Problem 1.Following is a list of various costs incurred in producing frozen pizzas. With respect to production and sale of frozen pizzas, classify each cost as variable, fixed, or mixed.
1. Property insurance premiums, $1500 per month plus $0.005 for each dollar or property over $3,000,000.
2. Packaging
3. Hourly wages of inspectors
4. Pension cost, $0.05 per employee hour on the job
5. Hourly wages of machine operators
6. Rent on warehouse, $5,000 per month plus $5 per square foot of storage used
7. Refrigerant used in refrigeration equipment
8. Pepperoni
9. Dough
10. Tomato paste
11. Property taxes, $50,000per year on factory building and equipment
12. Electricity costs, $0.08 per kilowatt-hour
13. Salary of plant manager
14. Straight-line depreciation on the production equipment
15. Janitorial costs, $3,000 per month.
Problem 2. For the current year ending March 31. Zing Company expects fixed costs of $425,750, a unit variable cost of $40, and a unit selling price of $65.
a. Compute the anticipated break-even sales(units)
b. Compute the sale (units) required to realize income from operation of $85, 125.
Problem 3. Anheuser-Busch Companies, Inc. reported the following operating information for a recent year (in millions):
Net Sales $14,935
Cost of good sold 8,983
Marketing and distribution 2,590
11,573
Income from operations 3,362*
*Before special items
In addition, Anheuser-Busch sold 136 million barrels of beer during the year. Assume that variable costs were 70% of the cost of good sole and 45% of marketing and distribution expense. Assume that the remaining costs are fixed. For the following year, assume that Anhuser-busch expects pricing, variable costs per barrel, and fixed costs to remain constant, expect that new distribution and general office facilities are expected to increase fixed costs by $133 million.
Rounding to the nearest cent:
a. Compute the break-even sale(barrels) for the current year.
b. Compute the anticipated break-even (barrels) for the following year.