Practice

Practice Text Exercises

Davis
University of Phoenix
Accounting/561-Principles of Accounting
July 1, 2011



Page 82

Question 2-48,

Net Sales                                                           75,044
Cost of products                                               36,438
Selling, general, and administration expense   21,848
Operating cost                                                   16,758
Increase %   26.5%     (16,758-13,249)/13.249

The percentage cost increase because the sales increase relates to the operating cost therefore the percentage cost inceases.

Question 2-61

  1. old(3.10-2.10) *600,000) -580,000=
              1*600,000= 600,000-580.000= 20,000

            New (3.10-1.10)*600,000}-1,140,000=
                      2*600,000= 1,200,000-1,140,00=60,000

  2.   old     580,000/1.00= $580,000 units
new   1,140,000/2.00= 570,000 units

  3. If the volume decrease to 500,000 so will the profit because of the high fixed cost.
1.00*500,000= 500,0000-580,000=   -80,000-20,000= -100,000 (old)
2.00*500,000= 1,000,000-1,140,000= -140,000-60,000= -200,000 (new)

  4. 1*700,000=700,000-580,000= 120,000-20,000=100,000
2*700,000= 1,400,000-1,140,000=260,000-60,000= 200,000

There will be   100,000 dollar increase with the old system and 200,000 increase with the new system.

  5. The old operation is less risky because of the fixed cost but the new environment brings more profit when the volume is increase but if the volume is decrease at any point then the organization faces a huge loss in profit.

Question 3:38

  1.   For units produce Maintenance cost for fixed is 10,000 and the cost for variable is 10,000+3,500=1350
Number sets fixed cost is 1,000 an variable cost is 6,000-1000=   5,000/5= 1,000 for each set up  
The month of April is irrelevant because the plant was closed for sometime in that month.

  2. Variable cost= 6,000/3,000= 2.00 and fixed cost 12,700
25,500-15,000=10500/16=...