BMAL 530 Homework 8

Description

Question 1

 

Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report only includes those costs that the particular department manager can control: raw materials, wages, supplies used, and equipment depreciation.

 

Prepare a responsibility accounting report for the ATV department. (Under budget amounts should be indicated by a minus sign.)

 

Question 2

 

A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $370 per pair and cost $262.70 per pair in variable costs to make. (Round your answers to 2 decimal places.)

 

(1) Compute the contribution margin per pair.

 

(2) Compute the contribution margin ratio.

 

Question 3

 

Blanchard Company manufactures a single product that sells for $215 per unit and whose total variable costs are $172 per unit. The company’s annual fixed costs are $597,700.

 

(a) Compute the company’s contribution margin per unit.

 

(b) Compute the company’s contribution margin ratio.

 

(c) Compute the company’s break-even point in units.

 

(d) Compute the company’s break-even point in dollars of sales.

 

Question 4

 

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $176 per unit. The company’s annual fixed costs are $631,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,100 units and its price will increase to $201 per unit. According to the production manager, variable costs are expected to increase to $141 per unit, but fixed costs will remain at $631,000. The income tax rate is 25%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

 

Prepare a forecasted contribution margin income statement.

 

Question 5

 

Company A is a manufacturer with sales of $3,000,000 and a 60% contribution margin. Its fixed costs equal $1,320,000. Company B is a consulting firm with service revenues of $3,100,000 and a 25% contribution margin. Its fixed costs equal $270,000.

 

Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales.

 

Which company benefits more from 20% increase in sales.