148. Lilah Fabulous operates a catering company. Lilah provides food and servers for parties. She also rents
tables, chairs, dinnerware, glassware, and linens. Jeff and Jessica Mantooth contacted Lilah about catering for
their daughter’s wedding. They have requested an open bar, hors d’oeuvres (enough for 300 people), a large
wedding cake, and forty tables with linens, dinnerware, and glassware. Lilah put together the following bid:
Food (300 ´ $7.50)
$2,250
Wedding cake ($150)
150
Beverages (300 ´ $5)
1,500
Servers (12 ´ 4 hours ´ $10)
480
Bartender (1 ´ 3 hours ´ $12)
36
Rental of:
Linens
80
Tables
200
Dinnerware
80
Glassware
80
Total
$4,856
Required:
Suppose that the Mantooths blanch when they see the bid. Mr. Mantooth suggests that they had hoped to spend no more than $3,750 or so on the
party. How could Lilah work with the Holmses to achieve a target cost of that amount?
149. Corlis Construction Company builds houses. Each job requires a bid. Corlis’ bidding policy is to estimate
the costs of materials, direct labor, and subcontractor’s costs. These are totaled and a markup is applied to cover
overhead and profit. In the coming year, Corlis believes it will be the successful bidder on ten jobs with the
following total revenues and costs:
Revenues
$648,000
Materials
$200,000
Direct labor
250,000
Subcontractors
150,000
600,000
Residual
$ 48,000
The residual will cover overhead and profits.
Required:
a.
What is the markup percentage on total direct costs?
b.
Suppose Corlis is asked to bid on a job with estimated direct costs of $57,500. What is the bid? If the customer complains that the profit
seems pretty high, how might Corlis counter that?
150. What are some of the pricing practices regulated by law?
Markup percentage = $48,000/$600,000 = 8%
Bid = $57,500 ´ 1.08 = $62,100
151. The variable costing income statement for Vamonos Company for 2014 is as follows:
Sales (5,000 units)
$100,000
Variable expenses:
Cost of goods sold
$30,000
Selling (10% of sales)
10,000
40,000
Contribution margin
$ 60,000
Fixed expenses:
Manufacturing overhead
$24,000
Administrative
14,400
38,400
Operating income
$ 21,600
Selected data for 2014 concerning the operations of the company are as
follows:
Beginning inventory
-0- units
Units produced
8,000 units
Manufacturing costs:
Direct labor
$3.00 per unit
Direct materials
1.60 per unit
Variable overhead
1.40 per unit
Required:
Prepare an absorption costing income statement for 2014.
Sales
$100,000
Less cost of goods sold:
{5,000 ´ [$3.00 + $1.60 + $1.40 + ($24,000/8,000)]}
45,000
Gross profit
$ 55,000
Less operating expenses:
Administrative expenses
14,400
24,400
Operating income
$ 30,600
152. Hornitos Company produced 30,000 units and sold 29,000 units in 2014. Beginning inventory was zero.
During the period, the following costs were incurred:
Indirect labor
$ 60,000
Indirect materials
30,000
Other (variable overhead)
90,000
Fixed manufacturing overhead
180,000
Fixed administrative expenses
150,000
Fixed selling expenses
120,000
Variable selling expenses, per unit
40
Direct labor, per unit
80
Direct materials, per unit
20
Required:
Compute the dollar amount of ending inventory using:
a.
Absorption costing
b.
Variable costing
Variable costs:
Direct materials
$ 20.00
Direct labor
80.00
Indirect labor
2.00
Indirect materials
1.00
Other variable overhead
3.00
Variable product costs per unit
$ 106.00
Fixed manufacturing overhead
6.00
Total product costs per unit
$ 112.00
Inventory units
1,000
Inventory value
$112,000
b.
Variable product costs per unit
$ 106.00
Inventory units
1,000
Inventory value
$106,000
153. Allison Manufacturing Company produces three products: A, B, and C. The income statement for 2014 is
as follows:
Sales
$200,000
Less: Variable expenses
127,000
Contribution margin
$ 73,000
Less fixed expenses:
Manufacturing
$20,000
Selling and administrative
14,000
34,000
Net income
$ 39,000
The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows:
A
B
C
Sales
$60,000
$40,000
$100,000
Contribution margin ratio
35%
30%
40%
Direct fixed expenses of products
$8,000
$5,000
$4,000
Required:
Prepare income statements segmented by products. Include a column for the entire firm in the statement.
154. The Levinson Company expected to produce 23,000 units at $190 per unit. The 2014 actual figures were
22,100 units which sold at $200 each.
Compute:
a. The Sales Price Variance
b. The Sales Volume Variance
c. The Overall (total) Sales Variance
Indicate whether Favorable or Unfavorable
A
B
C
Total
Sales
$60,000
$40,000
$100,000
$200,000
Less: Variable expenses
39,000
28,000
60,000
127,000
Contribution margin
$21,000
$12,000
$ 40,000
$ 73,000
Less: Direct fixed exp.
8,000
5,000
4,000
17,000
Product margin
$13,000
$ 7,000
$ 36,000
$ 56,000
Less: Common expenses
17,000
$ 39,000
155. The San Quintin Corporation manufactures automobile hub caps. In 2014, it expected to produce 385,000
hub caps at $6 per unit. The 2014 actual figures were 432,100 units which sold at $7 each.
