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# CVP, Job order and ABC costing

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Need assistance with four accounting homework problems (see requirements below but get problem facts from attached file).

Required:
a. Calculate the contribution margin ratio of each product.
b. Calculate the firm's overall contribution margin ratio
c. Calculate the firm's monthly break-even point in sales dollars.
d. Calculate the firm's monthly operating income.
e. Management is considering the elimination of the ProForce model due to its low sales volume and low contribution margin ratio. As a result, total fixed expenses sales volume can be reduced to \$1,080,000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the ProForce model? Explain your answer.
f. Assume the same facts as in part e. Assume also that the sales volume for the PowerGym model will increase by 1,000 units per month if the ProForce model is eliminated. Would you recommend eliminating the ProForce model? Explain your answer?

Required:
a. Calculate the break-even point for each firm in terms of revenue.
b. What observations can you draw by examining the break-even point of each firm given that they earned an equal amount of operating income on identical sales volumes in 2010?
c. Calculate the amount of operation income (or loss) that you would expect each firm to report in 2011 if sales were to
1. Increase by 20%.
2. Decrease by 20%.
d. Using the amounts computed in requirement c, calculate the increase or decrease in the amount of operating income expected in 2011 from the amount reported in 2010.
e. Explain why an equal percentage increase (or decrease) in sales for each firm would have such differing effects on operating income.
f. Calculate the ratio of contribution margin to operating income for each firm in 2010. (Hint: Divide contribution margin by operating income.)
g. Multiply the expected increase in sales of 20% for 2011 by the ratio contribution margin to operating income for 2010 computed in requirement f for each firm. (Hint: Multiply your answer in requirement f by 0.2)
h. Multiply your answer in requirement g by the operating income of \$210,000 reported in 2010 for each firm.
i. Compare your answer in requirement h with your answer in requirement d. What conclusions can you draw about the effects of operating leverage from the steps you performed in requirements f, g, and h?

Required:
a) Calculate the number of hours of direct labor used during November.
b) Actual manufacturing overhead costs incurred during November totaled \$166,425. Calculate the amount of over- or underapplied overhead for November.
c) Identify two possible explanations for the over- or underapplied overhead.
d) Explain the accounting appropriate for the over- or underapplied overhead at the end of November.

Required:
a. Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of March (using the activity-based costing approach).
b. Assume instead that Galvaset Industries applies manufacturing overhead on a direct labor hours basis (rather than using the activity-based costing system previously described).Calculate the total manufacturing cost and the cost per unit of the windows produced during the month of March. (Hint: you will need to calculate the predetermined overhead application rate using the total budgeted overhead cost for 2010.)
c. Compare the per unit cost figures calculated in parts a and b. Which approach do you think provides better information for manufacturing managers? Explain your answer.