ACCT 521 Connect Plus Homework 2 Solution (Liberty University)

Argentina Partners is concerned about the possible effects of inflation on its operations. 

 Presently, the company sells 77,000 units for $55 per unit.

 The variable production costs are $36, and fixed costs amount to $870,000. 

 Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year.

 Of the $36 variable costs, 50 percent are from labor and 25 percent are from materials.

 Variable overhead costs are expected to increase by 25 percent. 

 Sales prices cannot increase more than 10 percent.

 It is also expected that fixed costs will rise by 4 percent as a result of increased taxes and other miscellaneous fixed charges.

 The company wishes to maintain the same level of profit in real dollar terms. 

 It is expected that to accomplish this objective, profits must increase by 5 percent during the year.

Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. 

 Scholes is concerned about the possible effects of inflation on its operations.

 Presently, the company sells 94,000 units for $50 per unit. 

 The variable production costs are $20, and fixed costs amount to $1,540,000. 

 Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year.

 Of the $20 variable costs, 50 percent are from labor and 25 percent are from materials. 

 Variable overhead costs are expected to increase by 20 percent. 

 Sales prices cannot increase more than 10 percent. 

 It is also expected that fixed costs will rise by 4 percent as a result of increased taxes and other miscellaneous fixed charges.

 The company wishes to maintain the same level of profit in real dollar terms. 

 It is expected that to accomplish this objective, profits must increase by 9 percent during the year.

Cesar's Bottlers bottles soft drinks in a factory that can operate either one shift, two shifts, or three shifts per day.

 Each shift is eight hours long. The factory is closed on weekends. 

 The sales price of $11 per case bottled and the variable cost of $4 per case remain constant regardless of volume.

 Cesar's Bottlers can increase volume by opening and staffing additional shifts. 

 The company has the following three choices:

Lomas Electronics manufactures a portable testing device for use in oil exploration.

 The product's price and cost characteristics are

Sundial, Inc., produces two models of sunglasses: AU and NZ.

 The sunglasses have the following characteristics:

Assume that Limitless Labs, Inc., offers three basic drug-testing services for professional athletes. 

 Here are its prices and costs:

Power Music owns five music stores, where it sells music, instruments, and supplies.

 In addition, it rents instruments. 

 At the end of last year, the new accounts showed that although the business as a whole was profitable, the Fifth Avenue store had shown a substantial loss.

 The income statement for the Fifth Avenue store for last month follows:

You have been asked to assist the management of Ironwood Corporation in arriving at certain decisions. 

 Ironwood has its home office in Michigan and leases factory buildings in Wisconsin, Minnesota, and North Dakota, all of which produce the same product.

 Ironwood's management provided you a projection of operations for next year as follows:

Slavin Corporation manufactures two products, Alpha and Delta.

 Each product requires time on a single machine. 

 The machine has a monthly capacity of 500 hours. 

 Total market demand for the two products is limited to 190 units (each) monthly. 

 Slavin is currently producing 110 Alphas and 110 Deltas each month. 

 Cost and machine-usage data for the two products is shown in the following spreadsheet

Cray-Z Consultants provides management accounting advice to not-for-profit firms. 

 It employs three levels of consultants, based on experience and education: partner, senior, and associate. 

 When Cray-Z considers bidding on jobs, it estimates the costs using a set of standardized billing rates. 

 It then adds an estimate for travel, supplies, and so on (referred to as miscellaneous cost ). 

 Next it applies a percentage to the total of consultant cost and miscellaneous cost for general and administrative (G&A) expense. 

 The estimates for each of these elements are shown below: