Managerial accounting 4

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Question 1: (26 marks)

Dundar Mifflin manufactures and sells three products: X, Y, and Z. Annual fixed costs are $515,250 and data about the three products follow for 2017.

X

Y

Y

Sales

$150,000

$480,000

$790,000

Variable cost

 80,000

 175,000

290,000

Required:

1)     Determine the breakeven point

2)     The management expects sales to increase by 9% in 2018. What is the expected operating income in 2018?

Question 2: (24 marks)

Dundar Mifflin makes electronic product for the RCMP. The following data is for the first six months:

Direct Labor Hours

Manufacturing Overhead

January

45,000

$295,000

February

60,000

$320,000

March

57,000

$323,000

April

52,000

$247,250

May

34,000

$178,200

June

25,000

$162,500

Required:

1)     Use the high-low method to estimate the cost formula

2)     Estimate the total overhead cost at an activity level of 48,000 machine hours, using the separate estimates you obtained for its components.

Question 3: (30 marks)

Costco has recently started to take the customer orders over the web site.  Following is the past data for first six month:

Month

Customer Web site costs

Number of Web site hits

January

$8,960

11,600

February

$8,762

11,270

March

$9,032

11,720

April

$8,942

11,570

May

$8,420

10,700

June

$8,492

10,820

Required:

1)     Using the high-low method, estimate the variable cost per Web site hit and the monthly fixed costs.

2)     Determine the cost equation to estimate the customer Web site expenses for Costco Online.

3)     If Costco expects 9,500 Web site hits for July, what are their anticipated costs for July?

Question 4: (20 marks)

Gandalf and Company makes table tennis equipment for the retailers around the world.  Below is listed a number of activities and cost at Gandalf Corporation. Please list the activities as one of the following: fixed, mixed, contribution, cost behavior, variable, curvilinear, account analysis, regression analysis.

1

Changes in cost, but not in direct proportion to changes in volume

2

Costs that do not change while changes in volume

3

Sales – Variable Expense

4

Cost changes as volume changes

5

Cost that changes while changes in volume

6

Cost behavior is not linear

7

Equation which expresses how a cost behaves

8

Procedure that uses all the historical data points

9

Utility charges per kilowatt plus monthly fee

10

Monthly rent charges

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