Managerial Accounting

608 Words Feb 16th, 2015 3 Pages
H. Xue Managerial Accounting 2015 Spring
Homework 1
(Individual Assignment, Due on 02/11)
1. Das Doors Inc. has recorded the following costs at various volumes of production:
Production
Volume
Total
Costs
600,000 $700,000
400,000 500,000
200,000 300,000
Determine the fixed cost and per-unit variable cost using High-Low method.
2. Adams Company sells a single product. The product sells for $100 per unit. The company’s variable expenses are 80% of sales and its fixed expenses total $150,000 per year. a: What is the company’s contribution margin ratio? b: What is the company’s break-even point? (Give answer in dollars and in units.)
3. Jefferson Company reported $4,000,000 of sales during the month and incurred variable
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Why or why not?
5. (More difficult)
Pendleton Engineering makes cutting tools for metalworking operations. It makes two types of tools: R3, a regular cutting tool, and HP6, a high-precision cutting tool. R3 is manufactured on a regular machine, but HP6 must be manufactured on both the regular machine and a high-precision machine. The following information is available. Additional information includes the following:
• Pendleton faces a capacity constraint on the regular machine of 50,000 hours per year. Notice that both products need some regular machine time.
• The capacity of the high-precision machine is not a constraint.
• Of the $550,000 budgeted fixed overhead costs of HP6, $300,000 are lease payments for the highprecision machine. This cost is charged entirely to HP6 because Pendleton uses the machine exclusively to produce HP6. The lease agreement for the high-precision machine can be canceled at any time without penalties.
• All other overhead costs are fixed and cannot be changed.
a. What product mix—that is, how many units of R3 and HP6—will maximize Pendleton’s operating income? Show your calculations.
b. Suppose Pendleton can increase the annual capacity of its regular machines by 15,000 machinehours by leasing more machines at a cost of $150,000. Should Pendleton increase the capacity of the regular machines by 15,000 machine hours? By

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