BUS-317 Topic 5 WileyPLUS Assignment

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BUS-317 Topic 5 WileyPLUS Assignment

Question 1

Family Furniture Corporation incurred the following costs.

Identify the costs as variable, fixed, or mixed.

  1. Wood used in the production of furniture.
  2. Fuel used in delivery trucks.
  3. Straight-line depreciation on factory building.
  4. Screws used in the production of furniture.
  5. Sales staff salaries.
  6. Sales commissions.
  7. Property taxes.
  8. Insurance on buildings.
  9. Hourly wages of furniture craftsmen.
  10. Salaries of factory supervisors.
  11. Utilities expense.
  12. Telephone bill.

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Question 2

Wildhorse Company had $278,700 of net income in 2021 when the selling price per unit was $154, the variable costs per unit were $94, and the fixed costs were $573,300. Management expects per unit data and total fixed costs to remain the same in 2022. The president of Wildhorse Company is under pressure from stockholders to increase net income by $42,600 in 2022.

a) Compute the number of units sold in 2021.

b) Compute the number of units that would have to be sold in 2022 to reach the stockholders’ desired profit level.

c) Assume that Wildhorse Company sells the same number of units in 2022 as it did in 2021. What would the selling price have to be in order to reach the stockholders’ desired profit level?

Question 3

Carla Vista Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $34,220 in fixed costs to the $318,600 currently spent. In addition, Carla Vista is proposing that a 5% price decrease ($40 to $38) will produce a 25% increase in sales volume (23,600 to 29,500). Variable costs will remain at $25 per pair of shoes. Management is impressed with Carla Vista’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

a) Compute the current break-even point in units, and compare it to the break-even point in units if Carla Vista’s ideas are used.

b) Compute the margin of safety ratio for current operations and after Carla Vista’s changes are introduced. (Round answers to 0 decimal places, e.g. 15%.)

c) Prepare a CVP income statement for current operations and after Carla Vista’s changes are introduced.

Question 4

Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options.

Suppose that you are considering the purchase of a hybrid vehicle. Let’s assume the following facts. The hybrid will initially cost an additional $3,600 above the cost of a traditional vehicle. The hybrid will get 30 miles per gallon of gas, and the traditional car will get 20 miles per gallon. Also, assume that the cost of gas is $3.60 per gallon.

Using the facts above, answer the following questions.

a) What is the variable gasoline cost of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car? (Round answers to 2 decimal places, e.g. 0.25.)

b) Using the information in above part, if “miles” is your unit of measure, what is the “contribution margin” of the hybrid vehicle relative to the traditional vehicle? That is, express the variable cost savings on a per-mile basis. (Round answer to 2 decimal places, e.g. 0.25.)

c) How many miles would you have to drive in order to break even on your investment in the hybrid car?

Course: BUS-317 Financial Decision Making
School: Grand Canyon University

  • 08/08/2021
  • 150
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