Chapter 7

14. a. Direct material variance based on quantity purchase: AQ*(AP-SP) =12800*(0.97-0.95) =256(A) Direct material quantity variance: SP*(AQ-SP) = 0.95*(10700-(300*35) = 190(A) b. Price variance: purchasing department Quantity variance: production department c. Reasons for price variance:  The purchasing dep. Doesn’t perform well, so they can’t take the best price for the company.  Because of inflation, all prices of every goods increase, so the price of this increase  The more competitors, the higher the price, because the demand increases and the supply is still stable, so there is a lack of materials, and the suppliers increase the price Reasons for quantity variance ( Unfavourable)  Lack of skilled workers.  Lack of good administration  Lack of good strategy to motivate workers 16. SH.SR : 350*195 3900F AH.SR: 330*195 AH.AR 330*a x We have: 3900+ x = -2500 330*(195-a)=-6400 AH.AR= 70750 18. SQ*SP: 6* 0.5* 2400 AQ.SP: 6* x AQ.AP: 20375 800U 12375 U x= 6400 U a= 214.39

SQ= 2400*0.5= 1200 AQ*AP= 8000 AQ= (7200+800):6= 1333 c, material price variance: 20375- 8000= 12375 U labour SH.SR: 2400*2*17 3400U: efficiency variance AH.SR: 5000*17 650F AH.AR: 5000*a AH.AR=84350 e, standard price cost: (7200+ 81600): 2400= 37

f.5*4980 $1600 U FOH volume variance . 4 approach Variance overhead Actual $25900 $950 F budget 3*8950 $450U applied 3*8800 VOH spending Variance 500 F: total variance Fixed overhead Actual $ 72600 $600U FOH spending variance 2200 U budget $72000 VOH efficiency variance applied $ 4. actual price cost: (20375+81600):2400=43.5 456 4560 228U 228F Case D 1500 3 4500 6 4875 26812.4 675 5940 1080F 780A Case C 240 2 480 9.8 600 10.5 2437.5F 2250A 22.6 20 Unit produce Standard hours per unit Standard hours Standard rate per hour Actual hour work Actual labor cost Rate variance Efficiency variance Case A 800 3 2400 7 2330 15844 466F 490F Case B 750 0.

VOH: FOH: Actual 25900 72600 $98500 $350F OH spending c.b.5*4980 Budget $3*8800=$26400 $72000 $98400 Applied $3*8800=26400 $8*8800=70400 $96800 $1600 U budget at actual 3*8950=26850 72000 $98850 $450F Oh efficiency budget at standard applied 3*8800=26400 3*8800=26400 72000 8*8800=70400 $98400 1600U Volume $96800 VOH spending Variance 135 F: total variance Fixed overhead Actual $ 9600 $300F FOH spending variance 960 U budget $118800:12 VOH efficiency variance applied $36*240 $1260 U FOH volume variance . Actual VOH: $25900 FOH: $72600 $98500 $100 U 23. Variance overhead rate: 270000: 60000= 4.5 Fixed overhead rate: 118800: 3300= 36 Actual $22275 225 U budget 4.5*4900 360F applied 4.

we can see. the weakness of purchasing department or the increase of competition. . This is the consequence of the use of unskilled workers. The first thing we can see here is that the actual cost much more higher than the standard cost. Variable Manufacturing Overhead Fixed manufacturing overhead Various account To record actual overhead costs Working in process Variable manufacturing overhead Fixed manufacturing overhead To apply overhead to work in process Variable overhead spending variance Variable manufacturing overhead Variable overhead efficiency variance To record variable overhead variances Volume variance Fixed manufacturing overhead Fixed manufacturing spending variance To record fixed overhead variances 22275 9600 31875 31050 22410 8640 225 135 360 1260 960 300 18. so the more demand is and the stable or the less supply is. In the labor. there is the unfavorable variance. Although there is a favorable variance in labor rate. This makes the price goes up. this is pretty small when compared with the unfavorable variance in efficiency. we can see. the price and the quantity variances are unfavorable. in the efficiency. The main reasons for this are some unfavorable variances of materials and labor First. this can be caused by the lack of skilled workers and good administration. in materials. The reasons for price material maybe are inflation. g.b.

