ACTG 2020 Chapter Notes - Chapter 3: Income Statement, Gross Margin, Fixed Cost

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2 May 2017

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Raising marks, raising money, raising roofs: expense a is a fixed cost; expense b is a variable cost. During the current year, the activity level has increased but is still within the relevant range. In terms of cost per unit of activity, you would expect which of the following statements to be true: expense a has remained unchanged, expense b has decreased, expense a has decreased, expense b has increased. Ans: d: which of the following is an example of a committed fixed cost, a training program for salespersons, executive travel expenses, property taxes on the factory building, new product research and development. Raising marks, raising money, raising roofs: contribution margin is the excess of revenues over which of the following, cost of goods sold, manufacturing cost, all direct costs, all variable costs. Ans: d: at an activity level of 10,000 units, total variable costs were ,000 while total fixed costs were ,800.

Related Questions

Please answer the below questions.I only have 1 hours beforesubmit.Please!

Questions

1. Should the Federal Government question an educationalinstitution on its recruiting practices?

2. Should the Federal Government also question State and PrivateUniversityâs retention practices?

3. Shouldnât these companies be able to operate as a business-that is- making money the aggressive way?

4. Who are the stakeholders in this situation?

What is the ethical dilemma and duty in this matter

For Profit for Education? Putting Profits over PublicGood? Contd...

For-profit colleges in the US came under increased scrutiny onseveral counts. This case study describes the problems faced byâfor-profit collegesâ in the US such as high loandefault rates, vague accreditation standards, and low graduationand job placement rates. Complaints such as overpriced degrees,misleading claims, and increasing level of student debt resulted inthe government turning its attention to the entire for-profitcollege sector. According to some reports, too much taxpayer moneywas being used to generate profits for the colleges, instead ofproviding students with useful high-quality education. The casealso focuses on the alleged fraudulent practices adopted byfor-profit colleges in the US to gain access to more federalfinancial aid.

The Study

Concerned about the disproportionate percentage of federalstudent aid flowing to âfor-profit collegesâ, someanalysts began raising questions about the rapid growth of thefor-profit education sector, the aggressive recruitment ofstudents, and the value of the education provided by suchinstitutions.

There are strategies followed by âfor-profitcollegesâ in the US to attract more students. According toa report released by US Government Accountability Office (GAO),some for-profit colleges in the US were involved in deceptivepractices and had made misleading statements to prospectivestudents which included not providing clear information about thecollege's graduation rate, applicant's likely salary aftergraduation, accreditation of the school, and the duration and costsof the programs offered by the schools. This study concludes bydetailing the new regulations proposed by the federal governmentfor the âfor-profitâ education sector in order to safeguardstudents from misleading recruitment practices and incurring hugedebts, among other issues. This study also focus on studentenrollments and the methods these colleges were adopting to attractmore students.

On release of the GAO report, the shares of for-profit educationcompanies in the US, including Apollo Group Inc. (Apollo Groupâowner of University of Phoenix), DeVry Inc. (DeVry), EducationManagement Corp, and Corinthian Colleges, Inc. (Corinthian), fellsignificantly. "GAO's findings make it disturbingly clear thatabuses in âfor-profitâ recruiting are not limited to a few roguerecruiters or even a few schools with lax oversight.

To the contrary, the evidence points to a problem that issystemic to the for-profit industry,"⁹ said Tom Harkin(Harkin), Chairman, US Senate Health, Education, Labor, andPensions (HELP) Committee.

The GAO defined for-profit colleges as "institutions ofpost-secondary education that are either privately owned or ownedby a public traded company and whose net earnings can benefit ashareholder or individual."...

In May 2010, the GAO began its investigation of 15 for-profitschools in six states (Arizona, California, Florida, Illinois,Pennsylvania, and Texas and Washington, D.C (Refer to Exhibit IIIfor a list of the schools probed)...

High Tuition Fee
The report stated that the tuition fee at for-profit colleges washigh compared to similar programs at other public colleges.Investigators found that on an average, the fee for an associatedegree program was between 6 and 13 times higher at a for-profitschool than at a public college while a bachelor's degree at afor-profit college cost almost twice that in local publicinstitutions...

Deceptive Recruitment and Marketing Tactics
According to the report, campus officials of all 15 colleges misledpotential students and made deceptive statements about theirprograms' cost, quality, and duration, and the average salary ofgraduates (Refer to Exhibit V for some examples of deceptivepractices of for-profit institutions) For-profit colleges generallypaid recruiters by the number of enrollments that theygenerated...

Loan Defaults
For-profit colleges, which accounted for 10% of all collegestudents in the US as of 2009, derived three-fourth of theirrevenues from federal grants and loans. In 2009, at 14 for-profitschools, federal aid totaled 87% of revenue in 2009...

Martinez Companyâs relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:

	Amount Per Unit
Direct materials	$	6.00
Direct labor	$	3.50
Variable manufacturing overhead	$	1.50
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	3.00
Fixed administrative expense	$	2.00
Sales commissions	$	1.00
Variable administrative expense	$	0.50

Required:
1.	For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

2.	For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units?

3.	If 8,000 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)

4.	If 12,500 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)

5.	If 8,000 units are sold, what is the total amount of variable costs related to the units sold?

6.	If 12,500 units are sold, what is the total amount of variable costs related to the units sold?

7.	If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?

8.	If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced? (Round your answer to 2 decimal places.)

9.	If 8,000 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

10.	If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

11-a.

If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production?

11-b.

If 8,000 units are produced, What is this total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.)

12-a.

If 12,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production?

12-b.

If 12,500 units are produced, what is this total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.)

13.	If the selling price is $22 per unit, what is the contribution margin per unit sold? (Round your answer to 2 decimal places.)

Required:

14-a.

If 11,000 units are produced, what are the total amounts of direct manufacturing costs incurred to support this level of production?

14-b.

If 11,000 units are produced, what are the total amounts of indirect manufacturing costs incurred to support this level of production?

15.	What total incremental cost will Martinez incur if it increases production from 10,000 to 10,001 units?

champagnehyena432

PROBLEM 12-22 Accept or Reject a Special Order L012-4] Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total $15 B Direct materials .............. Direct labor. Variable manufacturing overhead .. Fixed manufacturing overhead .... Variable selling expense. Fixed selling expense ... Total cost ... $450,000 240,000 90.000 270,000 120,000 180,000 $1,350,000 The Rets normally sell for $50 each. Fixed manufacturing overhead is constant at $270,000 per year within the range of 25,000 through 30,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 25,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order, thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain's name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase add- tional units in the future. Determine the impact on profits next year if this special order is accepted. 2 Refer to the original data. Assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reim- burse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no vari- able selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? Assume the same situation as that described in (2) above, except that the company expects to sell 30,000 Rets through regular channels next year. Thus, accepting the US Army's order would require giving up regular sales of 5,000 Rets. If the Army's order is accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular channels?

ACTG 2020 Chapter Notes - Chapter 3: Income Statement, Gross Margin, Fixed Cost

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