Student Name: Class: Problem 5-11 MARWICK'S PIANOS, INC.

Income Statement For the Month of August Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses: Advertising Sales salaries & commissions Delivery of pianos Utilities Depreciation of sales facilities Total selling expenses Administrative expenses: Executive salaries Insurance Clerical Depreciation of office equipment Total administrative expenses Total selling and administrative expenses Net operating income $125,000 98,000 27,000

$700 10,950 1,200 350 800 14,000 2,500 400 1,800 300 5,000 19,000 $8,000 Correct!

MARWICK'S PIANOS, INC. Income Statement For the Month of August Total $125,000 98,000 10,000 1,200 800 110,000 15,000 Correct! 700 950 350 800 2,500 400 1,000 300 7,000 $8,000 Correct! Per Piano $3,125 2,450 250 30 20 2,750 $375 Correct!

Sales Variable expenses: Cost of goods sold Sales commissions Delivery of pianos Clerical Total variable expenses Contribution margin Fixed expenses: Advertising Sales salaries Utilities Depreciation of sales facilities Executive salaries Insurance Clerical Depreciation of office equipment Total fixed expenses Net income

Given Data P05-11: MARWICK'S PIANOS, INC. Costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities Administrative: Executive salaries Insurance Clerical Depreciation of office equipment Average sales price of piano Average cost of piano pianos sold & delivered in August Cost Formula $700 950 30 350 800 $2,500 $400 1,000 300 $3,125 2,450 40 per month per month plus per piano sold per month per month

8% of sales

per month per month per month plus $20 per piano sold per month

Student Name: Class: Problem 6-19 FEATHER FRIENDS, INC. Calculations 1. CM ratio Sales price Variable expenses Contribution margin 2. Dollar sales to break even Fixed expenses CM ratio Break-even sales 3. Net income increase Increased sales CM ratio Increased contribution margin Fixed costs change Net operating income increase 4. a. Degree of operating leverage Contribution margin Net operating income Degree of operating leverage b. Increase in net operating income Degree of op. leverage % Sales increase Increase in net operating income Dollars $20 8 $12 Correct! $180,000 60% $300,000 Correct! $75,000 60% $45,000 0 $45,000 Correct! $240,000 $60,000 4 Correct! 4 20% 80% Correct! Ratio 100% 40% 60% Correct!

FEATHER FRIENDS, INC. Contribution Income Statement 5. Units Last Year: 18,000 Total Per Unit $360,000 $20 144,000 8 216,000 $12 180,000 $36,000 Correct! Units Proposed: Total $432,000 192,000 240,000 210,000 $30,000 Correct!

Sales Variable expenses Contribution margin Fixed expenses Net operating income

24,000 Per Unit $18.00 8.00 $10.00

No, because the net income is greater without any changes, they should keep it as they originally had it. 6. Incremental analysis Expected total contribution margin Present total contribution margin Incremental contribution margin $247,500 216,000 $31,500 Correct!

Given Data P06-19: FEATHER FRIENDS, INC. Unit price Variable cost per unit Annual fixed costs Estimated sales increase Operating results last year: Sales Variable expenses Contribution margin Fixed expenses Net operating income Expected percentage sales increase next year Units sold last year Percentage reduction in sales price Increase in advertising expense Expected percentage increase in sales Increase in sales commission per unit Expected percentage increase in sales $20 $8 $180,000 $75,000

$400,000 160,000 240,000 180,000 $60,000 20% 18,000 10% $30,000 33% $1 25%

Student Name: Class: Problem 6-22 PEM, INC. 1. Contribution margin ratio: Sales Variable expenses Contribution margin Break-even point: Sales Variable expense Fixed expense Profits Break-even point (units) Break-even point (dollars) Alternative break-even point calculation: Break-even point (units) Break-even point (dollars) 2. Incremental contribution margin: Increased sales Less increase advertising cost Increase in monthly net income Current loss per month Add increase Total income per month 3. Sales Variable expenses Contribution margin Fixed expenses Net loss Units sold to reach target profit: Sales Unit contribution margin Fixed expenses Profits Number of units Alternative calculation: Number of units Total $585,000 409,500 $175,500 Correct! $600,000 420,000 180,000 0 20,000 $600,000 Per Unit $30 21 $9 Correct! Percent of Sales 100% 70% 30% Correct!

Correct! Correct!

20,000 $600,000

Correct! Correct!

$24,000 16,000 $8,000 ($4,500) 8,000 $3,500 $1,053,000 819,000 234,000 240,000 ($6,000)

Correct!

Correct!

Correct!

4.

690,000 8.25 1,800,000 9,750 23,000

Correct!

23,000

Correct!

Student Name: Class: Problem 6-22 5a. Contribution margin ratio: Sales Variable expenses Contribution margin Break-even point: Fixed expense Unit contribution margin Break-even point in unit sales Contribution margin ratio Break-even point in sales dollars 5b. Comparative income statements: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $780,000 576,000 234,000 180,000 $54,000 Correct! Per Unit $ 30 18 $12 Correct! $252,000 12 21,000 40% $630,000 Percent of Sales 100% 60% 40% Correct!

Correct! Correct! Not Automated Per Unit $30 21 $9 Automated Per Unit $30 18 $12

% 100% 70% 30%

Total $780,000 468,000 312,000 252,000 $60,000 Correct!

PEM, INC.