60000= 600000+300000 X=50$ 15.Chapter 9 9. Variable production cost per unit (75000+50000+37500):150000= 1. a.. the number of unit to earn profit of 260000: (130000+260000):650= 600 17. income before tax increase: 25 11. total contribution: 240000-1.0833 b.3X. Profit before tax: 224000 Tax 40% Profit after tax 134400 The number of unit to earn profit before tax of 224000: 240000 162500 45000 (64980) (142520) 97480 (56250) (50000) (8770) . a.083*90000-45000= 97530 Contribution margin per unit: 97530: 90000= 1. total revenue increases: 25+21= 46 b. Break even point in unit: 60000: (30-15) + 4000 (unit) Break even point in dolar: 60000: [(30-15):30]= 120000$ 14 Regard minimum price per unit as X Variable cost= 70% price We have: 0. Variable cost per unit: 150+700= 850 a. the number of unit to earn profit of $195000: (130000+195000): (1500-850)= 500 c.084 c. a. Income statement Revenue Variable production cost Variable selling and administration expense Closing inventory Total variable cost of goods of sale Total contribution Fixed production overhead Fixed selling and administration cost Net profit 10. the number of unit to be breakeven: 130000: (1500-850)= 200 b. total cost increases: 21 c.

124) – 1440= $197. If we want to increase the volume we have to decrease the price to attract customer. Therefore.71 Fixed cost: 1800*0.5+0.3*X):0. people using the ferry each day: 1450: 0. “ we may be showing a loss but we can make it up in volume”.4.5= 2900 b.62 To make profit of 250 each day.6. In some circumstance. each passenger is charged to be break even: 1800:2900= 0.9= 2610 Expected loss= (2610*0.6= 2700000 CM ratio (4500000-2700000):4500000= 0.124 Passenger volume: 2900* 0.5+0. 17) x belongs to N* the first price to make profit is 0. to attract new c.7 when x=1 e. the higher volume we get. for example in the introduction stage of a product.5m 22.36 $ d. Variable cost: 4500000*0.4 Regard Revenue needed to earn target: X We have: X= (50000*12+0.8= 1440 Variable cost: 1800-1440= 360 Variable cost per passenger: 360: 2900= 0.121*(2900-145x)+ 1440 29x2-525.5m= 1. regard the step we have to make profit as x ( x belongs to N*) We have: Passenger volume: 2900-2900.1450= 350 The country will be better of 152. .4 X= 6000000 Annual sales must increase: 6m. Regard the number of unit is X We have: revenue: 1500X Profit after tax 150X profit before tax: 150X: 0. the more we reduce the price. In this saying.9<0 x€ (0.2x) Cost: 0. if we want to increase the volume.121* (2900-145x) +1440 To make profit: Sale > cost (2900-145x)*(0.(2610*0.2x)> 0.6= 250X The number of unit: X= (130000+250X): 650 X= 325 unit Revenue: 1500*325= 487500 19.6). a.045x+304.0.64 Existing loss: 1800. we concern about the vicious circle between price and volume. each passenger must be charged: (250+1800):2900= 0.(130000+224000): 650= 545 b.5+0.05x= 2900-145x Price: 0.2x Sale: (2900-145x)* (0.

4 We have : profit= C. But this is also a strategy of managers. at that time. we have high volume .2= 0.15) Variable cost ( 4. CM ratio: (7.2-4. Sales ( 7. income will increase: 8.4. we still have a loss.37 31.295 c.15) Contribution Fixed cost (316600+ 41200) Net income BEP in revenue: 357800: (414000:1035000)= 894500 Degree of operation leverage: 414000:56200= 7.32)-316600 =43400 Degree of operational leverage= contribution: profit before tax =360000.2-125000*4. profit will increase 0.customers. BEP= 1600: C C= 0. 28. they are ready to accept the loss to increase the volume.fixed costs =(125000*7. maybe below the total cost. we have to decrease the price. profit before tax= contribution margin.295* 30%= 249% Check : Sales : Variable cost: Contribution Fixed cost Net income Income will increase: (151400-43400): 43400= 249% d. Regard the number of liquid is x the number of spray is 2x We have: Total contribution= 10x+2x*5 At BEP we have: C= fixed cost 20x= 100000 x= 5000 The number of spray is 10000 b. to gain the supports of customers.4 1170000 (702000) 468000 (316600) 151400 1035000 (621000) 414000 (357800) 56200 .2*125000*1.2. fixed cost is still stable.4= 791500 Margin of safety: 125000*7.4 If sales are 4001 C= 1600.791500=108500 $ Margin of safety in unit: 108500:7.fixed cost Id C increases 0.43400= 8. a.2= 15069 units b. especially at the introduction stage of a new product.4 BEP in dollars: 316600:0.32*125000*1.32):7. but the contribution is still less than the total fixed cost.

