# Sales analysis of units sold

1. Answer = 54500. The change in this question is the units that are sold; and so the sales will decrease, and also reduce the variable expense, as it changes with the change in units sold. Sales will now be 440000÷8000×7900=434500 while variable expense will be 280000÷8000×7900=276500. Fixed expense does not change, thus 434500-276500-103500=54500.

2. Answer = 16400. The explanation is for the first question above. Sales changes to 274500 while variable expense changes to170800.

3. Answer = 6170. Contribution margin is calculated as the division of the contribution by sales. Hence to get contribution you multiply sales with the contribution margin, which is 17% × 301000 and gives you 51170. Now to get net profit you less fixed expenses of 45000 to give you 6170.

4. Answer = 26920. The explanation is this same as for question 3 above. (62%×91000)-29500=26920.

5. Answer = 38520. Again in this question the explanation is the same as for the above two questions. (62%×146000)-52000=38520.

6. Answer= Increase by 2400. Net operating income is calculated by subtracting both variable expense and fixed expense from the sales. Previously, the net income was sales of 6300×140=882000 less variable cost of 6300×70=441000 less fixed cost of 385300 to give you a net income of 55700. In the second instance the sales units increase by 130 to give a sales of 6430×140=900200. You less variable cost of 6430×70=450100 and a fixed cost of 385300. But remember, there was an additional advertising cost of 6700 which also should be subtracted to give a net operating income of 58100. Thus, the change of the new income will be the difference of the two incomes i.e. 58100-55700=2400.

7. Answer= 220000. Breakeven point is given by fixed expenses divided by contribution per unit over sales price per unit. Contribution per unit is 280-78.4 which is 201.6, therefore, B.E.P is 158400 divided by (201.6 divided by 280 to give 220000.

8. Answer= 567600. The explanation is the same as No.7 above, therefore breakeven is 340560 ÷ [(150-60)÷150]=567600.

9. Answer = 6179. In this question we have an unknown which is the unit sales. We call it n to form the equation 165n-92n-431040=20000. Here you put the like terms together as 165n-92n=20000+431040. Hence 73n=451040. To remain with n on one side, you divide 451040 with 73 to give you 6179 units.

10. Answer= 29%. The formula for margin of safety is given by Actual sales units less breakeven point units, all this divided by actual sales, thus {14300-10153) ÷ 14300} = 29%.

Chapter 6

1. Answer= 111. Variable costing unit product cost excludes all fixed costs, and all other costs not associated with production which is sold and administrative cost. Therefore, it includes direct material cost, direct labour cost, and variable manufacturing overhead. Thus, variable costing unit product=48+50+13=111.

2. Answer=238. Absorption costing unit product cost includes the fixed manufacturing cost as opposed to variable costing which excludes it, thus, the absorption costing unit product cost = 104+86+11+(199800÷5400)=238.

3. Answer=11700. Remember variable costing excludes fixed cost and excludes other selling and administrative cost. Since 900 units were the ending inventory, the variable costing value for this ending inventory is 900×13=11700.

4. Answer= 255200. Period costs are costs which are not associated with production. In this they are 8800× 9+17600=255200.

5. Answer= 119250. The gross margin is calculated by subtracting variable expenses from total revenue.

6. Answer=26600. The net operating income is a summation of both divisions margins less common fixed expenses, thus (37300+89700) - 100400=26600.

7. Answer= 111900. Explanation similar to question 6 above. Only that we are required to calculate the margin i.e. sales minus variable expenses.

8. Answer= 282000. The fixed expenses include the president’s salary and the corporate office hence common fixed expenses are 174000+ (6400+4400)= 282000.

9. Answer =96 per unit. The explanation is as for question 1 above.

10. Answer= 99 per unit. The explanation is as for question 2 above.

Chapter 7

1. Answer=62480. The cash disbursement excludes the depreciation, since it involves no cash flows. Thus cash disbursements are direct labour budget of 3800×6 plus manufacturing overhead of 43220 less depreciation of 3540 to give 62480.

2. Answer= 27.50. The total direct labour cost is 6400×8.80 = 56320. The manufacturing overhead is 119680. Hence total cost is 176000. Basing the rate on direct labour hours divide by 6400 to get 27.50.

3. Answer 101530. The explanation is as for question 1 above.

4. Answer 41200 the explanation is as for question 1 and 3 above.

5. Answer= 11500 the deficit is equal to beginning balance+ receipt- disbursement-desired ending balance, thus 36000 plus 117000 minus 111000 minus 53500 to give a deficit of 11500.

6. Answer =19000, the explanation is as of question 5 above.

7. Answer =9700 the explanation is as of 5 and 6 above.

8. Answer =680000 units. Closing stock = opening stock+ production-sales, hence units to manufacture = closing stock+ units sold – opening stock.

