Answer the following questions:

Q 1

XYZ Company has the following information for Jan. 2020:

Fixed cost $32,000

Selling price per unit $12

Variable costs per unit $4

Actual sales revenue $60,000

Required:

Calculate the break-even point in units and in dollars.

Calculate No. of units to be sold to achieve a target income of $24,000. Prepare income statement to verify your answers.

What is the safety margin in units and in dollars

Assume that the variable cost per unit increased by10%, what is the effect on the break-even point in units.

Q2

Florida Tech Company produces and sells automobile batteries, the heavy-duty HD-260. The 2019 sales forecast is as follows.

Quarter HD-246

1 6,000

2 8,000

3 8,000

4 12,000

The January 1, 2019, inventory of HD-250 is 3,000 units. Management desires an ending inventory each quarter equal to 20% of the next quarter’s sales. Sales in the first quarter of 2020 are expected to be 30% higher than sales in the same quarter in 2019.

Instructions Prepare quarterly production budgets for each quarter and in total for 2019

Q3

XYZ Company has adopted the following production budget for the first 4 months of 2019.

Month Units Month Units

January 12,000 March 6,000

February 8,000 April 5,000

Each unit requires 2.5 pounds of raw materials costing $3 per pound. On December 31, 2018, the ending raw materials inventory was 3,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 10% of next month’s production requirements.

Instructions Prepare a direct materials purchases budget by month for the first quarter.

Q4

LMN Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:

Variable costs per unit:

 Manufacturing:

  Direct materials

$8

  Direct labor

$10

  Variable manufacturing overhead

$4

Variable selling and administrative

$5

Fixed costs per year:

 Fixed manufacturing overhead

$360,000

 Fixed selling and administrative

$200,000

During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company’s product is $60 per unit.

Required:

1. Assume that the company uses absorption costing:

1. Compute the unit product cost.

2. Prepare an income statement for the year.

2. Assume that the company uses variable costing:

1. Compute the unit product cost.
2. Prepare an income statement for the year.