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Accounting for Decision Making

Q1. 30% – A company has a selling price of $20 a unit, variable costs of $10 a unit, and fixed costs of $50,000.

A) 5%- What is the breakeven point in dollars sales?

B) 5%- What is the operating profit at a level of 10,000 units?

C) 5%- What is the breakeven in units if there is a 20% increase in fixed costs

D) 5%- Assume we sell 20,000 units. What is the operating income if there is a 20% increase in contribution margin, holding revenues constant?

E) 5%-Assume we have been selling 10,000 units, what is the operating profit if there is a 10% decrease in units sold?

F) 5% – Assume sales of 10.000 units. What is the operating income if there is a 10% decrease in contribution margin, holding revenues constant

Q2. 27% – A company sells three products ABC, DEF & XYZ in a 1:3:6 sales mix.

Sales price: ABC – $10 DEF -12 XYZ – $10
Variable cost: ABC – $8 DEF – 6 XYZ – $5
Total quantity sold: 20,000 units
Fixed cost are $50,000

A) 6% – Calculate breakeven in total sales dollars and in units of ABC, DEF& XYZ.

B) 5% – What is the total income the company can earn with this sales mix?

Say the sales mix changes from 1:3:6 to 6:3:1?

C) 6% -What is the breakeven point in sales dollars and units of each product?

D) 5% – What is the total income the company can earn with this sales mix?

E) 5% – Explain why the answers in parts A and B is different than in parts C and D?

Q3. 15%
A) 5%- For the year 2016, P marketing managers project quarterly sales of 100,000 product A and 50,000 per quarter of product B. Average selling prices are estimated at $8.00 per product A and $6.00 per product B. Sales are collected 60% in the quarter of sale and 40% the quarter after sale. Prepare a revenue budget for the year ending December 31,2016.

B) 5%- P begins 2016 with 80,000 of A in inventory. The vice president of operations requests that ending inventory on December 31,2016 of product A be no less than 60,000 units. Based on sales projections as budgeted above, prepare a production budget for product A in 2016?

C) 5% – If each produced unit of A requires 3 pounds of material and we have 30,000 pounds at the the beginning of the year and desire an ending inventory of 40,000 pounds, how many pounds need to be purchased?

Q4. 28% – XYZ Corporation is preparing a master budget for 2016. Sales for the year are expected to total 1,200,000 units. Quarterly sales in units are 20%,25%,30%, and 25% respectively. The sales price is expected to be $50 per unit for the first 3 quarters and $55 per unit beginning in the fourth quarter. Sales in the first quarter of 2017 are expected to be 10% higher than the budgeted sales volume for the first quarter of 2016.
Cash collections from sales are 60% in the quarter of sale, 30% in the following quarter and 8% in the second quarter after sale.
For production purposes management desires to maintain ending finished goods inventories at 25% of the next quarters budgeted sales volume. Beginning finished goods on Jan 1 2016 are 60,000 units.
For production purposes two pounds of raw material are required for each finished product.
Management targets ending inventory of materials equal to 20% of next periods production needs of finished goods
Beginning materials inventory on January 1, 2016 was 10,000 pounds.
Prepare

A)12%- cash inflows schedule for the third quarter 2016
B) 16%-materials purchase budget in pounds for the first quarter 2016

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