Question: Question: The Excel worksheet form that appears
The Excel worksheet form that appears below is to be used to recreate portions of the Review Problem relating to Voltar Company. Download the workbook containing this form from Connect, where you will also receive instructions about how to use this worksheet form.
You should proceed to the requirements below only after completing your worksheet.
Required:
1.Check your worksheet by changing the fixed expenses to $270,000. If your worksheet is operating properly, the degree of operating leverage should be 10.If you do not get this answer, find the errors in your worksheet and correct them. How much is the margin of safety percentage? Did it change? Why or why not?
2.Enter the following data from a different company into your worksheet:
Unit sales .................................................................10,000
Selling price per unit...................................................$120
Variable expenses per unit …………………....................$72
Fixed expenses ………………….............................$420,000
What is the margin of safety percentage? What is the degree of operating leverage?
3. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 15%.
4. Confirm the calculations you made in part (3) above by increasing the unit sales in your worksheet by 15%. What is the new net operating income and by what percentage did it increase?
5. Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $10,000 and at that price, Thad estimates that he could sell 600 units each year. The variable cost to produce and sell the cycles would be $7,500 per unit. The annual fixed cost would be $1,200,000.
a. Using your worksheet, what would be the unit sales to break even, the margin of safety in dollars, and the degree of operating leverage?
b. Thad is worried about the selling price. Rumors are circulating that other retro brands of cycles may be revived. If so, the selling price for the Western Hombre would have to be reduced to $9,000 to compete effectively. In that event, Thad also would reduce fixed expenses by $300,000 by reducing advertising expenses, but he still hopes to sell 600 units per year. Do you think this is a good plan? Explain. Also, explain the degree of operating leverage that appears on your worksheet.
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A. B 1 Chapter 5: Applying Excel 3 Data 4 Unit sales 5 Selling price per unit 6 Variable expenses per unit 7 Fixed expenses 20,000 units $60 per unit $45 per unit $240,000 9 Enter a formula into each of the cells marked with a ? below 10 Review Problem: CVP Relationships 11 12 Compute the CM ratio and variable expense ratio 13 Selling price per unit 14 Variable expenses per unit 15 Contribution margin per unit per unit ? per unit ? per unit 16 17 CM ratio 18 Variable expense ratio 19 20 Compute the break-even 21 Break-even in unit sales 22 Break-even in dollar sales ? units 23 24 Compute the margin of safety 25 Margin of safety in dollars 26 Margin of safety percentage 27 28 Compute the degree of operating leverage 29 Sales 30 Variable expenses 31 Contribution margin 32 Fixed expenses 33 Net operating income 34 35 Degree of operating leverage ? 36 H H Chapter 5 Form Filed in Chapter 5 Form
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> The following cost data pertain to the operations of Montgomery Department Stores, Inc., for the month of July. Corporate legal office salaries ............................................................................$56,000 Apparel Department cost of
> Whirly Corporation’s contribution format income statement for the most recent month is shown below: Required: 1. What would be the revised net operating income per month if the sales volume increases by 100 units? 2. What would be the
> Security Pension Services helps clients to set up and administer pension plans that are in compliance with tax laws and regulatory requirements. The firm uses a job-order costing system in which overhead is applied to clients’ accounts
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> Maria Am Corporation uses the weighted-average method in its process costing system. The Baking Department is one of the processing departments in its strudel manufacturing facility. In June in the Baking Department, the cost of beginning work in process
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> Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company’s predetermined overhead rate of $2.40 per machine-hour was based on a cost formula that estimates $192,000 of
> The following data from the just completed year are taken from the accounting records of Mason Company Required: 1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. 2. Prepare a schedul
> Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to b
> Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the followin
> Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Jo
> Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses a job-order costing system. The capacity of the plant is determined by the capacity of its constraint, which is time on the automated bandsaw t
> Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work a
> Braverman Company has two manufacturing departments—Finishing and Fabrication. The predetermined overhead rates in Finishing and Fabrication are $18.00 per direct labor-hour and 110% of direct materials cost, respectively. The company’s direct labor wage
> Fickel Company has two manufacturing departments—Assembly and Testing & Packaging. The predetermined overhead rates in Assembly and Testing & Packaging are $16.00 per direct labor-hour and $12.00 per direct labor-hour, respectively. The company’s direct
> Mickley Company’s plantwide predetermined overhead rate is $14.00 per direct labor-hour and its direct labor wage rate is $17.00 per hour. The following information pertains to Job A-500: Direct materials...........................................$231 Di
> Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production.........
> Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period’s estimated level of production. The
> Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year: During the year, the company had no beginning or end
> Yancey Productions is a film studio that uses a job-order costing system. The company’s direct materials consist of items such as costumes and props. Its direct labor includes each film’s actors, directors, and extras. The company’s overhead costs includ
> Warner Corporation purchased a machine 7 years ago for $319,000 when it launched product P50. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 300 machine costing $313,000 or by a new model
> The.Alpine.House,.Inc.,.is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: Amount Sales...................................................................................$150,000 Selling.pr
> Java Source, Inc., (JSI) buys coffee beans from around the world and roasts, blends, and packages them for resale. Some of JSI’s coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volume
> Munchak Company’s relevant range of production is 9,000–11,000 units. Last month the company produced 10,000 units. Its total manufacturing cost per unit produced was $70. At this level of activity the companyâ&#
> The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to
> Refer to the data given in Exercise 1–7. Answer all questions independently. Data from Exercise 1-7: The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 pe
> Refer to the data given in Exercise 3. Answer all questions independently. Data from Exercise 3: Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows:
> Refer to the data given in Exercise 3. Answer all questions independently. Data given in Exercise 3: Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as foll
> Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials …………………………………………………………………… $7.00 Direct labor……………
> Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold……………………………………………………………………………. 20,000 Selling price per unit…………………………………………………………………………………. $30 Variable selling expense per unit………………………………………………………………
> Miller Company’s contribution format income statement for the most recent month is shown below: Required: 1. What is the revised net operating income if unit sales increase by 15%? 2. What is the revised net operating income if the sel
> Olongapo Sports Corporation distributes two premium golf balls—Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Fixed expenses total $183,750 per month. Required: 1. Prepare a
> Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since intr
> Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: “Wes, I’m not sure how to go about answering the questions that came up at the meetin
> “Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $2,000. It seems we’re either too high to get the job or
> “Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $2,000. It seems we’re either too high to get the job or
> The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 2,000 sets per year. Annual cost data at full capacity follow: Direct labo
> This exercise relates to the Double Diamond Skis’ Shaping and Milling Department that was discussed earlier in the chapter.The Excel worksheet form that appears below consolidates data from Exhibits 4–5 and 4â
> The Excel worksheet form that appears below is to be used to recreate part of the example relating to Turbo Crafters that appears earlier in the chapter. Download the workbook containing this form You should proceed to the requirements below only after
> This Excel worksheet relates to the Dickson Company example that is summarized in Exhibit 2–5. Download the workbook containing this form from Connect, where you will also find instructions about how to use this worksheet form. Exhibit
> This Excel worksheet form is to be used to recreate Exhibit 1–7. Download the workbook containing this form from Connect, where you will also receive instructions. Required: 1. Check your worksheet by changing the variable selling cost
> The Ramon Company is a manufacturer that is interested in developing a cost formula to estimate the variable and fixed components of its monthly manufacturing overhead costs. The company wishes to use machine-ho The company leases all of its manufacturi
> Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the company’s market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in thi
> Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas: Cost Cost Formula Cost of goods sold .................
> The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company’s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base that correl
> Archer Company is a wholesaler of custom-built air-conditioning units for commercial buildings. It gathered the following monthly data relating to units shipped and total shipping expense: Required: 1. Prepare a scattergraph using the data given above.
