price = $800
Variable cost = 300
Contribution margin $500
Fixed cost per month $50,000
b.
Exercise 4-12
a.
Fixed costs per month $200,000/ variable cost per dollar or contribution margin ratio
b.
c.
Exercise 4-13
a. Selling price = $800
Variable cost = 300
Contribution margin
b.
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Chapter 4
Exercises 14-17Exercise 4-14
a.
Selling price = $800
Variable cost = 300
Contribution margin $500/Sales $800
b.
Exercise 4-15
a.
b.
Exercise 4-16
Selling price = $1,000
Exercise 4-17
a.
b. Breakeven Fixed 178,000/ ? =
c.
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Chapter 4
Exercises 18-21Exercise 4-18
a.
Fixed costs 103,000/ ? =
b.
c.
Exercise 4-20
a.
Dept. A Dept. B Dept C Total
Profit $99,000 $255,000 $88,000 $442,000
Divided by
Sales $265,000 $850,000 $900,000 $2,015,000
Percentage of sale 37.3%
b.
Dept. A Dept. B Dept C Total
Profit
Divided by
Sales $265,000 $850,000 $900,000 $2,015,000
Percentage of sale
Exercise 4-21
a.
b.
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Chapter 4
Problem 4-1
Royal Desert Hotel
Fixed (F) variable (V) or mixed (M)
a. Depreciation
b. Salaries of staff
c. Salaries of administrative staff
d. Soap, shampoo
e. Laundry costs
f. Food and beverage
g. Grounds maintenance
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Chapter 4
Problem 4-2Rykor Electronics
a. 140 units
Variable costs
Component costs $68,000
Supplies
Assembly labor
Shipping
Total
Fixed Costs
Rent
Supervisor salary
Electricity
Telephone
Gas
Advertising
Administrative costs
Total fixed
b.
c. Sales $1,200
Less variable costs
Contribution margin
d. Sales 150 units x $1,200
Less part b
Total profit
e.
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Chapter 4
Problem 4-3
Rykor Electronics
a.
High cost $134,700 - low cost = change in cost
High units sold 165 - low units = change in units
b.
Sales $1,200
Less variable costs
Contribution margin
c.
d. Sales of 150 units
e.
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Chapter 4
Problem 4-4
a.
Use regression analysis on the data
Fixed = $
Variable = $
b.
Variable Fixed
Account analysis
High-Low
Regression
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Chapter 4
Problem 4-5
Peterson Island Air
a.
Number of current round trips 6 per week x 52 weeks=
Total revenue
Total revenue per trip __________
Variable costs:
Fuel
Maintenance
Variable cost per trip _________
Contribution margin per trip __________
Fixed costs:
Salary
Depreciation of plane 20,000
Depreciation of office equipment
Rent expense
Insurance
Miscellaneous
Total fixed costs
===========
Breakeven trips
b.
c.
d.
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Chapter 4
Problem 4-6
Regal Hotel
a. Account analysis
Fixed Costs
Depreciation $10,000
Day manager salary $4,000
Night manger salary $
Variable costs
Cleaning staff $15,000
Food & beverages
Total variable
Number of rooms 1,500
Variable costs per room
b.
High -low
c. April revenue per occupied room $85
Less variable costs
Contribution margin per occupied room
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Chapter 4
Problem 4-7
Cindy Mathers Jewlery
a.
Consider which costs are variable and fixed
b.
Forecast plus 20%
Sales $18,624
Cost of Jewlery sold
Gross margin
Registration fee 1,000
Booth rental (5% of sales)
Salary of Jane Kramer 300
Before tax profit
=========
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Chapter 4
Problem 4-8
Premier Custom Computers
Sales $1,000,000 1,100,000 1,200,000 1,300,000 1,400,000
Cost of sales 700,000
70%
Gross Profit
Staff salaries 180,000 180,000 180,000 180,000 180,000
Rent 24,000
Utilities 3,600
Advertising 2,000
Operating profit 90,400
before bonuses
Staff bonuses 40% 36,160
Profit before taxes and
Owner's drawing:$54,240
======= ====== ========= ======== ==========
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Chapter 4
Problem 4-9
Xeroc, Inc.
a.
