Business finance assignment

  1. Porter Corporation has fixed costs of $500,000, variable costs of $32 per unit, and a contribution margin ratio of 20 percent.   a. Compute the unit sales price and unit contribution margin for the above product.   b. Compute the sales volume in units required for Porter Corporation to earn an operating income of $900,000.  c. Compute the dollar sales volume required for Porter Corporation to earn an operating income of $900,000.

a.

Unit sales price

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Unit contribution margin

b.

Sales volume in units

units

c.

Sales volume in dollars

  1. Using the high-low method, Regency Hotels estimates the total costs of providing room service meals at $12,000 per month, plus 60 percent of room service revenue.   a. What is the contribution margin ratio of providing room service meals?   b. What is the break-even point for room service operations in terms of total room service revenue?   c. What would you expect to be the total cost of providing room service in a month in which room service revenue amounts to $40,000?

a.

Contribution margin ratio

%

b.

Break-even service revenue

c.

Total cost

  1. Identify each of the following costs or categories of costs as fixed, variable, semivariable or none with respect to net sales.

a.

The cost of goods sold.

b.

Salaries to salespeople (these salaries include a monthly minimum amount, plus a commission on all sales).

c.

Income taxes expense.

d.

Property taxes expense.

e.

Depreciation expense on a sales showroom, based on the straight-line method of depreciation.

f.

Depreciation expense on a sales showroom, based on the double-declining-balance method of depreciation.

  1. Identify the effects of an increase in the volume of activity on the following costs. (Assume volume remains within the relevant range.)

a.

Total variable costs.

b.

Variable cost per unit.

c.

Total fixed cost.

d.

Fixed cost per unit.

e.

Total semivariable costs.

f.

Semivariable cost per unit.

  1. The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period.

Machine-

Hours

Manufacturing Overhead

January

6,000

$

310,000

February

3,200

224,000

March

4,900

263,800

April

2,700

180,000

a-1. Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour. (Round your answer to 2 decimal places.)

a-2. Use the high-low method to determine the fixed element of monthly overhead cost.

b. Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May’s manufacturing overhead costs.

c. Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs?

1.

Manufacturing overhead cost

per machine hour

a-2.

Fixed element of monthly overhead cost

b.

Estimated manufacturing overhead cost

Amount

c.

February

March

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