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Practice exam questions, managerial accounting

Can you help me understand these problems??

1. Wertman Corporation produces and sells a single product with the following characteristics:

Per Unit Percent of Sales
Selling price $219 100%
Variable expenses $113 52%
Contribution margin $ 106 48%

The company is currently selling 2,100 units per month. Fixed expenses are $210,000 per month.

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $13 per unit. In exchange, the sales staff would accept a decrease in their salaries of $67,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 336 units. What should be the overall effect on the company's monthly net operating income?

a.decrease of $63,052
b.increase of $125,548
c.increase of $436,548
d.increase of $70,948

2. Castil Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.4 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:

August 19,900 units
September 21,800 units
October 21,700 units
November 20,800 units
December 20,400 units

The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 9,700 kilograms of Jurislon were on hand. The cost of Jurislon is $4.6 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.

The desired ending inventory of Jurislon for the month of September is:


Solution Preview

Your tutorial creates a status quo and pro-forma contribution margin income statement for ...

Solution Summary

Your tutorial creates a status quo and pro-forma contribution margin income statement for the first problem and a full materials budget (even though not requested) for the second problem. This permits you to see the full picture and know where the responses were derived. The problems are worked in Excel (see **attached**). Click in cells to see computations.