ACT 5140 – Accounting for Decision Makers

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ACT 5140 – Accounting for Decision Makers

ACT 5140 – Accounting for Decision MakersChapter 3Question #1The Samantha Corporation sells only one product. The following is budgeted information forthat product:Annual production and sales capacity (units)Budgeted selling priceVariable cost of goods soldFixed manufacturing costsVariable selling and administrative costsFixed selling and administrative costs80,000$150 per unit$45 per unit$740,000$15 per unit$700,000Samantha’s corporate tax rate is 35%.a) How many units does Samantha need to sell to breakeven?b) How much revenue does Samantha need to generate to breakeven?c) How many units does Samantha need to sell to earn an operating profit (before taxes) of$360,000?d) How much revenue does Samantha need to generate to earn net income (after taxes) of$585,000?e) Assume Samantha is currently producing and selling 32,000 units. By what percentagewill operating income change if sales increase by 10% from 32,000 units? Be sure toprovide figures to justify your answer.f) Assume Samantha is currently producing and selling 32,000 units. By what percentagewill operating income change if sales decrease by 8% from 32,000 units? Be sure toprovide figures to justify your answer.Question #2A production company is planning to sell tickets to a show for $150 each. It’s budgets variablecosts are $20 per attendee. Total fixed costs are estimated to be $130,000. The theatre canaccommodate up to 800 people because of safety concerns. What should the production companydo? Why? Be specific in your response.Question #3The following is budgeted information for the Joseph Corporation:Annual production & salesProjected selling priceDirect Production Cost InformationMaterials (per unit)Direct Labor (per unit)Product 130,000$55Product 210,000$120$9$15$16$25Additional information:Selling & administrative costs (a mixed cost) are budgeted to be $754,000 at theproduction and sales listed above. The variable component is $4 per unit (same for eachproduct).Manufacturing overhead costs (a mixed cost) are budgeted to be $900,000 at theproduction and sales listed above. The fixed component is $660,000. Each product usesthe same amount of variable manufacturing overhead per unit.Assuming the budgeted sales mix remains intact, how many units of each product does Josephneed to sell in order to break even?