> Refer to the data for Highlands Company. Assume that the company uses the FIFO method in its process costing system. Required: 1. Compute the number of tons of pulp completed and transferred out during June. 2. Compute the equivalent units of production
> Refer to the data for Pureform, Inc., in Exercise 4–9. Exercise 4–9: Pureform, Inc., uses the weighted-average method in its process costing system. It manufactures a product that passes through two departments. Data
> Refer to the data for Alaskan Fisheries, Inc., in Exercise 4–10. Exercise 4–10: Alaskan Fisheries, Inc., processes salmon for various distributors and it uses the weighted-average method in its process costing system.
> MediSecure, Inc., uses the FIFO method in its process costing system. It produces clear plastic containers for pharmacies in a process that starts in the Molding Department. Data concerning that department’s operations in the most recent period appear be
> Brooks Corporation uses a job-order costing system to apply manufacturing costs to jobs. The company closes its underapplied or overapplied overhead to cost of goods sold. Its balance sheet on March 1 is as follows: During March the company completed th
> What is the meaning of margin of safety?
> Star Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1 are given below. Because the videos differ in length and in complexity of production, the company uses a
> What is the meaning of break-even point?
> What is the meaning of operating leverage?
> What is the meaning of contribution margin ratio? How is this ratio useful in planning business operations?
> Assume that a company has two processing departments—Mixing followed by Firing. Explain what costs might be added to the Firing Department’s Work in Process account during a period.
> How do direct labor costs flow through a job-order costing system?
> How do you compute the unadjusted cost of goods sold?
> How do you compute the cost of goods manufactured?
> How do you compute the total manufacturing costs within a schedule of cost of goods manufactured?
> How do you compute the raw materials used in production?
> What is underapplied overhead? Overapplied overhead?
> Stillicum Corporation makes ultra-light weight backpacking tents. Data concerning the company’s two product lines appear below: The company has a traditional costing system in which manufacturing overhead is applied to units based on di
> A number of terms relating to the cost of quality and quality management are listed below: Appraisal costs ……………………………………………………………… Quality circles Quality cost report …………………………………………………………… Prevention costs Quality of conformance ………………………………………………………
> Describe the terms (a) “control premium” and (b) “illiquidity discount” when discussing possible external or outside buyers of a venture.
> What is an employee stock option plan (ESOP)? How is an ESOP used to buy out a venture?
> What is foreclosure?
> What is meant by loan default? Also, describe (a) an acceleration provision and (b) a cross-default provision.
> What is the purpose of the U.S. Bankruptcy Code? What are some of the characteristics of ventures that use instead of private liquidation?
> Describe a venture bankruptcy. Also, indicate the difference between (a) a voluntary bankruptcy petition and (b) an involuntary bankruptcy petition.
> What is bankruptcy and how is it used by ventures?
> What are the steps or stages in a “typical” execution and time line schedule used in planning and executing an IPO?
> Describe the absolute priority rule.
> What is a private liquidation? What does the process of assignment mean?
> What is a private workout? Also, describe some of the characteristics of ventures that are likely to engage in private workouts.
> What is a systematic liquidation of a venture? What are some of the advantages and disadvantages of a systematic liquidation?
> What is meant by initial public offering (IPO) underpricing?
> Describe the two following terms that may be involved in underwriting a new securities issue: (a) green shoe and (b) lockup provision.
> When an investment banking firm decides whether to underwrite or market a securities issue, what is meant by a firm commitment and best efforts?
> What is meant by due diligence? How does a traditional registration differ from a shelf registration?
> An insolvent venture is one where equity is negative and/or the cash flow of the firm is unable to meet debt obligations.
> Define asset restructuring and describe how it can be implemented to escape from financial distress.
> Define operations restructuring and describe how it can be implemented to escape financial distress.
> What do we mean when we say a venture is insolvent?
> Use the concept of cash flow insolvency over time and describe what would happen if the problem is temporary rather than permanent.
> Describe what is meant by (a) a leveraged buyout (LBO), and (b) a management buyout (MBO).
> Describe how the relative value method is used to value a firm’s equity.