Automated % 100% 60% 40%

Given Data P06-22: PEM, INC. Information from recent month's income statement: Sales Units sold Sales price per unit Variable expenses Contribution margin Fixed expenses Net operating loss Information for Part 2: Increase in monthly advertising budget Increase in monthly sales Information for Part 3: Reduction in selling price Increase in monthly advertising budget Increase in monthly unit sales Information for Part 4: Increase in packaging cost per unit Targeted profit each month Information for Part 5: Reduction in variable costs per unit Increase in monthly fixed costs Expected sales in units $ 585,000 19,500 $ 30 409,500 175,500 180,000 $ (4,500)

$16,000 $ 80,000

10% $60,000 200%

$0.75 9,750

$ 3 $ 72,000 26,000

Student Name: Class: Problem 07-15 Requirement 1: FAR NORTH TELECOM, INC. Unit Product Cost Absorption Costing $48 2 30 $80 Correct! Variable Costing $48 2 0 $50 Correct!

Direct materials Variable manufacturing overhead Fixed manufacturing overhead Unit product cost

Requirement 2: FAR NORTH TELECOM, INC. Absorption Costing Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses* Net operating income *Variable Fixed Total Requirement 3: FAR NORTH TELECOM, INC. Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold Variable selling and administrative expense Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expenses Net operating loss Requirement 5: Reconciliation: Variable costing net income (loss) Add: Fixed overhead cost deferred in inventory under absorption costing Absorption costing net operating income $1,500,000 500,000 180,000 $180,000 470,000 $650,000 $1,500,000 800,000 700,000 650,000 $50,000 Correct!

680,000 820,000

360,000 470,000

830,000 ($10,000) Correct!

($10,000) 60,000 $50,000 Correct!

Given Data P07-15: FAR NORTH TELECOM, INC. Manufacturing costs: Variable costs per unit: Direct materials Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable (percentage of sales) Fixed (total) Activity: Units produced Units sold Selling price per unit

$48 $2 $360,000 12% $470,000

12,000 10,000 $150

Student Name: Class: Problem 09-26 WESTEX PRODUCTS

Requirement 1a: Schedule of expected cash collections Next Year's Quarter Second Third $ 99,000 260,000

Current year - Fourth quarter sales: Next year - First quarter sales: Next year - Second quarter sales: Next year - Third quarter sales: Next year - Fourth quarter sales: Total cash collections

First 66,000 195,000

Fourth

132,000 325,000 457,000 Correct!

261,000 Correct!

359,000 Correct!

165,000 130,000 $ 295,000 Correct!

Total 66,000 294,000 392,000 490,000 130,000 $ 1,372,000 Correct! $

Requirement 1b: Schedule of expected cash disbursements for merchandise purchases for next year Next Year's Quarter Second Third $ 37,200 196,800

Current year - Fourth quarter purchases: Next year - First quarter purchases: Next year - Second quarter purchases: Next year - Third quarter purchases: Next year - Fourth quarter purchases: Total cash payments

First 25,200 148,800

Fourth

49,200 244,000 293,200 Correct!

174,000 Correct!

234,000 Correct!

61,000 100,800 $ 161,800 Correct!

Total 25,200 186,000 246,000 305,000 100,800 $ 863,000 Correct! $

Requirement 2: Budgeted selling and administrative expenses for next year Quarter First Second Third Fourth Year $ 300,000 $ 400,000 $ 500,000 $ 200,000 $ 1,400,000 15% 15% 15% 15% 15% $ 45,000 $ 60,000 $ 75,000 $ 30,000 $ 210,000 50,000 50,000 50,000 50,000 200,000 95,000 110,000 125,000 80,000 410,000 20,000 20,000 20,000 20,000 80,000 $ 75,000 $ 90,000 $ 105,000 $ 60,000 $ 330,000 Correct! Correct! Correct! Correct! Correct!

Budgeted sales Variable expense rate Variable expenses Fixed expenses Total expenses Less depreciation Cash disbursements

Requirement 3: Cash budget for next year Quarter Second Third $ 12,000 $ 10,000 359,000 457,000 371,000 467,000 234,000 90,000 10,000 75,000 409,000 (38,000) 48,000 $ 10,000 Correct! 293,200 105,000 10,000 48,000 456,200 10,800 $ 10,800 Correct!

Cash balance, beginning Add collections from sales Total cash available Less disbursements: Merchandise purchases Selling and administrative expenses Dividends Land Total disbursements Excess (deficiency) of receipts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending

First 10,000 261,000 271,000 174,000 75,000 10,000 259,000 12,000

Fourth 10,800 295,000 305,800 161,800 60,000 10,000 231,800 74,000

Year 10,000 1,372,000 1,382,000 863,000 330,000 40,000 123,000 1,356,000 26,000

$ 12,000 Correct!

48,000 (48,000) (48,000) (3,600) (3,600) (51,600) (51,600) $ 22,400 $ 22,400 Correct! Correct!

Given Data P09-26: WESTEX PRODUCTS Budgeted Sales and Merchandise Purchases:
Merchandise Purchases $ $ $ $ $ 126,000 186,000 246,000 305,000 126,000

Sales

Current year Fourth quarter Next year First quarter estimated Second quarter estimated Third quarter estimated Fourth quarter estimated

$ $ $ $ $

200,000 300,000 400,000 500,000 200,000

Additional information: Percentage of sales collected in same quarter Percentage of sales collected in quarter following sales Percentage of sales deemed uncollectible Percentage of merchandise purchases paid in same quarter Percentage of merchandise purchases pain in following quarter Budgeted quarterly operating expenses for next year plus percentage of sales Amount of depreciation budgeted each quarter Dividends to be paid each quarter Cash purchase of land in second quarter Cash purchase of land in third quarter Cash account balance at end of current year Bank loan borrowing increments Maximum loan balance allowed Interest rate per quarter on bank loans Current outstanding loan balance

$ $ $ $ $ $ $ $ $

65% 33% 2% 80% 20% 50,000 15% 20,000 10,000 75,000 48,000 10,000 1,000 100,000 2.5% -