Project #114548 - ACCT202/ CVP analysis project

Accounting 202:  Spring 2016               30 points    
PROJECT 2 - CVP ANALYSIS                    
                         
Name:     Class time      
                         
Enter the last 4 digits of your student ID number:                
              (These digits will be used to for some variables in the project)    
Save this file in EXCEL FORMAT as: P2Lastname         Highest =         
Round all  dollar amounts to whole dollars, except for per unit amounts.  Per unit amounts should be  Lowest other than 0=      
rounded to the nearest cent. Percentages should be rounded as follows: 20.75% or .2075          
Do not change rows or colums on this spreadsheet. Input areas are in yellow.            
You MUST show your work in the areas indicated to get credit for the problem.            
                         
Presented below is Trident Company's Income Statement prepared on the traditional (functional)  basis:         
                         
Requirement 1:  Replace the two unknown amounts (?) in A. and B. as directed.  To find the unknown for B, you will have to      
               complete Requirement 2.   Then, complete the  totals on the income statement.            
                         
Trident Company        
Income Statement        
For the Year Ended December 31, 2015        
                         
  Sales            $350,000          
  Cost of Goods Sold                    
    Direct materials (variable)     $60,000            
    Direct labor (variable)              52,500            
    Manufacturing Overhead (mixed)            64,000            
                             176,500          
  Gross Margin                          173,500          
  Operating Expenses                    
                         
    Commissions (variable)              21,000            
    Shipping (variable)      ?   A.  Multiply the HIGHEST digit entered above       
               above by 1,000 and enter here enter the result      
    Advertising (fixed)              90,000            
    Billing (mixed)      ?  B.Complete Requirement 2 below and insert result     
    Sales and Administrative salaries (fixed)          60,000            
  Total Operating Expenses                    
                         
  Net Operating Income (Loss)                  
                         
Requirement 2:                      
Billing costs for the past 5 years along with total units sold follows: Year Sales in Units Billing Costs        
            2014 47,700  $             6,750        
            2013 44,000  $             6,312        
            2012 42,000  $             6,066        
            2011 45,500  $             6,580        
            2010 46,000  $             6,618        
Use the high-low method to calculate the following:                 
        Show your work in this area:    ANSWER:         
   a.  Variable cost per unit            
               
                         
   b.  Total fixed costs            
               
                         
   c.  Total cost equation for billing costs                
                         
   d.  Total billing costs if 25,000 units are sold                  
                         
                         
      Insert your answer for 2)d. in the income statement above in the blank provided        
      for Billing  (Unknown B)                
                         
Selling price per unit is $14 and variable manufacturing overhead is $1 per unit.  All variable expenses in the company vary in terms of units sold.  There was no change in beginning or ending inventories.  Trident's plant has a capacity of 50,000 units  per year.        
       
       
       
                         
The company has been operating at a loss for several years.  Management is trying to determine what it can do to make next year profitable.        
       
                         
Requirement 3:                      
Redo Trident's 2015  income statement in contribution format, showing both a total column and a per unit column in the space provided below.  (Hint:  Divide total column by units to get the per unit variable cost amount)        
       
Hint:  You will need to calculate the variable and fixed components of Manufacturing Overhead (MOH) and billing.        
       
      Total Units Amount                
        Per Unit                
                         
Sales                    
Variable Costs                    
    Direct materials                    
    Direct Labor                    
    Variable MOH                    
    Sales commissions                    
    Shipping                      
    Variable billing                    
    Total Variable Costs                    
Contribution Margin                    
Fixed Costs                    
   Fixed MOH                    
   Advertising                      
   Sales and admn. salaries                    
   Fixed billing                    
    Total Fixed Costs                    
Net Operting Income                    
                         
                         
Requirment 4:                      
Calculate Trident's current breakeven point in both units and dollars.               
  Show work in this area:                    
Units:           ANSWER          
                         
                         
            Units            
                         
Dollars:                      
                         
                         
            Dollars            
                         
Requirement 5:                      
                         
Multiply the lowest digit (other than zero) from the last four digits of your student ID number by 10,000 and         
enter  for C. below.                      
                         
a.  The vice president suggests that selling price be lowered by 5%  and advertising be reduced  by.       C.          
   She is confident that this action will increase sales to 40,000 units.              
                         
  The new selling price price per unit  would be:                
                         
  The new advertising amount would be:                  
                         
                         
                         
                         
                         
                         
b.  Prepare a new contribution margin income statement, using the vice president's recommendation.  Remember, when volume changes,     
total variable costs change proportionately.  To get total variable costs, multiply the per unit amounts from Requirement 3 by the new     
number of units.   (Remember, VC per unit remains constant.)              
                         
      Total Units Amount                
        Per Unit                
                         
Sales      New from above             
Variable Costs                    
    Direct materials                    
    Direct Labor                    
    Variable MOH                    
    Sales commissions                    
    Shipping                      
    Variable billing                    
    Total Variable Costs                    
Contribution Margin                    
Fixed Costs   2                
   Fixed MOH                    
   Advertising        New from above             
   Sales and admn. salaries                    
   Fixed billing                    
    Total Fixed Costs                    
Net Operting Income                    
                         
                         
Requirement 6:                      
Using the budgeted income statement based on the vice president's proposal above, calculate the           
Show your work in the areas provided.                  
a.  Margin of safety in units:                    
                         
                         
b.  Margin of safety in dollars of sales:                  
                         
                         
c.  Margin of safety percentage:                    
                         
                         
                         
Requirement 7:                      
a.  Calculate the degree of operating leverage using the vice-president's proposed income statement above.         
Answer should use two decimal places.                  
      Show your work in this area:              
                         
              Answer          
                         
                         
                         
b.  If sales volume increase 10%, operating income will increase:              
                         
      Percent   Dollars              
                     
                         
                         

Subject Business
Due By (Pacific Time) 03/11/2016 12:30 am
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