ACT 5140 – Accounting for Decision Makers
HW #5 – Chapter 3
Directions: Answer all 3 questions. Please submit your work in Word or PDF formats only.
You can submit an Excel file to support calculations, but please “cut and paste” your
solutions into the Word or PDF file. Be sure to show how you did your calculations. Also,
please be sure to include your name at the top of the first page of your file. The assignment
is due by 11:59 PM on October 2, 2016. Please run spell check and proofread your answers. If
you have any questions, please e-mail me at yessman@nova.edu or ayessmancma@gmail.com.
Good luck!
Question #1
The Samantha Corporation sells only one product. The following is budgeted information for
that product:
Annual production and sales capacity (units)
Budgeted selling price
Variable cost of goods sold
Fixed manufacturing costs
Variable selling and administrative costs
Fixed selling and administrative costs
80,000
$150 per unit
$45 per unit
$740,000
$15 per unit
$700,000
Samantha’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 percentage
will operating income change if sales increase by 10% from 32,000 units? Be sure to
provide figures to justify your answer.
f) Assume Samantha is currently producing and selling 32,000 units. By what percentage
will operating income change if sales decrease by 8% from 32,000 units? Be sure to
provide figures to justify your answer.
Question #2
A production company is planning to sell tickets to a show for $150 each. It’s budgets variable
costs are $20 per attendee. Total fixed costs are estimated to be $130,000. The theatre can
accommodate up to 800 people because of safety concerns. What should the production company
do? Why? Be specific in your response.
Question #3
The following is budgeted information for the Joseph Corporation:
Annual production & sales
Projected selling price
Direct Production Cost Information
Materials (per unit)
Direct Labor (per unit)
Product 1
30,000
$55
Product 2
10,000
$120
$9
$15
$16
$25
Additional information:
Selling & administrative costs (a mixed cost) are budgeted to be $754,000 at the
production and sales listed above. The variable component is $4 per unit (same for each
product).
Manufacturing overhead costs (a mixed cost) are budgeted to be $900,000 at the
production and sales listed above. The fixed component is $660,000. Each product uses
the same amount of variable manufacturing overhead per unit.
Assuming the budgeted sales mix remains intact, how many units of each product does Joseph
need to sell in order to break even?
