ACCT 301 ASSIGNMENT 2

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ACCT 301 ASSIGNMENT 2

COST ACCOUNTING

ACCT 301

ASSIGNMENT 2

You are required to work in this assignment individually. Any suspicious activities or cheating will result zero grade in this assignment.

Q1 CVP analysis has a number of uses. Describe two of these. [1 Point]

Q2 Suppose a service organization has a mixed cost function. When it experiences a 5% increase in sales, income increases by more than 5%. Explain why this occurs. [1 Point]

Q3 ABC Compagny is selling the unit of final product for $70. The projected income statement for 2014 follows:

Sales $4,000,000

Variable costs (2,000,000)

Contribution Margin 2,000,000

Fixed costs (1,500,000)

Pretax profit $ 500,000

1. Compute the contribution margin per unit and the number of units that must be sold to break even. [1 Point]
2. Compute the contribution margin ratio and the breakeven point in total revenue (in $).[1 Point]
3. What is the margin of safety in number of units? [1 Point]
4. Assume a tax rate of 25%. How many units must be sold to earn an after-tax profit of $300,000? [1 Point]

Q4. RSE Corporation sells its product for $11 per unit. Its variable cost is $2 per unit, and total fixed costs are $600. Assuming next periods estimated sales are 240 units and that 240 units is within the relevant range, calculate the following amounts:

1. Degree of operating leverage [1 Point]
2. Margin of safety in units [1 Point]
3. Margin of safety in revenues (in $) [1 Point]
4. Estimated income or loss (indicate which) [1 Point]