Management Accounting - Assignment 2

Date Due:

SHOW CALCULATIONS IF NEEDED

Question 1:

Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets:

Revenues (400 sets sold @ $600 per set) $240,000

Variable costs (400 sets @ $ 400 per set) 160,000

Fixed costs 50,000

• How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point?
• How many sets of clubs must be sold to earn a target operating income of $90,000?
• What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30 percent?

Question 2:

The Beta Mu Omega Chi (BMOC) fraternity is looking to contract with a local band to perform at its annual mixer. If BMOC expects to sell 250 tickets to the mixer at $10 each, which of the following arrangements with the band will be in the best interest of the fraternity?

1. $2500 fixed fee
2. $1000 fixed fee plus $5 per person attending
3. $10 per person attending
4. $25 per couple attending

Question 3:

LSB Company has the following income statement:

Revenues $100,000

Variable Costs 25,000

Contribution Margin 75,000

Fixed Costs 60,000

Operating Income 15,000

• What is LSBs operating leverage?

• If LSBs sales increase by 15% next month, what will be the companys operating profit?

Question 4:

Valley Company sells two products. Product M sells for $12 and has variable costs per unit of $7. Product Qs selling price and variable costs are $15 and $10, respectively. If fixed costs are $60,000 and Valley sells twice as many units of Product M as Product Q, what is the breakeven sales in units for Product M ?