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The Hartford Symphony Guild is planning its annual dinner dance. The dinner dance committee has assembled the following expected costs for the event: Dinner (per person) $10 Favors and program (per person) $4 Band $700 Rental of ballroom $2,000 Professional entertainment during intermission $2,000 Tickets and advertising $700 The committee members would like to charge $41 per person for the evening’s activities. Required: 1. Compute the breakeven point for the dinner dance (in terms of the number of persons who must attend). 2. Assume that last year only 200 persons attended the dinner dance.If the same number attend this year, what price per ticket must be charged in order to break even? 3. Refer to the original data ($41 ticket price per person). Prepare a CVP graph for the dinner dance from zero tickets up to 550 tickets sold.
• Question 2
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 21 Direct labor $ 11 Variable manufacturing overhead $ 4 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 320,000 Fixed selling and administrative expenses $ 100,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $51 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for year 1 and year 2. b. Prepare an income statement for year 1 and year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for year 1 and year 2. b. Prepare an income statement for year 1 and year 2. 3. Reconcile the difference between variable costing and absorption costing net operating income in year 1and year 2.
• Question 3
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: Product A B C Selling price $240 $ 320 $ 300 Variable expenses: Direct materials 18 72 27 Other variable expenses 174 152 228 Total variable expenses 192 224 255 Contribution margin $ 48 $ 96 $ 45 Contribution margin ratio 20% 30% 15% The same raw material is used in all three products. Barlow Company has only 4,900 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $9 per pound. Required: 1. Compute the amount of contribution margin that will be obtained per pound of material used in each product. 2. a. Compute the amount of contribution margin on each product. b. Which orders would you recommend that the company work on next week—the orders for product A,product B, or product C? 3. .A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional pound of materials?
• Question 4.
Imperial Jewelers is considering a special order for 24 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $408.00 and its unit product cost is $268.00 as shown below: Direct materials $ 147 Direct labor 81 Manufacturing overhead 40 Unit product cost $ 268 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $11 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $10 per bracelet and would also require acquisition of a special tool costing $457 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order. Required: a. What effect would accepting this order have on the company’s net operating income if a special price of $368.00 per bracelet is offered for this order? b. Should the special order be accepted at this price?