1) The variable cost of producing one chocolate chip cookie at a small cookie stand is $0.75. Fixed costs per week are $1000.

A. Sketch a graph of costs in the relevant range of 0-1000 cookies. Label each cost graph and the data points for 0and 1000 cookies.

B. Provide the equation for the straight line that represents these costs.

2. The following information is available for B company for the month ended July 31,2004

Beginning Ending

Direct materials inventory $27,000 $24,500 Work in process inventory $25,000 29,000 Finished goods inventory $22,000 $15,000 Direct materials purchased $21,000 Direct labor(2500hrs @$12) $30,000 Indirect labor $3,000 Indirect materials $2,500 Office supplies expense $100 Equipment depreciation-factory $2,000 Equipment depreciation-office $750 Administrative expenses $20,000 Office utilities $75 Factory uitilities $200 Marketing expense $2,500 Sales $150,000 Sales commissions $1,500 Prepare an income statement that shows the costs of goods sold for July.

3. Your company's marketing department

prepared the following information for the semiannual sales budget: January $150,000 April $35,000 February $160,000 May$25,000 March $120,000 June $105,000 Historically, the cash collection of the sales has been: 50% of the sales collected in the month sale 35% of sales collected in the month following sale 15% of sales collected in the 2nd month following sale Prepare a cash receipt budget for April, May and June showing totals for each monthe and for the quarter.

4. Based on the following information, prepare a flexible budget for the production and sale of 50 units: Sales revenue $100 per unit Direct material $25 per unit Direct labor $15 per unit Commission $10 per unit Fixed costs $50 for the production of up to 75 units

5. HTN. Inc. has begun production on a new type of television satellite dish. The primary cost of the dish is direct materials with costs of $50, Direct labor is estimated to be $8 per unit, overhead is estimated to be $10 per unit and selling and administrative expenses are estimated to be $5 per unit. If HTN desires a profit of $75 per unit, what is the required markup on the direct materials?

6. If a company's assets are $500,000 for 2005 and $700,000 for 2006, what would a horizontal analysis tell you about the year-to-year change?

7. You've just been informed that you'll now be evaluated on the basis of your segment's return on investment in relation to the ROI values of the other corporate segments. What are two ways you could increase your segment's ROI and boost your evaluation?

Use the following information to complete a contribution margin income statement and answer the next question.

8. A B C Total Sales

Product $20,000 $19,000 $12,000 $51,000

Variable costs $9,000 $7,000 $6,000 $22,000

Fixed costs $7,000 $16,000 $3,000 $26,000

Why would you recommend discontinuing the product that appears unprofitable? Why or why not?

9. Classify the following examples of quality costs as prevention (p) appraisal (a) internal dailure (if) or external failure (ef) The cost of repairs made under warranty Downtime caused by quality problems The costs of inspecting raw materials They cost of quality improvement projects Liability costs arising from legal actions against the seller The costs of scrap and spoilage Lost sales Design and engineering costs

10. Youre a manager of a small potato chip manufacturing company. Your company produces only one type of chip and packages the chips in 1-pound bags only. These bags are sold to convenience stores within a 10-mile radius of our operation. How would you suggest that overhead be allocated to each bag of chips? Why?

11. Why do capital investment decisions require consideration of the time value of money?

12. How do variable costing and absorption costing differ? When is net income different under these two methods?

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