Response to the following questions:
1. Texas Co. expects sales of 20,000 units of S1 in September. DX1 is its most popular high performance desktop model. The sales manager is confident that, between October and December, the total sales will have a 40% growth rate each month from the month before. Each unit requires 30 sets of micro chip. The firm has a policy to maintain inventory at the end of each month equal to 20% of the following month's estimated sales. The same policy applies also to the micro chips and components required to assemble the finished product.
Required:
1. What is the budgeted production (in units) for each of the months September, October, and November?
2. How many sets of micro chip does the company plan to purchase in September and in October?
2. Texas Co. established the following overhead cost pools and cost drivers:
Overhead Cost Pool Budgeted Estimated Overhead Cost Driver Cost Driver Level
Quality controls $780,000 # of inspections 26,000 inspections
Machine setups $720,000 # of setups 12,000 setups
Other overhead costs $900,000 # of machine hrs 50,000 machine hrs
Total overhead costs $2,400,000
A recent order for sailboats used:
Quality inspections 750 inspections
Machine setups 500 setups
Machine hours (MHs) 2,400 machine hours
Required:
a. What is the overhead rate per machine hour if the number of machine hours (MHs) is used as a single cost driver under traditional costing system?
b. Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?
c. Utilizing ABC, how much total overhead is assigned to the order?
3. Texas Co. plans to produce and sell electronic products. The projected data for producing its products are as follows:
Budgeted sales (in units) 3,000
Selling price per unit $60
Variable costs per unit $36
Total fixed costs $40,000
Income tax rate 30%
Desired profits after tax $35,000
Required
Please answer the following questions and show all your works (formula and numbers) to get full credits.
a. What are the contribution margin per unit and CM ratio?
b. How many units (per year) would it have to produce in order to break even?
c. To earn the desire after-tax profits, how many units would it have to sell/produce?
d. Calculate the margin of safety ratio in the budgets amounts are sold. Define what is meant by the MOS.
e. Calculate the degree of operating leverage if the budgets amount are sold. Define what is meant by the DOL.