Managerial Accounting (DQ1-1)
Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question. Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information. Your Discussion Question responses should be both grammatically and mechanically correct and formatted in the same fashion as the questions themselves. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your responses and document them in a bibliography using APA style.
Chapters 2 and 3 introduce you to basic cost behavior, cost-volume relationships, and ways to measure cost behavior. Based on these readings, perform the following. (25 points) (A 1½-page response is required.)
The Assignments:
- Complete a solution set for Fundamental Assignment Material – Exercise 2-A1, “Cost-Volume-Profits and Vending Machines” below. Be sure to show or explain how you arrive at each answer.
2-A1 Cost-Volume-Profits and Vending Machines
Delgado Food Services Company operates and services soft drink vending machines located in restaurants, gas stations, and factories in four southeastern states. The machines are rented from the manufacturer. In addition, Delgado must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 40 machines.
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Fixed monthly expenses follow:
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Machine rental: 40 machines @ $43.50 $1,740
Space rental: 40 locations @ $28.80 1,152
Part-time wages to service the additional 40 machines 1,908
Other fixed costs 200
Total monthly fixed costs $5,000
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Other data follow.
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Per Unit Per $100 of Sales
Selling price $1.00 100%
Cost of snack .80 80
Contribution margin $ .20 20%
_________________________________________________________
Required:
These questions relate to the above data unless otherwise noted. Consider each question independently.
1. What is the monthly break-even point in number of units? In dollar sales?
2. If 36,000 units were sold, what would be the company’s net income?
3. If the space rental cost were doubled, what would be the monthly break-even point in number of units? In
dollar sales?
4. If, in addition to the fixed space rent, Delgado Food Services Company paid the vending machine
manufacturer 2 cent per unit sold, what would be the monthly break-even point in number of units? In
dollar sales? Refer to the original data.
5. If, in addition to the fixed rent, Delgado paid the machine manufacturer 4 cent for each unit sold in excess
of the break-even point, what would the new net income be if 36,000 units were sold? Refer to the original data.
- Complete the Cognitive Exercises 3-25, 3-26, 3-27, and 3-28 listed below.
3-25 Mixed Costs and the Sales Force
Wysocki Company pays its sales force a fixed salary plus a 5% commission on all sales. Explain why sales force costs would be considered a mixed cost.
3-26 Committed and Discretionary Fixed Costs in Manufacturing
Among the fixed costs of Howarth Company are depreciation and research and development (R&D). Using these two costs as examples, explain the difference between committed and discretionary fixed costs.
3-27 Cost Functions and Decision Making
Why is it important that decision makers in a corporation know the cost function for producing the companies’ products?
3-28 Statistical Analysis and Cost Functions
What advantages does using regression analysis have over the visual-fit method for determining cost functions?
Reference Textbook
Horngren, C. T., Sundem, G. L., & Stratton, W. O. (2002).Introduction to Management Accounting, (12th ed.). NJ: Prentice Hall.
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