ACC 560 WK4

Exercise 5-6

Crane Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,500 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $388 and $259, respectively.

Identify the above costs as variable, fixed, or mixed.

Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance. Exclude mixed costs in the calculation for variable cost per unit.  (Round answers to 2 decimal places e.g. 2.25.)

Calculate the expected costs when production is 6,465 units.

Exercise 5-13 (Video)

Ivanhoe Company has the following information available for September 2020.

Compute the unit contribution margin.

Prepare a CVP income statement that shows both total and per unit amounts.

Compute Ivanhoe’ break-even point in units.

Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.

Problem 5-2A a-b,d (Video)

Cullumber Diesel owns the Fredonia Barber Shop. He employs 7 barbers and pays each a base rate of $1,200 per month. One of the barbers serves as the manager and receives an extra $560 per month. In addition to the base rate, each barber also receives a commission of $6.10 per haircut. Other costs are as follows.

Cullumber currently charges $12 per haircut.

Determine the variable costs per haircut and the total monthly fixed costs.  (Round variable costs to 2 decimal places, e.g. 2.25.)

Compute the break-even point in units and dollars.

Determine net income, assuming 2,000 haircuts are given in a month.

Exercise 6-2 (Video)

In the month of June, Jose Hebert’s Beauty Salon gave 4,125 haircuts, shampoos, and permanents at an average price of $25. During the month, fixed costs were $16,500 and variable costs were 75% of sales.

Determine the contribution margin in dollars, per unit and as a ratio.  (Round contribution margin and contribution margin per unit to 2 decimal places, e.g. 5.75.)

Using the contribution margin technique, compute the break-even point in dollars and in units.

Compute the margin of safety in dollars and as a ratio.

Exercise 6-7 (Video)

PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 40% contribution margin ratio. The company’s fixed costs are $15,800,200 (that is, $79,001 per service outlet).

Calculate the dollar amount of each type of service that the company must provide in order to break even.  (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

The company has a desired net income of $55,003 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet?  (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

Exercise 6-12 (Video)

Dalton Inc. produces and sells three products. Unit data concerning each product is shown below.

The company has 1,900 hours of labor available to build inventory in anticipation of the company’s peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $13.

Determine the number of direct labor hours per unit.  (Round answers to 2 decimal places, e.g. 52.75.)

Determine the contribution margin per direct labor hour.  (Round intermediate calculation and final answers to 2 decimal places, e.g. 52.75.)

Determine which product should be produced. 

Determine the total contribution margin for that product.

Problem 6-4A (Video)

Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows.

Calculate contribution margin per unit.

Ignoring the machine time constraint, which single product should Tanek Industries produce? 

What is the contribution margin per unit of limited resource for each product?  (Round answers to 2 decimal places, e.g. 10.50.)

If additional machine time could be obtained, how should the additional time be used? The additional time should be used to produce the 

 product.