Answered: Explain THREE limiting assumptions of…

Business

Accounting

Explain THREE limiting assumptions of cost volume profit

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 4CE: Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and...

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Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and sell 49,300 units at a price of 12.50 each. Beginning inventory of finished goods is 42,500, and ending inventory of finished goods is expected to be 34,000. Total selling expense is projected at 26,000, and total administrative expense is projected at 134,000. Required: 1. Prepare an income statement in good form. Be sure to include the percent of sales column. 2. What if the cost of goods sold percentage for the past few years was 65 percent? Explain how management might react.
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Total cost and number of units in the first seven months of 2020 are given below. According to this information, which of the following is the cost equation? Periods Total Cost No.of Units January 21,410 210 February 22,040 240 March 22,775 275 April May 23,195 295 23,510 310 June 23,720 320 July 24,350 350 Select one: O a. Y=23150+25*X O b. Y=20500+23*X Oc. Y=20000+22.5*X O d. Y=17000+21*X
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Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials …………………… $60,000 $90,000 Direct Labour ………………………. 80,000 120,000 Overhead: Indirect Materials…………... 25,000 37,500 Indirect Labour ……………. 40,000 50,000 Depreciation ………………. 20,000 20,000 Selling & Administrative Expenses: Sales Salaries ………………… 50,000 65,000 Office Salaries ………………… 30,000 30,000 Advertising …………………………45,000 45,000 Other …………………………… 15,000 20,000 Total $365,000 $477,500 d) Assuming sales of 5,000 units, calculate Buggs-Off break-even point and margin of safety in units and sales dollars. e) Recompute the break-even point in units, assuming that variable costs increased by 20% and fixed costs…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials …………………… $60,000 $90,000 Direct Labour ………………………. 80,000 120,000 Overhead: Indirect Materials…………... 25,000 37,500 Indirect Labour ……………. 40,000 50,000 Depreciation ………………. 20,000 20,000 Selling & Administrative Expenses: Sales Salaries…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials …………………… $60,000 $90,000 Direct Labour ………………………. 80,000 120,000 Overhead: Indirect Materials…………... 25,000 37,500 Indirect Labour ……………. 40,000 50,000 Depreciation ………………. 20,000 20,000 Selling & Administrative Expenses: Sales Salaries ……………………… 50,000 65,000 Office Salaries ……………………… 30,000 30,000 Advertising ………………………….. 45,000 45,000 Other …………………………………………. __15,000 __20,000 Total $365,000 $477,500 Required: a) Classify each cost element as either fixed, variable, or mixed b) Calculate: i) the variable production cost per unit and the total fixed production overhead. ii) The total variable cost per unit and the…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lowerlimits of activity for the year ended December 31, 2020.Lower Limit Upper LimitProduction (# of boxes) 4,000 6,000Production Costs:Direct Materials …………………… $60,000 $90,000Direct Labour ………………………. 80,000 120,000Overhead:Indirect Materials…………... 25,000 37,500Indirect Labour ……………. 40,000 50,000Depreciation ………………. 20,000 20,000Selling & Administrative Expenses:Sales Salaries ……………………… 50,000 65,000Office Salaries ……………………… 30,000 30,000Advertising ………………………….. 45,000 45,000Other …………………………………………. __15,000 __20,000Total $365,000 $477,500 g) Briefly explain the impact of each of the following scenarios on the contribution margin per unit and thebreak-even point:(i) Sales volume increases(ii) Total fixed cost decreases(iii) Selling price per unit increases(iv) Variable…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lowerlimits of activity for the year ended December 31, 2020. Lower Limit Upper LimitProduction (# of boxes) 4,000 6,000Production Costs:Direct Materials …………………… $60,000 $90,000Direct Labour ………………………. 80,000 120,000Overhead:Indirect Materials…………... 25,000 37,500Indirect Labour ……………. 40,000 50,000Depreciation ………………. 20,000 20,000Selling & Administrative Expenses:Sales Salaries ……………………… 50,000 65,000Office Salaries ……………………… 30,000 30,000Advertising ………………………….. 45,000 45,000Other …………………………………………. __15,000 __20,000Total $365,000 $477,500 d) Assuming sales of 5,000 units, calculate Buggs-Off break-even point and margin of safety in units and sales dollars. e) Recompute the break-even point in units, assuming that variable costs increased by 20% and fixed costs are…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lowerlimits of activity for the year ended December 31, 2020. Lower Limit Upper LimitProduction (# of boxes) 4,000 6,000Production Costs:Direct Materials …………………… $60,000 $90,000Direct Labour ………………………. 80,000 120,000Overhead:Indirect Materials…………... 25,000 37,500Indirect Labour ……………. 40,000 50,000Depreciation ………………. 20,000 20,000Selling & Administrative Expenses:Sales Salaries ……………………… 50,000 65,000Office Salaries ……………………… 30,000 30,000Advertising ………………………….. 45,000 45,000Other …………………………………………. __15,000 __20,000Total $365,000 $477,500 Required:a) Classify each cost element as either fixed, variable, or mixed b) Calculate:i) the variable production cost per unit and the total fixed production overhead.ii) The total variable cost per unit and the total fixed…
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round.The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lowerlimits of activity for the year ended December 31, 2020.Lower Limit Upper LimitProduction (# of boxes) 4,000 6,000Production Costs:Direct Materials …………………… $60,000 $90,000Direct Labour ………………………. 80,000 120,000Overhead:Indirect Materials…………... 25,000 37,500Indirect Labour ……………. 40,000 50,000Depreciation ………………. 20,000 20,000Selling & Administrative Expenses:Sales Salaries ……………………… 50,000 65,000Office Salaries ……………………… 30,000 30,000Advertising ………………………….. 45,000 45,000Other …………………………………………. __15,000 __20,000Total $365,000 $477,500Required:a) Classify each cost element as either fixed, variable, or mixedb) Calculate:i) the variable production cost per unit and the total fixed production overhead.ii) The total variable cost per unit and the total fixed costsHint:…
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