Managerial accounting

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Holmes Colleges Sydney *

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HI6025

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Accounting

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Apr 3, 2024

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Managerial accounting Chapter 6 Break even point in units = Total fixed expenses / Contribution margin per unit = 90000 / 16 = 5625 units Break even point in dollars = Total fixed expenses / CM ratio = 90000 / 40% = $225000 B) Calculate the contribution margin ratio, the annual margin ratio, and the annual profit Contribution margin ratio = contribution margin per unit / selling price per unit = 16 / 40 = 40% Annual profit = Contribution margin - Total Fixed expenses = 500000 * 40% - 90000 = 200000 - 90000 = $110000 C) Assuming YUX Corporation increases its selling price by 30% and all other factors (including demand) remail constant, determind by what percentage annual profits will increase. Annunal profit will increase by total increase in sales = 12500 units * (40*30%) = 12500 * 12 = 150000 Total percentage increase = 150000 * 100 / 110000 = 136.36% D) Assume the price remains at $40 per unitand variable costs remain the same per unit, but fixed costs increase by 30% annually. Calculate the percentage increase in unit sales required to acheive the same level of annual profit calculated in part b. Unit sales required = (Total Fixed cost + Profit required) / CM per unit = (90000 + 30%) +110000 / 16 = 227000 / 16 = 14188 units Percentage increase = (14188 - 12500) / 12500 = 1688 / 12500 = 13.50% E) Determine the sales required to earn an operating income of $360,000 after tax. YUX Corporation's tax rate is 40%. After tax profit required = 360000, Before tax profit required = 600000 Sales required = 90000 + 600000 / 16 = 690000 / 16 = 43125 units

Q2 Contribution Margin = sales- variable cost/ sales =(1728000-1123200/1728000)*100=35% Breakeven sales in dollars = fixed cost/ contribution margin= 806400/.35 = 2304000 1.unit sales price =1728000/57600 =30 Variable cost pu=1123200/57600= 19.50 Increased sale price= 30*1.25=37.5 Revised contribution margin ratio= (37.5-19.5)/37.5 =48% Breakeven point in dollars =806400/.48 = 1680000 2. Selling price =30 Variable expense =19.5+(30*5%)=21 Contribution margin =(30-21)/30*100=30% Break even point in dollars=806400/.30= 2688000 3. Revised variable cost= 964800 Revised variable cost pu=964800/57600=16.75 Contribution margin= (30-16.75)/30*100 =44.167 Fixed cost = 964800 Breakeven point in dollars= 964800/.4416667= 2184288 Q 3 Calculation of Break-even point in Dollars Break-even point in dollars = Fixed Costs/ Contribution margin ratio Blossom Company: Break-even point in dollars = $ 106,000/ 40% = $ 265,000

Crane Company: Break-even point in dollars = $ 262,000/ 80% = $ 327,500 Calculation of Margin of Safety Ratio Margin of Safety Ratio = (Current Sales Revenue – Break-even Sales Revenue)/ Current sales revenue Blossom Company: Margin of Safety Ratio = ($390,000 - $ 265,000)/ $ 390,000 = 32.05% Crane Company: Margin of Safety Ratio = ($390,000 - $ 327,500)/ $ 390,000 = 16.03% Working Note: Calculation of Contribution margin Ratio Contribution margin ratio = Contribution margin/ Sales revenue Blossom Company: Contribution margin ratio = $ 156,000/ $ 390,000 = 40% Crane Company: Contribution margin ratio = $ 312,000/ $ 390,000 = 80% Answer 2) Calculation of Degree of Operating Leverage

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Degree of Operating Leverage = Contribution margin/ Operating Income Blossom Company: Degree of Operating Leverage = $ 156,000/ $ 50,000 = 3.12 Crane Company: Degree of Operating Leverage = $ 312,000/ $ 50,000 = 6.24 Answer 3) Variable Cost Income Statement if Sales revenue increases by 20% Blossom Company Crane Company Sales Revenue $ 4,68,000 $ 4,68,000 Less: Variable Costs $ 2,80,800 $ 93,600 Contribution Margin $ 1,87,200 $ 3,74,400 Less: Fixed Costs $ 1,06,000 $ 2,62,000 Operating Income $ 81,200 $ 1,12,400 Answer 4) Variable Cost Income Statement if Sales revenue decreases by 20% Blossom Company Crane Company Sales Revenue $ 3,12,000 $ 3,12,000 Less: Variable Costs $ 1,87,200 $ 62,400 Contribution Margin $ 1,24,800 $ 2,49,600 Less: Fixed Costs $ 1,06,000 $ 2,62,000 Operating Income $ 18,800 $ -12,400 Chapter 7

Total cost of perforimg on own the services=$130,000 Total cost of outsourcing=3,000*48=$144,000 Cost of outsourcing is more than cost o performing the services on own ,thus it is better to outsource as a benefit of $14,000($144,000-$130,000) would be received if housekeeping is not outsourced. b.Break-even(in hours=Fixed costs/Contribution per unit Fixed costs assuming 50% eliminated=50,000*50%=$25,000 Contribution per unit=$48-($4+$30+$1) Contribution per unit=$13 Break-even (in hours)=25,000/13 Break-even in hours=1,923 hours c.The Qualitative factors that the company should consider in outsourcing include: Quality of management Quality of poducts Thus these two factors will affect the outsourcing decision Q 2 Cost of old scanner 98400 Less: Depreciation 24600 =98400/4 Book value of old 73800

scanner Book value of old scanner 73800 Less: Sales value 48000 Loss on sale 25800 2 Retain Scanner Replace Scanner Net Income Increase (Decrease) Annual operating costs 318000 243000 75000 New scanner cost 0 109000 -109000 Old scanner salvage 0 -48000 48000 Total 318000 304000 14000 Yes, purchase the new scanner on January 2, 2017 Workings: Retain Scanner Replace Scanner Annual operating costs =106000*3 =(106000- 25000)*3 Q Contribution Margin = Selling price unit - Variable cost per unit Contribution margin per machine hour = Contribution margin / machine hour BasicDeluxe Selling price per unit 43 55 variable price per unit 19 30.50 Contribution margin (Selling price - variable cost) 24 24.50 Machine hours 0.50 0.70 Contribution margin per machine hour (Contribution margin/machine hour) 48 35 2. If there is additional machine hour of 1,550 , then we should m anufacture BASIC product. Because it has more Contribution margin per machine hour when compared to deluxe product. It means we can earn profit (contribution) of 48 in basic product in 1 hour but deluxe will give profit (contribution) of 35 in 1 machine hour. 3. Analysis showing contribution margin if additional 1,550 hours are:

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1 ) Divided equally between basic and deluxe product: Basic $37,200 Deluxe $27,125 Total contribution margin $64,325 Explanation :- Basic Deluxe Machine hour (1,550/2) 775 775 Contribution margin per machine hour 48 35 Total contribution margin (Contribution margin per machine hour * Machine hour) 37,20027,125 Total contribution margin = 37,200 + 27,125 = 64,325 2) Total contribution margin $74,400 Explanation :- Total contribution margin = Contribution margin per machine hour * Machine hour = 1,550 * 48 = 74,400 Chapter 13 Q1 Annual Cash saving = 35200-30000 = 5200

Cash payback period = Initial investment/Annual cash saving = (39000 - 10290) / 5200 = 5.521 Years Blue Spruce Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $170,000 and has an estimated useful life of eight years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $32,000. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 11%. Click here to view the factor table. Solved by verified expert 1) Net present value = -Initial Cost + Annual Cash Flow *PVIFA(12%,8) Net present value = -175606 + 34100*4.96764 Net present value = - 6209 Note : Since NPV is negative , Purchase of new bottling machine are not viable 2) Minimum Reduction in downtime have to be worth each year = Initial Cost/PVIFA(12%,8) Minimum Reduction in downtime have to be worth each year = 175606/4.96764 Minimum Reduction in downtime have to be worth each year = $ 35,350

You will be redirected to view. Sheridan Company is considering a long-term investment project called ZIP. ZIP will require an investment of $134,000. It will have a useful life of four years and no salvage value. Annual cash inflows would increase by $79,000, and annual cash outflows would increase by $38,000. In addition, the company's required rate of return is 9%. Click here to view the factor table. (a) Calculate the net present value on this project. (If the answer is negative, use either a negative sign preceding the number e.g. -5,275 or parentheses e.g. (5,275). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.) Net present value $enter the net present value in dollars rounded to 0 decimal places Identify whether the project should be accepted or rejected. The project should be select an option . (b) Calculate the internal rate of return on this project. (Round answer to 1 decimal place, e.g. 5.2%) Interna l rate of return enter the internal rate of return in percentages rounded to 1 decimal place % Identify whether the project should be accepted or rejected. The project should be select an option .

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Coronado Corporation, which operates an amusement park, is considering a capital investment in a new ride. The ride would cost $141,000 and have an estimated useful life of 5 years. The park will sell it for $66,000 at that time. (Amusement parks need to rotate rides to keep people interested.) The ride will be expected to increase net annual cash flows by $26,200. The company’s borrowing rate is 8%. Its cost of capital is 10%. Click here to view the factor table. Calculate the net present value of this project to the company. Net present value $enter the net present value in dollars rounded to 0 decimal places uestion 2 Blue Spruce Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Old Equipment New Equipment Cost $81,600 Cost $39,000 Accumulated depreciation $41,600 Estimated useful life 8 years Remaining life 8 years Salvage value in 8 years $4,600 Current salvage value $10,920 Annual cash operating costs $30,000 Salvage value in 8 years $0 Annual cash operating costs $35,200 Depreciation is $10,200 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight- year period with salvage value of $4,600.

Calculate the annual rate of return. Bramble Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra three hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing. Data for the two computers are as follows: Current Computer New Computer Original purchase cost $14,600 $25,300 Accumulated depreciation $6,100 $0 Estimated operating costs $23,900 $19,600 Useful life 5 years 5 years If sold now, the current computer would have a salvage value of $9,800. If it is used for the remainder of its useful life, the current computer would have zero salvage value. The new computer is expected to have zero salvage value after five years. Determine whether the current computer should be replaced. (Ignore the time value of money.) Current computer should be select an option . The incremental analysis shows that net income for the five-year period will be $enter a dollar amount select an option .