5 star only!!!

PART #1a

Review Decision Case 1 (Steve and Linda Hom) starting on page 984 of your text. In your initial post, answer the two case questions:

1. Compute the annual breakeven number of meals and sales revenue for the restaurant.

2. Compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year.

In addition, address the following in one to two paragraphs:

1. Identify and discuss several qualitative factors that should be considered in the decision process in addition to the quantitative data already computed in the case assignment.

2. What are the potential benefits of applying CVP analysis to business decision making?

3. Provide an example of another business scenario that could benefit from CVP analysis and explain how you would apply CVP analysis in the decision-making process.

Case 1. Steve and Linda HOM live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda A professional chef, was impressed with the cooking methods and the spices used in the thai food. Bartlesville does not have a thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maitre d’. The restaurant would serve dinner Tuesday-Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat for. Tables can be moved together for a large party. Linda is planning two seatings per evening, and the restaurant will be open 50 weeks per year.

The Homs have drawn up the following estimates:

Requirements:

1. Compute the annual breakeven number of meals and sales revenue for the restaurant.

2. Also compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year.

Part #1b

At the end of each module, you will apply the module’s concepts by completing comprehensive assignments from the textbook.

Complete problems P16A-17B (p. 898), P16A-19B (p. 899),  P18-24A (p. 979), P18-26A (p. 980) in your textbook.

Present your analysis of the assigned problems in Excel format. Enter non-numerical responses in the same worksheet using textboxes.

• P16A-17B: Sue Electronics makes CD players in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The assembly department had no work in process on March 31. In med-April, Sue Electronics started production on 100,000 CD players. Of this number 76,100 CD players were assembled during April and transferred out to the programming department. The April 30 work in process in the assembly department was 40 % of the way through the assembly process. Direct materials costing $378,720 were placed in production in assembly during April, and direct labor of $157,700 and manufacturing overhead of $98,505 were assigned to that department.

Requirements:

1. Draw a timeline or the assembly department

2. Use the time to help you compute the number of equivalent units and the cost per equivalent unit in the assembly department for April.

3. Assign total cost in the assembly department to (a) units completed and transferred to programming during April and (b) units still in process at April 30.

4. Prepare a T-account for work in process inventory, assembly to show its activity during April, including the April 30 balance.

• P16A-19B: Roots exteriors produces exterior siding for homes. The preparation department begins with wood, which is chopped in small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the compression department, where the wood is compressed into sheets. Conversion cost are added evenly throughout the preparation process. March data for the preparation department are as follows (in millions):

Requirements:

1. Draw a timeline for the preparation department

2. Use the time to help you compute the equivalent (hint- each direct ,material added at a different point in the production process requires its own equivalent-unit computation.)

3. Compute the total cost of the units (sheets)

1. Completed and transferred out to the compression department.

2. In the preparation departments ending work in process inventory.

1. Prepare the journal entry to record the cost of the sheets completed and transferred out to the compression department.

2. Post the journal entries to the work in process inventory, preparation T-account. What is the ending balance?

• P18-24A: British Productions performs London shows. The average show sells 1,200 tickets at $5 per ticket. There are 120 shows a year. The average show has a cast of 70, each earning an average of $300 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $& per guest. Annual fixed cost total $459,000.

Requirements:

1. Compute revenue and variable cost for each show.

2. Use the income statement equation approach to compute the number of shows British Productions must perform each year to break even.

3. Use the contribution margin approach to compute the number of shows need each year to earn a profit of $3,825,000. Is this profit goal realistic? Give your reasoning.

4. Prepare British Productions’ contribution margin income statement for 120 shows for 2011. Report only two categories of cost: Variables and fixed.

• P18-26A: Big time investor group is opening an office in Dallas. Fixed monthly cost are office rent ($8,200), depreciation on office furniture ($1,500), utilities ($2,300), special telephone lines ($1,300), a connection with an online brokerage service ($2,900), and the salary of a financial planner (9% of revenue), advertising (12% of revenue), supplies and postage (4% of revenue), and usage fees for the telephone lines and computerized brokerage service (5% of revenue).

Requirements:

1. Use the contribution margin ratio CVP formula to compute Big time’s breakeven revenue in dollars. If the average trade leads to $800 in revenue for big time, how many trades must be made to break even?

2. Use the income statement equation approach to compute the dollar revenues needed to earn a target monthly operating income of $11,200.

3. Graph big time’s CVP relationship. Assume that an average trade leads to $800 in revenue for big time. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, the operating income area, and the sales  in units (trades) and dollars when monthly operating income of $11,200 is earned. The graph should range from ) to 80 units.

4. Suppose that the average revenue big time earn increases to $900 per trade. Compute the new breakeven point in trades. How does this affect the breakeven point?