Cost Acct problems

1. Fancy Mirrors, Inc. manufactures high end pool tables. They have had a steady growth rate for the past seven years. However, the CFO believes increased advertising will be necessary next year to maintain the company’s present growth. To prepare for the advertising campaign, Fancy Mirror’s controller has prepared and presented to the CFO the following data for year 2015.

Variable Cost (per wall mirrors)

Direct materials 13.25

Direct manufacturing labor 18.00

Variable overhead 12.50

Fixed costs

Manufacturing $30,000

Advertising, Marketing 120,000

Selling price $110.00

Expected sales 32,000 units

Income Tax Rate 30%

a. What is the projected net income for 2015?

b. What is the breakeven point in units for 2015?

c. If an additional $10,000 is spent on advertising in 2016, what are the required 2016 revenues, for 2016 net income to equal 2015 net income?

2. Relax Company manufactures reclining chairs. Each chair sells for $400. The fixed costs of manufacturing reclining chairs is $62,700, and the variable costs are $180 per unit.

a. Calculate Relax Company’s break-even point in Units

b. Calculate Relax Company’s Contribution Margin, per unit

c. Calculate Relax Company’s’ break-event point in Sales $

d. Determine the sales volume in dollars that Relax Company must achieve to earn a $45,000 after-tax (20% rate) income from the sales of each reclining chair.