Project #25143 - Managerial Accounting

ScholarPak Company produced and sold 76,000 backpacks during the year just ended at an average price of $36.00 per unit. Variable manufacturing costs were $15.00 per unit, and variable marketing costs were $7.20 per unit sold. Fixed costs amounted to $546,000 for manufacturing and $220,800 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

 

1.     If ScholarPak’s variable manufacturing costs do increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 

Zodiac Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows:

 

 

    Labor-Intensive
   Production System

    Computer-Assisted
   Manufacturing System

  Direct material

 

$  9.70

 

$ 8.80  

  Direct labor

.8DLH @ $20.00

16.00

.5DLH @ $24.50

12.30  

  Variable overhead

.8DLH @ $15.50

12.40

.5DLH @ $15.50

7.75  

  Fixed overhead*

 

$2,630,000

$

4,310,000  


 

*

These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced.

 

     The company’s marketing research department has recommended an introductory unit sales price of $71.00. Selling expenses are estimated to be $880,000 annually plus $4.30 for each unit sold. (Ignore income taxes.)

 

1.     Calculate Zodiac’s estimated break-even point in annual unit sales of the new product if the company uses the (a) labor-intensive production system; (b) computer-assisted manufacturing system. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

 

2.     Determine the annual unit sales volume at which the firm would be indifferent between the two manufacturing methods. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

 

3.     Determine the annual unit sales volume at which the firm would be indifferent between the two manufacturing methods. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

 

 

 

 

 

 

Steven Clark and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7:00 a.m. to 11:00 p.m. The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the two eight-hour shifts.

     In order to determine the feasibility of the project, Clark hired a marketing consultant to assist with market projections. The results of this study show that if the firm spends $990,000 on advertising the first year, the number of new clients expected each day will be 52. Clark and his associates believe this number is reasonable and are prepared to spend the $990,000 on advertising. Other pertinent information about the operation of the office follows:

 

The only charge to each new client would be $62 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements or judgments. Clark estimates that 20 percent of new client consultations will result in favorable settlements or judgments averaging $4,200 each. It is not expected that there will be repeat clients during the first year of operations.

The hourly wages of the staff are projected to be $52 for the lawyer, $42 for the paralegal, $32 for the legal secretary, and $22 for the clerk-receptionist. Fringe benefit expense will be 40 percent of the wages paid. A total of 440 hours of overtime is expected for the year; this will be divided equally between the legal secretary and the clerk-receptionist positions. Overtime will be paid at one and one-half times the regular wage, and the fringe benefit expense will apply to the full wage.

Clark has located 6,000 square feet of suitable office space which rents for $58 per square foot annually. Associated expenses will be $55,000 for property insurance and $75,600 for utilities.

It will be necessary for the group to purchase malpractice insurance, which is expected to cost $362,000 annually.

The initial investment in the office equipment will be $122,000. This equipment has an estimated useful life of four years.

The cost of office supplies has been estimated to be $10 per expected new client consultation.

 

1.     Determine how many new clients must visit the law office being considered by Steven Clark and his colleagues in order for the venture to break even during its first year of operations. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

2.     Compute the law firm’s safety margin. (Round final answer to the nearest whole dollar amount.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A contribution income statement for the La Jolla Inn is shown below. (Ignore income taxes.)

 

 

 

 

 

  Revenue

$

1,800,000

 

  Less: Variable expenses

 

1,170,000

 

 


 


 


 

  Contribution margin

$

630,000

 

  Less: Fixed expenses

 

504,000

 

 


 


 


 

  Net income

$

126,000

 

 



 



 



 


 

 

1.

Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement.

 

 

 

Subject Mathematics
Due By (Pacific Time) 03/16/2014 05:16 pm
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