1:0.5 493 552.05) .125= 12.8 3004 2990.5) (5632.5 328.25* 10X=10X-0.5 27.5%= 195000 2m*13%= 260000 0.4*10X-216000 3. Pretax profit= revenue* 0.11) 82) Gravel 65.5 27.5(5659.8(2990.5 5632.7*0.8m*3.167* revenue Pretax profit= revenue-variable cost-fixed cost 0. total concrete culvert produce in June: 380000-24500 +20000= 375500 000 Opening Closing Used Pounds to Cost inventory inventory purchase Concrete 82 68.985 (15*375.5 2263 a. Projected revenue for 2009: Interest of business loan : Interest of consumer loan: Interest of government securities Total revenue: 20 January to march April to June July to September October to December Total 22 Opening 27 34 24.6= 0.d.5%=28000 483000 Closing 34 24.3 92.5) (3004+68.5 Sales 540 680 490 550 2260 3m*6.5 30 $000 Production 547 670.5*0.5% Chapter 8 17.7 282.5X= 216000 X= 61715 units e.988 (8*375.5 5659. Margin of safety in unit: 3200-2800=400 units Margin of safety in dollars: 400*65= 26000 Margin of safety in percentage: 26000 : ( 3200865)=0.

5*0.3X+135000= 173250+ 0.6=30900 $ 25.5*40%*1%) 27.41.4-44*0.5*30%+ 38*40%.01) 36.75* 0.3+29500*0.75*0.498 (41.4.674 (38*0.5*0.434 (41. Cash collection November December January February March 92. 2009: 44000*0.3+44*0.492 (41.01) b. we have: 0.5+65.6X= 0.75= 255000 Total Credit sales in May : 135000: 0.5*40%*1%) 40.75X-0.3+29.5*40%.5*0. Regard total sales in April as X We have: Closing balance of receivable on 30 April: 0.3+ 44*0.29.3+39.4*0.3) $000 16.38*40%*1%) 39. April May June Total Beginning cash 3700 3600 ? ? balance Cash receipt 8200 10100 ? ? Total cash available Cash disbursement Payments on account Wages expenses Overhead cost Total cash disbursements 11900 13700 20500 38900 1300 5000 4000 10300 3900 6100 4600 14600 5700 6200 ? 16300 ? 17300 13000 ? .732 (39. balance of receivable at March 31.25X X= 340000 Total credit sales of April 2009: 170000*0.5*30%+38*30%+39.5*40%-39.4*0.4= 337500 Projected cash received: 850000*25%+ 337500*25%+ 15%*255000+85000*75%*60%= 717625 $ The expected account receivable at June 30 2009: 850000*75%*40%+337500*15%= 305625$ 30.5*0.24.3 X In May.

Cash 1600 excess( deficie ncy) Minimum cash (3500) balance Cash available (1900) (900) (3500) (4400) ? (3500) ? ? (3500) (5800) b. a. write-off credit sale. Financing Borrowings 2000 ? (500) ? ( repayment) Acquire( sell) 0 0 ? ? investment Receive ( pay) 0 0 ? (10) interest Ending cash 3600 ? ? 3690 balance 33. estimated credit sales for July The amount affect the budget income statement: credit sales for July. provision for uncollectible credit sale . c. account receivable at June. account receivable at July 31: ($000) 750+ 900-660-27= 963 The amount affect the cash budget: collection of credit sales.

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