Break-Even Sales and Cost-Volume-Profit Chart

Last year Hever Inc. had sales of $888,000, based on a unit selling price of $370. The variable cost per unit was $277.5, and fixed costs were $101,750. The maximum sales within Hever Inc.’s relevant range are 3,100 units. Hever Inc. is considering a proposal to spend an additional $41,625 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

Required:

A. Construct a cost-volume-profit chart on your own paper, indicating the break-even sales for last year. In your computations, do not round the contribution margin percentage.

B. Using the cost-volume-profit chart prepared in part (1), determine (a) the income from operations for last year and (b) the maximum income from operations that could have been realized during the year. In your computations, do not round the contribution margin percentage.

C. Construct a cost-volume-profit chart (on your own paper) indicating the break-even sales for the current year, assuming that a noncancellable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. In your computations, do not round the contribution margin percentage.

D. Using the cost-volume-profit chart prepared in part (3), determine (a) the income from operations if sales total 2,400 units and (b) the maximum income from operations that could be realized during the year. In your computations, do not round the contribution margin percentage.

If a firm's production process involves increasing returns to scale, what will happen to its average total cost if it increases all inputs proportionately (that is, by the same percentage)?

Discuss the pros and cons of keeping the federal funds rate near zero percent.

Why can the Drude equation not be applied in the range of wavelengths near maximum absorbance?

A 60-year-old man, who has normal vision, has a near point of 93 cm. Instead of using reading glasses, he chooses to use a magnifier of focal length 15 cm for reading. He reads with his eyes relaxed.
(a) Find the magnification M.
(b) What is the distance from the page to the magnifier?
(c) What is the maximum angular magnification that can be obtained with this magnifier by a child with a near point of 14 cm?

In this week's lecture #3, Walter Lewin lit a fluorescent bulb by holding it near a Van de Graaff generator, charged to 300,000 V. Suppose that the spherical conductor of the Van de Graaff has a diameter of 68.69 cm, that the bulb is 100.56 cm in length, and Prof. Lewin is holding the near end of the bulb 32.23 cm from the surface of the Van der Graaff. What is the potential difference (V) between the two ends of the bulb?

Toby agreed to build a hog confinement facility for Pork USA. The contract between Toby and Pork USA required: That work begin on or before May 1, 2016, weather permitting, or on the next day for which construction was practicable after that in the event of bad weather. The contract specified that time is of the essence to assure that the project was done before Fall. In fact, a freak spring snowstorm occurred on April 30, and Toby couldn't start construction until May 5. That Toby obtain a construction permit before any work could commence.That in order for Toby to obtain monthly construction payments, Toby would be required to submit inspection certificates from the county engineer's office. That once the construction certificate is present, payments would be issued immediately. That Toby will reduce the contract price by the amount of money it receives from a special state construction incentive program, provided Pork USA makes application to the state on or before June 1. Pork USA fails to make the necessary application.

Assume that Toby's delay in starting work made Pork USA doubt he was committed to the contract. Pork USA accuses Toby of a breach of contract and says the contract is cancelled, and demands that Toby return a $25,000 construction deposit paid by Pork USA. Toby doesn't  dispute that he breached the contract, but  claims that Pork USA owes him at least $25,000, since he spent a lot of time planning, arranging for workers, applying for permits, and ordering supplies. Will a court side with Pork USA or with Toby? Explain.

Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $13 million and the M&O cost is estimated at $1.7 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $17 million, but less contamination will render the M&O cost lower at $0.5 million per year. At an interest rate of 11% per year and a 5-year project period, which system is better—ponds or tubes? Use a present worth analysis.

The present worth of lined ponds is $ ________million and that of plastic tubes is $ __________ million.

_____________ are used to grow algae.

In each of the following scenarios, identify the accounting conventional rule that applies.
1. The company’s vehicles, which would only have a small scrap value if the company goes into liquidation.

2. The proprietor who has supplied the business capital out of his own private bank account.

3. Electricity consumed in period 1 and paid for in period 2.

4. The proprietor who argues that the accountant has got a motor vehicle entered twice in the books of account.

5. Equipment originally purchased for GHS 500,000 which would now cost GHS 555,000.

6. A company agrees to a five-year construction contract.

7. A demand by the company’s chairman to include every detailed transaction in the presentation of the annual accounts.

8. A company borrowed $100,000 in December and will make its only payment for interest when the note comes due six months later. The total interest for the six months will be $3,600. On the December income statement, the accountant reported interest expense of $600.

9. A retailer wishes to report its merchandise inventory on its balance sheet at its retail value.

10. Near the end of the current year, a company required a customer to pay $200,000 as a deposit for work that is to begin in the following year. At the end of the current year the company reported the $200,000 as a liability on its balance sheet.

11. The creative chief executive of a corporation who is personally responsible for numerous inventions and innovations is not reported as an asset on the corporation's balance sheet.

12. A company sold merchandise of $8,000 to a customer in December. The company's sales terms require the customer to pay the company in 30 days. The company's income statement reported the sale in December.

13. A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During the year, the corporation's monthly income statements report Property Tax Expense of $1,000.

14. A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life.

15. Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory.