The following events took place during the year for the Boltwood Company. Boltwoodmanufactures large steel tanks. Boltwo...

The following events took place during the year for the Boltwood Company. Boltwood
manufactures large steel tanks. Boltwood began the year with no inventory.
- Incurred 3000 direct labor hours at $20/hour
- Paid indirect labor costs of $35,000
- Incurred utilities, rent, and depreciation on factory totaling $56,000
- Incurred $3,000 of depreciation on the salesman's car
- Direct materials purchased and used in production amounted to $80,000
- 1,000 steel tanks were started and completed.
- 700 steel tanks were sold for $360,000.
A. What is total manufacturing overhead for the year?

B. What is the balance in the inventory account before any tanks are sold? (Show each thing you
are including as well as the total.)
C. What is the cost per unit of a tank during this year. Round to the nearest penny.
D. What is cost of goods sold for the year?
E. What is the cost of inventory on the balance sheet at the end of the year?
F. What will Boltwood report as gross margin for the year?

Question 3
1. What would happen to the average manufacturing cost per steel tank if production
doubled the following year? (Assume all costs behave exactly as theory would predict.)
A.
It would be somewhere between the current year's cost and double the current
year's cost.
B.
It would decrease to half the cost in the current year.
C.
It would double from amount in the current year.
D.
It would be somewhere between half of the current year's cost and the full amount
of the current year's cost.
E.
It would not change.
5 points

Question 4

1. Millar Inc. manufactures a mechanical component and several other products. The
mechanical components require aluminum, screws, and labor and machine finishing time.
Millar employs several part-time machinists and one full-time production supervisor who
always works 40-hours per week. The part-timers are called in as needed. Millar leases
the building and hires a cleaning company to provide services on a weekly basis. Millar
uses the straight line method for the depreciation calculation. Classify each of the
following costs for June according to whether it is most likely a Fixed (F) or Variable (V)
cost with respect to the number of mechanical components produced.
2.

1. Wages of production supervisor

2. Depreciation on machinery

3. Wages for the machinists

4. Aluminum

2.
A.
5. Lease costs

F
B.
V

15 points

Question 5
1.

Total Variable cost

1,000
2,000
widgets widgetsproduced
produced
$30,000
1.

Total Fixed cost
Variable cost per unit
Fixed cost per unit

2.
3.
5.

$10,000
4.
6.

2.
Consider the behavior of variable and fixed costs.
3. Label and supply supply the missing $ amounts for 1-6. at the top of the answer box.
After the answer for 6, label and show any work.
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12 points

Question 6
1. Consider the following results for 2 companies in the Halloween costume rental business:
Jeepers Creepers
$ 400,000 $ 500,000
$
Variable Selling costs
$ (225,000)
(225,000)
$
Fixed selling costs
$ (185,000)
(90,000)
Net income
$ 85,000 $ 90,000
Sales

2.
3. a. Compute the magnitude of operating leverage for each company.
4. b. Which company will experience the greater percentage increase in net income if both
have the same percentage increase in sales volume next year? Support your answer with a
specific explanation, but no computations.
5.

10 points

Question 7
1. Sumner Clinic does cholesterol testing. The direct labor costs and supplies cost for the
tests are $25 each. Sumner operates a small lab to analyze the results. The lab costs
appear to be a combination of fixed and variable costs. Sumner has tracked the total lab
costs and the number of tests for the last 5 months and gathered the following data.
Month
May
June
July
August
September
October

Tests

Lab
Costs
110 $6,600
180 $9,450
240 $10,400
260 $12,600
120 $7,200
190 $10,200

2.
3. 1. Use the High-Low method to find the lab cost per test.
2. Use the High-Low method to find the fixed cost per month for lab costs.
3. Estimate total lab costs for November when Sumner plans to have 200 tests analyzed.

Question 8
1. The plant manager asked you to assist in creating a formula to predict maintenance costs.
You collected data and came up with two alternative cost functions:
Function A: y = 16x + 8,340, where x is machine hours. R2 = .63
Function B: y= 42x + 15,392, where x is number of production runs. R2 = .45
Your company had 1,000 machine hours during May and 100 production runs during May.
1. Using function A, predict maintenance costs for May.

2. Which function will provide the most accurate prediction, and why? Just answer 1 or 2
then be concise with your explanation.

Question 9
1. The following data have been collected for four different cost items.
Cost Item
Cost at 100 units produced
Cost at 140 units produced
W
$8,000
$10,560
X
$5,000
$5,000
Y
$6,500
$9,100
Z
$6,700
$8,580
2. Classify each of these cost items by its cost behavior with respect to units produced.
3.

W

X

Y

2.
1.
Z

Variable
2.
Fixed
3.
Mixed

Question 10
1. Next year, Coma Paint Company is budgeting the following operating results for next
year:
Sales ..........................$270,000
Variable expenses ........(108,000)
Fixed Expenses............ ( 90,000)
Net Operating Income.....$72,000
What is Coma's break-even point next year in sales dollars? Choose the closest answer to
yours.
A.
$198,000
B.
$150,000
C.
$120,000
D.
$337,500
E.
$108,000
F.
$90,000

Question 11

1. Use this information for the questions in this section.
Tyler Co. is experiencing erratic sales of it's product- a special battery. Tyler Co. sold
50,000 units for the month and has the following account balances for the income
statement:
Sales
Variable expenses
Fixed expenses

$625,000
$500,000
$80,000

2.
A. Compute the company's contribution margin ratio.
B. Compute the break-even point for Tyler Co. in units and in Sales Revenue
C. What is Tyler’s margin of safety in revenue based on the monthly results above?
D. The company president of Tyler Co. believes a 80 cents per unit decrease in the sales
price and a $50,000 increase in the advertising costs will double sale. If this is correct,
what will the new net income be?
E. Use the original data (ignore part D). Assume Tyler is considering a machine lease
that will reduce variable expenses by $35,000 per month. The lease will cost $20,000 per
month. At what level of units sold will the 2 options (current vs. lease machine)
generate the same net income?
3. Put your 4 final answers at the top of the answer box (labeled, of course). Show your
work for each answer under your 4th answer.

Question 12
1.

The Springfield Opera Company (SOC) is planning its annual gala. The following costs are expected:

2.

Dinner and program costs (per
person)
Ballroom rental
Band
Only 400 people attended the party last year.
should SOC charge per ticket to break even?

Question 13

$10
$3,560
$4,000
If that many people attend this year, how much

1. Henning Corporation produces and sells two models of hair dryers, Standard and Deluxe.
The company has provided the following data relating to these two products:

Selling
price..............................................
Variable production
cost..............................
Variable selling and administrative
expense......
Expected monthly sales in
units....................

Standard Deluxe
$40
$55
$10

$16

$14

$11

400

1,200

2.
3. The company's total monthly fixed expense is $15,000.
4. Round any %'s to the nearest tenth of a %. (i.e. .25333 = 25.3%)
5. 1. What is the contribution margin per unit for the standard product?
2. What is the contribution margin per unit for the deluxe product?
3. What is the weighted average contribution margin per unit for Henning? Round to the nearest penny.

4. How many of each product will Henning need to sell to have net income of $200,000
for the month?
6. Label and show your final answers for 1-4 at the top of the answer box. Show your work
under that (after your answer for #4)

Question 14
1. Refer to the facts in the prior question.
If the actual monthly sales in units were divided equally between the two models (800
Standard and 800 Deluxe) and nothing else changed, net income would be:
A.
lower than with the expected sales mix.
B.
higher than with the expected sales mix.

C.
the same as with the expected sales mix.
D.
cannot be determined with this information
5 points

Question 15
1. Preacher Corporation's income statement for last year appears below:
Preacher sold 100,000 units last year.
Sales
Cost of goods sold:
Direct materials
Direct labor (variable)
Variable manufacturing overhead
Fixed manufacturing overhead
Gross margin
Selling and administrative
expenses:
Variable
Fixed
Net operating income

$1,000,000
($200,000)
(120,000)
(50,000)
(100,000)
530,000

(90,000)
(140,000)
$300,000

2.
3. 1. What is Preachers contribution margin (total, not per unit)?
4. 2. Compute break-even for Preacher in units.
5. Show final answers first, then work below that. Show your steps.

Question 16
1. Below is a traditional cost-volume–profit graph for Agassi Company for the month of
October. Agassi sells a single product- a specialty doll. The graph is not to scale.

The points on the graph are as follows:
A: (0, 8200)
B: (1000,42000)
C: (1000, 29200)
1.
2.
3.
4.

What is the per unit selling price for each doll?
What is the fixed costs for the month of October?
What is net income when 1000 dolls are sold?
What is the variable cost of one doll?

Label and answer each question at the top of the answer box. Then below answer 4,
show your work for all of the questions.