9. Answer= 48 per unit. Total directed labour cost is hours per unit × labour rate per hour.

10. Answer= 23.6 per direct labour hour. Explanation is as of quesstion4 above.

Chapter 8

1. Answer= 456 F. Variance =Budgeted –Actual, hence 1060+ (606×16)- 10300= 456.

2. Answer= 220 F. Explanation same as question 1 above.

3. Answer= 1700 hrs .One unit required 2100 ÷ 1050 hrs what about 850 units? Hence =( 2100÷ 1050)× 850.

4. Answer=16497F. Labour efficiency variance = actual hour × standard rate- standard hours× standard rate.

5. Answer=17871 U. Variable overhead efficiency variance= standard rate ×(standard hrs- actual hrs).

6. Answer=159300. Variable cost per patient was 157530 ÷ 8900, hence for 9000 patients is 157530÷ 8900 ×9000.

7. Answer= 2877. The explanation is similar to question 1 above.

8. Answer= 2556. Flexible budget is the same as actual level of activity.

9. Answer= 44U. Explanation as question 1 above.

10. Answer =1720 F. Material quantity variance is standard price × (standard quantity- actual quantity.

Chapter 9

1. Answer=2700. If the required rate of return is 10%, then the required income is24300, but the operating income now is 27000 thus the residual is the difference which is 2700.

2. Answer=42.1 hrs Delivery time cycle includes the weight time and the through put time, the through put time is composed of process time ,inspection time, move time and the queue time hence 28.6+(0.5+0.1+9.5+3.4)=42.1

3. Answer= 14.0 hrs. Through put time is as explained above thus 4.5+0.3+3.1+6.1=14.0

4. Answer= 30.5% Manufacturing cycle efficiency = value added time divided by through put time. Value added time is the process time. Thus, 32÷(32+22+22+29)= 30.5

5. Answer=0.11, Explanation for M.C.E is as for question 4 above.

6. Answer=27.2hrs, Explanation is as for question 2 above.

7. Answer 4.5%. Margin is calculated as operating income divided by sales thus 810450÷18010000=4.5%.

8. Answer= 4.19 Asset turnover is calculated as sales divided by average operating asset thus 18280000 ÷ 4360000= 4.19

9. Answer= 21.11% Return on investment is calculated as net operating income divided by average operating asset thus 1171840 ÷ 5550000 × 100 = 21.11%

10. Answer=9.8% the explanation is as for question 7 above.

Chapter 10

1. Answer = an increase of 17500. Before eliminating the department, the net operating income from the department is (35000) i.e. contribution of 35000- fixed cost of 70000, when you eliminate the department you do away with the contribution and all fixed cost except 17500. This means that the department will make a loss of 17500, when you compare these two, the loss is decreasing with 17500, and this means that there is an increase in net operating income of 17500.

2. Answer = Decrease by 53400 per month. The explanation is as for question 1 above. Only that in this case the loss is increasing with the elimination of the department.

3. Answer = Overall net operating income would increase by 85000. The explanation is as for question 1 and 2 above.

4. Answer = QR, QX, BJ. The order of emphasis should be from the most profitable to least profitable. The margin of each case is sales price per unit minus unit cost per unit. This gives rise to the order QR, QX, BJ.

5. Answer = Option B (Yes, No, Yes). To process further, there should be significant gain from the process. In product Y, the additional cost is 5 and hence the selling cost of the further processed unit should be more than 22 and in this case its less hence product Y should be the only product not to be processed further, while other products should be processed further.

6. Answer= (5). The company sell beef juice at $47. If processed further they incur $31 and sells at $73. The profit from further processing is $42 which is less by $5.

7. Answer = 43000. The answer is the difference between the total cost of alternative A and alternative B. i.e. (44000+50000+11800+19900)-(59000+50000+28900+30800)= 43000.

8. Answer = 10000 Advantage. By upgrading the net gain, is sales price minus cost. I.e. 180000-120000=60000. This is advantageous by 10000 as opposed to selling them at their present condition 50000.

9. Answer = 45000. The explanation is as for question 7 above.

10. Answer = (82000). The explanation is as of questions 1, 2 and 3 above.

Chapter 11

1. Answer= 3.3 yrs. Payback period is calculated as initial investment divided by cash inflow per period, in this case initial investment is 77000, and cash inflow is 23000 hence 77000÷23000=3.3 years.

2. Answer= 1.6 yrs. In this case payback period time, we less depreciation from the income.

3. Answer= 2.8 yrs. Payback period will be given by initial investment of 369000 divide by cash flows of (80000+51000), giving 2.8 years.

4. Answer=134592. N.P.V is equal to discounted cash inflow less initial investment. Using the PVIFA table, the PVIFA value of 9% in 4 years is 3.2397 and hence, the present value of cash inflows is 3.2397×128000=414592. NPV is hence 414592-280000=134592.

5. Answer= 4272. The explanation is as question 4 above. PVIFA value from tables is 3.5172. Hence NPV is (3.5172×16000)-52000 =4272.

6. Answer= 33144. The explanation is as for question 4 and 5 above.

7. Answer= 1.39. The profitability index is calculated as present value of cash inflow divided by initial cash inflow. Hence 63830÷46000=1.39.

8. Answer= 1.34. The explanation is as question 7 above I.e. 95140÷71000=1.34

9. Answer=34.7%. Required rate of return is income dived by investment. In this case, the income is the same as the saving. I.e. 125000 hence 125000÷360000=34.7%

10. Answer=5.7 yrs. Payback period is given by initial investments divided by annual cash inflows hence, 510000÷90000=5.7 years.

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