High units in sales and production 150 - low units =
High units in production costs $95,000 - low units =
High units in selling costs $16, 000 - low units =
Change in $/change in units = variable costs
High Production Low High Selling Low
Total costs 95,000 16,000
Variable costs
Per unit x high
Per unit x low
Total fixed costs
b.
1,400 units x $800 = revenues
d. Profit of $1,500,000
e. Break out each department
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Chapter 4
Problem 4-10
Ballard HiFi
Profitability Analysis
For the Year Ended 12/31/03
a.
Audio Video Car Total
Contribution margin $1,080, 000 460,000 570,000 $2,110,000
Divided by
Sales $3,000,000 1,800,000 1,200,000 6,000,000
CM ratio 36.00% 35.16%
b.
$100,000 times the applicable CM ratio
c.
Fixed costs $690,000/contribution margin ratio
d. Profit of $1,500,000
e. Break out each department
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Chapter 4
Problem 4-11
RealTime Service
a.
Consulting Training Repair Total
Sales $600,000 $480,000 $360,000 $1,440,000
Less variable costs
Salaries 300,000
Supplies parts 24,000
Other 1,200
Total costs 325,200
Contribution margin 274,800
Less fixed common costs 263,000
Profit
=========
b.
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Chapter 4
Problem 4-12
Sercon, Inc. and Zercon, Inc.
a.
Which company has the highest operating leverage?
b.
Sercon, Inc. 10% increase 10% decrease in sales
Sales $80,000,000 88,000,000
Less variable costs 20,000,000
Less fixed costs 50,000,000 50,000,000 50,000,000
Profit $10,000,000
========== =========== ==============
Zercon, Inc. 10% increase 10% decrease in sales
Sales $80,000,000 88,000,000
Less variable costs 50,000,000
Less fixed costs 20,000,000 20,000,000 20,000,000
Profit $10,000,000
========== =========== ==============
c.
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Chapter 4
Problem 4-13
Xenoc, Inc.
a.
Current profit $400,000 /2,000 units = $200 profit per unit
$200 profit per unit/$50 assembly per hour = 4 hours per unit
b.
c.
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Chapter 4
Problem 4-14
Pacer Running Shoes
a.
110,000 assembly hours available to produce two lines: Master & Finisher
How many pairs of each model should be produced in the coming year?
b.
Suppose management decises that at least 4,00 pairs of each model must be
produced. What is the opportunity cost of this decision versus only 2,000 pairs?
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Chapter 4
Problem 4-15
Casper's Seafood
Based on the limited information provided, provide Bob with an estimate of the
net effect of the coupon campaign on annual profit (ignore taxes).
Increase in normal sales $2,500,000
Less discount
Increase in sales after discount
Less incremental costs
Incremental profit
=================
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Chapter 4
Case 4-1
WENDELL ROBERTS CONSULTING
Required
Explain why William's assumption leads to a higher claim. Is his behavior ethical?
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Chapter 4
Case 4-2
ROTHMUELLER MUSEUM
a.
Revenue:
b.
Breakeven point
Fixed costs:
Contribution margin
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Chapter 4
Case 4-3
MAYFIELD SOFTWARE CUSTOMER TRAINING
a.
Consider the fixed costs:
b.
Calculate the contribution margin
Revenue:
Less:
Variable costs
Contribution margin
c.
Consider trainer costs.
d.
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Chapter 4
Case 4-4
KROG'S METALFAB, INC.
a.
Step 1
Step 2
Step 3
b.
c.
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Chapter 4
Case 4-5
SEATTLE ESPRESSO, INC.
Forecast with more labor
Jan. Feb. March April May June
Revenues
Costs of goods sold
Labor
Utilities
Net profit
July Aug. Sept Oct. Nov. Dec.
Revenues
Costs of goods sold
Labor
Utilities
Net profit
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