Question 1:

East Meets West Ltd. operates two stores, one in Victoria and another in Halifax. The following income statements were prepared for the most recent year:

  Victoria Halifax
Net sales $3,780,000 $960,000
Variable costs:    
Cost of goods sold 1,512,000 528,000
Sales commission 189,000 48,000
Utilities 17,200 15,300
Contribution margin $2,061,800 $368,700
Fixed costs:    
Annual building lease 84,000 39,000
Salaries 380,000 180,000
Allocated corporate overhead 750,000 250,000
Amortization of store equipment & leasehold improvements 60,000 30,000
Operating income (loss) $787,800 $(130,300)

 

The store equipment and leasehold improvements have no market value. The building leases can be cancelled without penalty.

Required:

  1. Calculate the dollar value of sales required for each store to break-even assuming that all of the fixed costs are to be covered?
  2. Should management close the Halifax store? Assume that corporate overhead would be reduced by $100,000 if the Halifax store is closed.

 

Question 2:

Columbia Coco Beans Inc. sells two types of coffee, Regular and Decaf. The monthly budget for Canadian coffee sales is based on a combination of last year’s performance, a forecast of industry sales, and the company’s expected share of the Canadian market. The following information is provided for October:

  Budgeted Actual
  Regular Decaf Regular Decaf
Price per kilogram $50 $60 $52 $60
Variable cost per kilogram 24 26 24 28
Contribution margin $26 $34 $28 $32
Sales (in kg) 4,000 4,500 3,700 4,800

 

Budgeted fixed costs are $58,000. Actual fixed costs are $62,000.

Required:

1) Calculate the static-budget, flexible-budget and sales-volume variances for the contribution margin, for the company for October.

 

Question 3:

Saul’s Appliances manufactures industrial dryers and washers. During July the following data are available:

  Dryers Washers
Actual units sold 10,000 40,000
Budgeted sales 8,820 33,180
Actual selling price $700 $900
Budgeted selling price $710 $930
Budgeted market share 25% 24%
Actual market share 20% 25%
Budget cont. margin /unit $275 $375
Required:    
Determine the following:    
  1. Sales-mix and sales-quantity variances
  2. Market-share and market-size variances (for calculation purposes round combined actual and budgeted market share percentages to six decimal places).

Question 4:

For each of the following items identify whether it is spoilage, reworked units, or scrap.

  1. Defective jeans sold as seconds ________
  2. Shavings_______
  3. Edges from plastic moldings________
  4. Carpets sold as seconds________
  5. Precision tools that are not built successfully to the necessary tolerance, but which can be successfully converted to a saleable product________
  6. Rock extracted as a result of mining processing________
  7. Complex defective products such as semiconductors_______

 

Question 5:

The Scooter Company uses a process cost system for making scooter wheels. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of October the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Spoilage is detected at the end of the process. Other data for the month include:

 

Beginning work-in-process inventory 1,600 units
Units started 20,000 units
Units placed in finished goods 12,000 units
Ending work-in-process inventory 1,200 units
Normal spoilage % on all units finished 20 percent

 

Conversion costs                                        $40,320

Cost of direct materials                                 $40,000

Beginning work-in-process costs:

Materials                                                                      $4,000

Conversion                                                                   $4,032

Required:

  1. Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.
  2. Prepare journal entries to record transferring out of cost from the work-in-process accounts.

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