Compute:
a. The Sales Price Variance
b. The Sales Volume Variance
c. The Overall (Total) Sales Variance
Indicate whether Favorable or Unfavorable
156. Custom Chrome Enterprises produces mag wheels for motorcycles. During 2014, Custom Chrome
expected to sell 275,000 mag wheels at $185 each. The actual sales for 2014 were 333,500 mag wheels at $179
each.
1- Calculate:
a. Sales Price Variance
b. Sales Volume Variance
c. Overall (Total) Sales Variance
Indicate whether Favorable or Unfavorable.
2- Calculate the variances if actual sales had been 266,000 mag wheels at $150 each.
157. Hang 10 Inc. produces two types of surfboards: basic and deluxe. The basic surfboard sells for $25 and the
deluxe sells for $100. Hang 10 is budgeting sales for 2014 of 1,000 basic surfboards and 650 deluxe. Variable
costs associated with the basic surfboard amount to $10 and $40 for the deluxe. Actual units sold were 1,200
basic and 550 deluxe.
Required:
a.
Calculate the contribution margin variance
b.
Calculate the sales mix variance
(1,750
1,650)
*
=
3,272
Basic
Deluxe
Total
($25 ´ 1,000 ) =
$25,000
Variable Costs:
($10 ´ 1,000) =
10,000
($40 ´ 650) =
26,000
36,000
Contribution margin
$15,000
$39,000
$54,000
Average CM per unit
$32.73
158. Morgantown Avionics produces two types of altimeters, an Analog model and a Digital model. Budgeted
and actual data for the two models are shown below:
Budgeted Amounts:
Analog Model
Digital Model
Total
Sales:
($90 25,000)
$2,250,000
($150 15,000)
$2,250,000
$4,500,000
Variable Expenses
500,000
750,000
$1,250,000
Contribution Margin
$1,750,000
$1,500,000
$3,250,000
Actual Amounts:
Analog Model
Digital Model
Total
Sales:
($88 25,900)
$2,279,200
($160 13,500)
$2,160,000
$4,439,200
Variable Expenses
518,000
675,000
1,193,000
Contribution Margin
$1,761,200
$1,485,000
$3,246,200
Calculate:
a. Contribution margin variance
b. Budgeted average unit contribution margin
c. Contribution margin volume variance
159. The following information about Morgantown Avionics’ two Altimeter models is provided:
Budgeted
Actual
Analog model sales in units
25,000
25,900
Digital model sales in units
15,000
13,500
Analog model budgeted contribution margin
$70
Digital model budgeted contribution margin
$100
Budgeted average unit contribution margin
$81.25
Total contribution margin
$3,250,000
$3,246,200
Calculate the sales mix variance.
160. The following information about Morgantown Avionics’ two Altimeter models is provided:
Budgeted
Actual
Analog model sales in units
25,000
25,900
Digital model sales in units
15,000
13,500
Total contribution margin
$3,250,000
Budgeted average unit contribution margin
$81.25
Budgeted unit sales for the entire Avionics industry were 2,500,000 of all model types and actual unit sales for the industry were 2,550,000.
Calculate:
a. Market share variance (take percentages out to 4 significant digits)
b. Market size variance
161. Custom Choppers, Inc. produces two types of motorcycles, a standard model which sells for $5,000, and a
customized model which sells for $10,000. Budgeted sales for the year are 300 standard models and 100
customized models. Variable expenses are $1,500 for the standard model and $3,500 for the customized model.
Actual sales were 500 standard models at $6,000 and 150 customized models at $12,000.
Calculate:
a. Contribution Margin Variance
b. Budgeted Average Unit Contribution Margin
c. Contribution Margin Volume Variance
Indicate whether Favorable (F) or Unfavorable (U)
162. The following information about the two motorcycle models produced by Custom Choppers, Inc. is given:
Budgeted
Actual
Standard model sales in units
300
500
Customized model sales in units
100
150
Standard model budgeted contribution margin
$3,500
Customized model budgeted contribution margin
$6,500
Budgeted average unit contribution margin
$4,250
Total contribution margin
$1,700,000
$3,525,000
Calculate the sales mix variance.
163. The following information about Morgantown Avionics’ two Altimeter models is provided:
Budgeted
Actual
Standard model sales in units
300
500
Customized model sales in units
100
150
Total contribution margin
$1,700,000
Budgeted average unit contribution margin
$4,250
Budgeted unit sales for the entire Motorcycle Choppers industry were 4,000 of all model types and actual unit sales for the industry were 4,600.
Calculate:
a. Market share variance (take percentages out to 4 significant digits)
b. Market size variance
164. Many products have a predictable profit or product life cycle. Describe the product life cycle from the
marketing perspective. In addition, graph profit versus the different phases. Finally, discuss the impact of the
product life cycle on products, learning effects, setups, purchasing, and marketing expenses.
The product life cycle describes the profit history of the product according to four stages; introduction, growth,
maturity, and decline. The graph would look like the following:
The impact of the product life cycle on cost management would be as follows:
165. Discuss the limitation of profit measurement.