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##### Course: Principal of Managerial Accounting Course Code: ACCT-(Answered)

Description

Question

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Q1:
Kaahi Shop, Inc., is a large retailer of surfboards. The company assembled the information shown below for the quarter ended May 31:
Amount Total sales revenue \$ 800,000
Selling price per surfboard
\$ 400 Variable selling expenses per surfboard \$50
\$20 Total fixed selling expenses \$ 150,000
\$ 120,000 Merchandise inventory, beginning balance \$ 80,000
Merchandise inventory, ending balance
\$ 100,000 Merchandise purchases \$ 320,000
Required:
1. Prepare a traditional income statement for the quarter ended May 31.
2. Prepare a contribution format income statement for the quarter ended May 31.
3. What was the contribution toward fixed expenses and profits for each surfboard sold during the quarter? (State this figure in a single dollar amount per surfboard).

Course: Principal of Managerial Accounting

Course Code: ACCT 201

Spring 2016

Assignment 01

Q1:

Kaahi Shop, Inc., is a large retailer of surfboards. The company assembled the information shown below

for the quarter ended May 31:

Total sales revenue

Selling price per surfboard

Variable selling expenses per surfboard

Total fixed selling expenses

Merchandise inventory, beginning balance

Merchandise inventory, ending balance

Merchandise purchases

Amount

\$ 800,000

\$ 400

\$50

\$20

\$ 150,000

\$ 120,000

\$ 80,000

\$ 100,000

\$ 320,000

Required:

1. Prepare a traditional income statement for the quarter ended May 31.

2. Prepare a contribution format income statement for the quarter ended May 31.

3. What was the contribution toward fixed expenses and profits for each surfboard sold during the

quarter? (State this figure in a single dollar amount per surfboard).

Q2:

Speed parcel service operates a fleet of delivery trucks in a large metropolitan area. A careful study by

the company?s cost analyst has determined that if a truck is driven 120,000 miles during a year, the

average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the

average operating cost increases to 13.6 cents per mile.

Required:

1. Using the high low method, estimate the variable and fixed cost elements of the annual cost of

truck operation.

2. Express the variable and fixed costs in the form Y = a + bX

3. If a truck were driven 100,000 miles during a year, what total cost would you expect to be

incurred?

Q3:

Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for \$60

per unit and has a CM ratio of 40%. The company?s fixed expenses are \$360,000 per year. The company

plans to sell 17,000 bookbags this year.

Required:

1. What are the variable expenses per unit?

2. Using the equation method:

a. What is the break-even point in units and in sales dollars?

b. What sales level in units and in sales dollars is required to earn an annual profit of \$90,000?

c. Assume that through negotiation with the manufacturer the Super Sales Company is able to

reduce its variable expenses by \$3 per unit. What is the company?s new break-even point in

units and in sales dollars?

3. Repeat (2) above using the formula method.

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