1. Compute the manufacturing product cost per unit for each type of bookcase.
2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcase were assigned to the standard bookcases at $6 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of postmanufacturing activities such as distribution, marketing and customer service. The postmanufacturing costs were $19 per standard bookcase and $15 per unfinished bookcase. Compute the full product costs per unit.
3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
4. What price should Johnston's managers set for unfinished bookcases to earn a unit profit of $16?
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Budgeted Cost
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Cost
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of Activity
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Allocation Base
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Allocation Rate
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$250,000
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Number of parts
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$0.90
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3,500,000
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Direct labor hours
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15
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190,000
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Number of finished units
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3.7
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Lawton produced two types of bookcases in April: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs and other data.
Compute the manufacturing product cost per unit of each type of bookcase. Standard and Unfinished.
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Standard Bookcase
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Unfinished Bookcase
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Direct materials
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29300
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28400
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Materials handling
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Assembling
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Finishing
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0
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Total manufacturing cost
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Number of units
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3000
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3000
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Manufacturing cost per unit
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Compute the full product costs per unit.
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Standard Bookcase
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Unpainted Bookcase
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Manufacturing product costs
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Postmanufacturing activities
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Premanufacturing activities
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Full product cost per unit
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Sales price per unit unfinished _________
Christi, Inc., is using a cost of quality approach to evaluate design engineering efforts for a new skateboard. Christ's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the 2 year life of the skateboards follow. Also shown are the cost allocation rates for each activity.
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Predicted
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Activity Cost
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Reduction in
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Allocation Rate
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Activity
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Activity Units
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Per Unit
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Inspection of incoming materials
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420
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$46
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Inspection of finished goods
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420
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18
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Number of defective units
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discovered in-house
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1,000
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54
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Number of defective units
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discovered by customers
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400
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74
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Lost sales to dissatisfied customers
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125
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98
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1. Calculate the predicted quality cost savings from the design engineering work.
2. The predictive quality cost savings from the design work is ______
3. Christi spent $101,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" activity? The net benefit of "preventive" quality activity is $ ____
Too Sweet sells 2 dozen for every dozen of custard filled donuts. A dozen plain donuts sells for $6. A dozen custard filled donuts sells for $8, with a variable cost of $5.20 per dozen.
Determine Too Sweet's monthly breakeven point in dozens of plain donuts and custard filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.
Compute Too Sweet's margin of safety in dollars for May 2012.
If Too Sweet can increase monthly sales volume by 10%, what will operating income be? (The sales tax remains unchanged.)
The breakeven point is _____ dozen plain donuts and _____ dozen custard filled donuts.
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Plain/doz.
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Filled/doz.
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Total
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Sales revenue
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Variable costs
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Contribution margin
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Fixed costs
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Operating income
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Compute Too Sweet's margin of safety in dollars for May 2012.
The margin of safety in dollars is ______
If Too Sweet can increase sales revenue by 10%, keeping the sales mix the same, operating income will be _____
Fill in the blanks for each missing balance.
Which company has the lowest breakeven point in sales dollars?
What causes the lowest breakeven point?
(Round the contribution margin per unit to the nearest cent. Enter the ratio as a decimal rounded to two decimal places. Use parenthesis or a minus sign for operating losses.)
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Company
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Up
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Down
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Left
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Right
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Sales revenue
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$710,000
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$608,000
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Variable costs
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150,100
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291,840
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164,320
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Fixed costs
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125,000
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139,000
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Operating income (loss)
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$15,800
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$35,680
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Units sold
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190,000
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10,000
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Contribution margin per unit
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$1.42
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$98.80
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$13.44
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Contribution margin ratio
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0.21
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0.21
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Calculate the breakeven sales dollars for company - Up ____
Calculate the breakeven sales dollars for company - Down ____
Calculate the breakeven sales dollars for company - Left ____
Calculate the breakeven sales dollars for company - Right ____