# Accounting Problems

Marshall 12-18 (Means chapter 12, problem 18)

CVP analysis-what-if questions; sales mix issue. Kiwi Manufacturing Co. makes a single product that sells for $32 per unit. Variable costs are $20.80 per unit, and fixed costs total $47,600 per month.

Required:

A. Calculate the number of units that must be sold each month for the firm to break even.

B. Calculate operating income if 5,000 units are sold in a month.

C. Calculate operating income if the selling price is raised to $33 per unit, advertising expenditures are increased by $7,000 per month, and monthly unit sales volume becomes 5,400 units.

D. Assume that the firm adds another product to its product line and that the new product sells for $20 per unit, has variable costs of $14 per unit, and causes fixed expenses in total to increase to $63,000 per month. Calculate the firm's operating income if 5,000 units of the original product and 4,000 units of the new product are sold each month. For the original product, use the selling price and variable cost data given in the problem statement.

E. Calculate the firm's operating income if 4,000 units of the

original product and 5,000 units of the new product are sold each month.

F. Explain why operating income is different in parts d and e, even though sales totaled 9,000 units in each case.

Marshall 14-18 (means chapter 14 problem 19)

Sales, production, purchases, and cash budgets. Seymour, Inc., is in the process of preparing the fourth quarter budget for 2004, and the following data have been assembled:

The company sells a single product at a selling price of $60 per unit. The estimated sales volume for the next six months is as follows:

September 13,000 units

October 12,000 units

November 14,000 units

December 20,000 units

January 9,000 units

February 10,000 units

All sales are on account. The company's collection experience has been that 32% of a month's sales are collected in the month of sale, 64% are collected in the month following the sale, and 4% are uncollectible. According to budget, the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) is expected to be $499,200 on September 30, 2004. Management's policy is to maintain ending finished goods inventory each month at a level equal to 40% of the next month's budgeted sales. The finished goods inventory on September 30, 2004, is expected to be 4,800 units.

To make one unit of finished product, five pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal

30% of the next month's estimated usage. The raw materials inventory is expected to be 19,200 pounds on September 30, 2004.

The cost per pound of material is $4, and 70% of all purchases are paid for in the month of purchase; the

September 30, 2004. remainder is paid in the following month. The accounts payable for raw material purchases is expected to be $75,960 on September 30, 2004.

Required:

A. Prepare a sales budget in units and dollars, by month and in total, for the fourth quarter (October, November, and December) of 2004.

B. Prepare a schedule of cash collections from sales, by month and in total, for the fourth quarter of 2004.

C. Prepare a production budget in units, by month and in total, for the fourth quarter of 2004.

D. Prepare a materials purchases budget in pounds, by month and in total, for the fourth quarter of 2004.

E. Prepare a schedule of cash payments for materials, by month and in total, for the fourth quarter of 2004.

https://brainmass.com/business/finance/accounting-problems-60294

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For the problem 14-18, I have ...

#### Solution Summary

The solution has two problems. CVP problem of Kiwi Manufacturing relating to breakeven calculations and Preparation of various budgets for Seymour Inc