Question: 1) In September 2015, Lionel Town PLC management team plans to achieve breakeven profit by the end of the fourth quarter in their recently developed sporting good shoe line. Mary Stuart, the VP of operations, wants to know how ambitious the plans really are .To help her determine this, she reviews the following plan data. The company sells each unit for $200. Variable cost are estimated to be at $90.83 per unit, and total fixed cost are roughly $160,285 per month of operating this business line. The fixed production cost are $93,619 and fixed administrative and selling cost are estimated to be $66,666.00.
Required: a) Determine how many units must be sold to breakeven in the given month.
b ) Kindly express breakeven quantity in terms of dollars of sales
c) From tour readings, explain what is meant by "margin of safety" If management expects to have sales of $300,000, determine the margin of safety.
d) Determine the contribution margin per unit and explain what this measures.
2) An electrical component manufacturer has selected direct labor hours as an application base .They plan to sell 35,000 units of copper tubing although the factory has the capacity to produce 40,000 units under the normal circumstances.
Overheads were initially estimated as follows:
- Indirect material and supplies ........................... $96,200
- Repairs and maintenance ..................................$24,100
- Plant service contracts .......................................$37,000
- Refurbishing cost ................................................$89,100
- Machinery depreciation.................................... $185,000
- Factory insurance .............................................. $18,200
- Property taxes ...................................................$4,500
- Heat, light and power ........................................$52,700
- Miscellaneous factory overheads ....................$6,000
- Indirect Labor .....................................................$120,000
- Materials .............................................................$80,000
- Transportation ...................................................$25,000
- Rent .....................................................................$40,000
- Security cost ......................................................$15,000
All overhead cost except depreciation, property taxes and miscellaneous factory overhead are expected to increase by 10% during the year. Depreciation should increase by 12% and a 20% increase in property taxes and miscellaneous overhead is expected. A total of 55,600 direct labor hours was estimated to produce 35,000units of copper tubing.
a) Determine the total estimated overhead
b) Calculate the predetermined overhead rate
c) Calculate the overhead application rate if 60,000 direct labor hours was estimated to be used in production .Ascertain applied to the job if it took 120 direct labor hours.
d) How do you dispose of under or over applied manufacturing overhead at the end of the period and why is this done?
3) Within the field of management accounting, as in any other professional area, one must constantly be adapted to global and environmental issues such as BP oil spill in The Gulf Of Mexico .In an increasingly global economy, effective management of environmental cost and performance may become a source of competitive advantage.
Required: a) What is environmental accounting
b) How is Environmental accounting management used in decision making?
c) What is your opinion on the above statement? Clearly state your reason