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

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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
Variable administrative expenses per surfboard
$20 Total fixed selling expenses $ 150,000
Total fixed administrative expenses
$ 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

 

Variable administrative expenses per surfboard

 

Total fixed selling expenses

 

Total fixed administrative 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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