Expert Answers

1. Show all steps of your calculation and formula as well as the final answer ( to receive credit)
Idol Company has developed standards for the materials required to produce a single unit of Model IWIN, 25 pounds of Supreme at $130.00 per pound. Last month, Idol purchased 490,000 pounds of Supreme at a total cost of $61,250,000. Idol used 482,000 pounds of Supreme to make 19,000 units of IWIN.

Calculate the material price variance and material quantity variance, and indicate whether each variance is favorable or unfavorable.

2. Show all steps of your calculation and formula as well as the final answer ( to receive credit) (TCO 7) Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company’s retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales.

Computer
Home Office

Equipment
Furniture
Total

Sales
$1,200,000
$800,000
$2,000,000

Less cost of goods sold
700,000
500,000
1,200,000

Contribution margin
500,000
300,000
800,000

Less direct fixed costs:

Salaries
175,000
175,000
350,000

Other
60,000
60,000
120,000

Less allocated fixed costs:
Rent
14,118
9,882
24,000

Insurance
3,529
2,471
6,000

Cleaning
4,117
2,883
7,000

President’s salary
76,470
53,350
130,000

Other
7,058
4,942
12,000

Total costs
340,292
380,708
649,000

Net Income
$159,708
($ 8,708)
$151,000

Prepare an incremental analysis to determine the incremental effect on profit of discontinuing the furniture line.

3. Question Show all steps of your calculation and formula as well as the final answer ( to receive credit)
(TCO 7) Each year, ACE Engines surveys 7,600 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize results for $50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a higher-quality job than his company has been doing, but is unwilling to spend more than $12,000 above current costs. The head of bookkeeping for ACE has prepared the following summary of costs related to the survey in the prior year.
Mailing
$27,000

Printing (done by Lester Print Shop)
9,000

Salary of Pat Fisher, part-time employee who stuffed envelopes and summarized data when surveys were returned (130 x $16)
2,080

Share of depreciation of computer and software used to track survey responses and summarize results
1,200

Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company
600

Total
$39,880

Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey as in the past. Will ACE accept the RBG offer? Why or why not?

4. Show all steps of your calculation and formula as well as the final answer ( to receive credit)
(TCO 9) A project will require an initial investment of $750,000 and will return $200,000 each year for five years. If taxes are ignored and the required rate of return is 9%,
what is the project’s net present value? Based on this analysis, should the company proceed with the project?

5. Show all steps of your calculation and formula as well as the final answer ( to receive credit)
(TCO 9) A project will require an initial investment of $60,000 and will return $25,000 each year for five years. If taxes are ignored and the required rate of return is 14%, what is the project’s net present value? Based on this analysis, should the company proceed with the project? (Points : 25)