QUESTION 1

1. You are advising the management at the company ABC regarding their pricing decisions in relation to a new product. Existing information is as follows:

Direct materials $4 per unit; direct labor $3 per unit; variable manufacturing overhead $5 per unit; variable selling and administrative expenses $2 per unit; fixed manufacturing overhead expenses $$40,000; and fixed selling and administrative expenses $70,000.

There is an expectation that company will sell 20,000 units.

Required: (Please note that you should answer the questions in Word offline and please do NOT answer in the Blackboard!!!)

1. Determine the unit product cost if company uses an absorption costing approach in its cost-plus pricing.
2. Determine the target selling price given that company uses a 40 percent markup percentage.
3. It has been brought to your attention that company is making an investment of $100,000 in the making, marketing, and distribution of the 20,000 units of their new product. The management require a 50 percent return on this investment. Calculate the markup percentage on absorption costing given this information.
4. If the company only sells 15,000 units at $21 per unit what would be the return on investment?
5. Describe a limitation of the absorption costing approach to costing.

As part of the process of preparing the master budget for the coming year, you’ve been asked to perform what-if analyses, in the form of scenarios, on the original planning assumptions regarding Product A produced by your company. The following are the baseline planning data for the coming year for this product: Sales volume (annual, in units) 2,500 Selling price per unit $ 1,500 Variable cost per unit $ 1,000 Fixed costs (per year) $ 200,000 Required: 1. Based on the baseline planning data, what is the budgeted operating income for Product A for the coming year? 2. Determine the estimated operating income under each of the following scenarios (for each scenario you should report both the new budgeted operating income and the percentage change in operating income from the baseline budgeted result): a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than planned. b. Variable cost per unit is 5% higher than planned, while fixed costs are lower by this same percentage. c. Selling price per unit is 10% higher than planned, while volume is decreased by 8%.

A company sells clocks for $20 each. Its variable cost per unit is $14, and its fixed cost per year is $9,000.

1. If it sells 2,000 clocks this year, what is its contribution margin?

2. If it sells 2,000 clocks this year, what is its operating income?

3. If it sells 2,000 clocks this year, what is its operating leverage?

4. If it sells 2,000 clocks this year, what would be the percentage change in its operating income if it sells 5% more clocks next year?

5. What is the company’s contribution margin per unit?

6. What is the company’s contribution margin ratio?

7. How many units must the company sell to break even?

8. What amount of sales dollars is needed to breakeven?

9. How many units must the company sell to earn an operating income of $6,000?

10. What amount of sales dollars is needed to earn an operating income of $6,000?

11. If the company is currently selling 2,000 clocks, what is the margin of safety in units?

12. If the company is currently selling 2,000 clocks, what is the margin of safety in sales dollars?

13. If the company is currently selling 2,000 clocks, what is the margin of safety percentage?

Rey Custom Electronics (RCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time-and-material pricing. The following budgeted cost data are available. Time Charges Material Loading Charges Technicians' wages and benefits $150,000 - Parts manager's salary and benefits - $34,000 Office employee's salary and benefits 30,000 15,000 Other overhead 15,000 42,000 Total budgeted costs $195,000 $91,000 The company has budgeted for 6,250 hours of technician time during the coming year. It desires a $38 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2020 will be $700,000. Compute the rate charged per hour of labor. (Round answer to 2 decimal places, e.g. 10.50.) Labor rate $ per hour Compute the material loading percentage. Material loading percentage % RCE has just received a request for a bid from Buil Builders on a $1,200,000 new home. The company estimates that it would require 80 hours of labor and $40,000 of parts. Compute the total estimated bill. Total estimated bill $

PLEASE EXPLAIN WHY YOU CHOOSE EACH ANSWER

1). How many distinct ways can a President, Vice President, Secretary and Treasurer be selected from a group of 10 people if no one can hold more than on position?

A). P(10,4)

B). 10 choose 4

C). 10^4

D). 4^10

E). 13 choose 10

F). None of these

2). How many shortest lattice paths are there from (0,0) to (10,4)

A). P(10,4)

B). 10 choose 4

C). 10^4

D). 4^10

E). 13 choose 10

F). None of these

3). At a movie theater with 4 different movies, how many ways can 10 people select a show? They do not have to all go to the same shoe but several poeple can go to the same show.

A). P(10,4)

B). 10 choose 4

C). 10^4

D). 4^10

E). 13 choose 10

F). None of these

Analyze if the statements that are presented below are True or False. You MUST justify your answer to get credit. Answers without justification (even if they are correct) will be given zero marks.

1. (a) In any Pareto-optimal allocation of a two-good economy, each consumer has to consume a positive amount of both goods.

2. (b) A monopolist never produces on the elastic segment of its average revenue curve.

3. (c) If a firm’s production exhibits increasing returns to scale, then the firm’s marginal costs are decreasing and below its average costs.

4. (d) Maroon Theater practices third-degree price discrimination and sells tickets to three groups of customers: students, regular customers and senior citizens. The inverse demand of the three groups is linear. Furthermore, the students’ and senior citizens’ elasticities of demand for tickets are −4 and −3, respectively. Because the price charged to regular customers is greater than the price charged to senior citizens, we know with certainty that the ticket price for students will be lower than the ticket price for regular customers.

A statistical program is recommended. You may need to use the appropriate appendix table or technology to answer this question.

The owner of a theater would like to predict weekly gross revenue as a function of advertising expenditures. Historical data for a sample of eight weeks follow.

(a)

Find an estimated regression equation relating weekly gross revenue (in thousands of dollars) to television and newspaper advertising (in thousands of dollars). (Let x₁ represent television advertising, x₂ represent newspaper advertising, and y represent weekly gross revenue. Round your numerical values to two decimal places.)

ŷ =

Plot the standardized residuals against ŷ.

does the residual plot support the assumptions about ε? Explain

Suppose that the sitting​ back-to-knee length for a group of adults has a normal distribution with a mean of μ=24.0 in. and a standard deviation of σ=1.1 in. These data are often used in the design of different​ seats, including aircraft​ seats, train​ seats, theater​ seats, and classroom seats. Instead of using 0.05 for identifying significant​ values, use the criteria that a value x is significantly high if​ P(x or ​greater) ≤0.01 and a value is significantly low if​ P(x or ​less) ≤0.01. Find the​ back-to-knee lengths separating significant values from those that are not significant. Using these​ criteria, is a​ back-to-knee length of 26.3 in. significantly​ high?

***Find the​ back-to-knee lengths separating significant values from those that are not significant.

​Back-to-knee lengths greater than ____ in. and less than _____ nothing in. are not​ significant, and values outside that range are considered significant.

​(Round to one decimal place as​ needed.)

***A​ back-to-knee length of 25.3 in. ______ [is or is not] significantly high because it is _______ [Inside or outside] the range of values that are not considered significant.