Cost Accounting Exam 1 Study Guide
Test 1 Review
Use the following information to answer questions 1-3.
Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets:
Revenues (400 sets sold @ $600 per set) $240,000
Variable costs 160,000
Fixed costs 50,000
1. How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point?
a. 400
b. 250
c. 200
d. 150
2. How many sets of clubs must be sold to earn a target operating income of $90,000?
a. 700
b. 500
c. 400
d. 300
3. What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30 percent?
a. $489,000
b. $429,000
c. $420,000
d. $300,000
4. Garrett manufacturing sold 410,000 units of its product for $68 per unit in 2011. Variable cost per unit is $60 and total fixed costs are $1,640,000.
a. Calculate contribution margin
b. Calculate operating income
5. Garrett’s current manufacturing process is labor intensive. Kate Schoenen, Garrett’s production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of Schoenen’s proposal affect your answers to a & b of #4.
6. Should Garrett accept Schoenen’s proposal? Explain.
Use the following information to answer questions 7-10.
Java Joe Coffees wants to find an equation to estimate monthly utility costs. Java Joe’s has been in business for one year and has collect the following cost data for utilities:
7. Which of the preceding costs is variable? Fixed? Mixed? Explain
8. Using the high-low method, determine the cost function for each cost.
9. Combine the preceding information to get a monthly utility cost function for Java
Use the following information to answer questions 1-3.
Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets:
Revenues (400 sets sold @ $600 per set) $240,000
Variable costs 160,000
Fixed costs 50,000
1. How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point?
a. 400
b. 250
c. 200
d. 150
2. How many sets of clubs must be sold to earn a target operating income of $90,000?
a. 700
b. 500
c. 400
d. 300
3. What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30 percent?
a. $489,000
b. $429,000
c. $420,000
d. $300,000
4. Garrett manufacturing sold 410,000 units of its product for $68 per unit in 2011. Variable cost per unit is $60 and total fixed costs are $1,640,000.
a. Calculate contribution margin
b. Calculate operating income
5. Garrett’s current manufacturing process is labor intensive. Kate Schoenen, Garrett’s production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of Schoenen’s proposal affect your answers to a & b of #4.
6. Should Garrett accept Schoenen’s proposal? Explain.
Use the following information to answer questions 7-10.
Java Joe Coffees wants to find an equation to estimate monthly utility costs. Java Joe’s has been in business for one year and has collect the following cost data for utilities:
7. Which of the preceding costs is variable? Fixed? Mixed? Explain
8. Using the high-low method, determine the cost function for each cost.
9. Combine the preceding information to get a monthly utility cost function for Java