Instructions
For this homework assignment, you will need the Unit VII Homework Worksheet that includes your unit questions. Be sure to follow all directions and show your work for each problem. Upon completion of the homework, upload your file for submission to your instructor.
1. Susie Ques Inc., a company that produces and sells a single product, has provided its contribution format income statement for October:
Sales (6,200 units)
$136,400
Variable expenses
$80,600
Contribution margin
$55,800
Field expenses
$48,700
Net operating income
$7,100
If the company sells 5,800 units, its total contribution margin should be how much money?
There is not a word length requirement for this question; however, you must show your work.
2. The records of the Dodge Corporation show the following results for the most recent year:
Sales (16,000 units)
$256,000
Variable expenses
$160,000
Net operating income
$32,000
Given the provided date, identify the contribution margin.
There is not a word length requirement for this question; however, you must show your work.
3. Briquette Corporation has in stock 35,800 kilograms of material L that it bought five years ago for $5.55 per kilogram. This raw material was purchased to use in a product line that has been discontinued. Material L can be sold as is for scrap for $1.67 per kilogram. An alternative would be to use material L in one of the company’s current products, Q08C, which currently requires 2 kilograms of a raw material that is available for $9.15 per kilogram. Material L can be modified at a cost of $0.78 per kilogram so that it can be used as a substitute for this material in the production of product Q08C. However, after modification, 4 kilograms of material L is required for every unit of product Q08C that is produced. Briquette Corporation has now received a request from a company that could use material L in its production process. Assuming that Briquette Corporation could use all of its stock of material L to make product Q08C or the company could sell all of its stock of the material at the current scrap price of $1.67 per kilogram, what is the minimum acceptable selling price of material L to the company that could use material L in its own production process?
There is not a word length requirement for this question; however, you must show your work.
4. Little Cory Corporation is considering dropping product G41O. Data from the company’s accounting system appear below:
Sales
$450,000
Variable expenses
$185,000
Fixed manufacturing expenses
$149,000
Fixed selling and administrative expenses
$113,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.
Required:
a. According to the company’s accounting system, what is the net operating income earned by product G41O?
b. What would be the effect on the company’s overall net operating income of dropping product G41O? Should the product be dropped?
There is not a word length requirement for this question; however, you must show your work.
Direct materials
$342
Direct labor
$80
Variable manufacturing overhead
$48
Fixed manufacturing overhead
$520
Total manufacturing cost per unit
$990
5. Hanson, Inc. makes 1,000 units per year of a part called a prositron for use in one of its products. Data concerning the unit production costs of prositron follow:
An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.
Required:
a. Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.
b. Assume that Hanson, Inc. could use the facilities presently devoted to production of the prositrons to expand production of another product that would yield an additional contribution margin of $50,000 annually. What is the maximum price Hanson, Inc. should be willing to pay the outside supplier for prositrons?
There is not a word length requirement for this question; however, you must show your work.
6. Binford Corporation’s contribution margin ratio is 58%, and its fixed monthly expenses are $94,000. Assume that the company’s sales for May are expected to be $178,000.
Required:
Estimate the company’s net operating income for May, assuming that the fixed monthly expenses do not change.
There is not a word length requirement for this question; however, you must show your work.
