Question: Write your answer in the space provided.
1) Johnson Scooter Company is considering whether or not to expand into a new area of the United States. They produce high-performance gas scooters with moderate gas mileage, but have developed a new battery technology that combines a small amount of electrical energy with the existing gas power. This new technology will significantly increase the fuel economy of their bikes. They will need to spend $5,075,000 to retrofit a building to incorporate the new fuel-saving technology. New worker training will cost $1,984,000. Other expenses involved to set up and run the new plant are $332,000. The CEO anticipates that, with gas price increases, the profit potential of this expansion is $7,588,000. Do the benefits outweigh the costs, or do the costs outweigh the benefits, and by how much?
2) Match the appropriate terms with the correct definitions.
3) Use the appropriate letter(s) to indicate if the following costs would be found on the income statement of a
A. service company.
B. merchandising company.
C. manufacturing company.
You may use more than one letter for each answer.
________ Revenue
________ Salaries expense
________ Customer service expense
________ Cost of goods manufactured
________ Cost of goods sold
4) Compute the missing amounts.
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Miami Company
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Orlando Company
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Sales
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$300,000
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(D)
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Cost of Goods Sold
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|
|
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Beginning Inventory
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(A)
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65,000
|
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Purchases and Freight-In
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119,000
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(E)
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Cost of goods available for sale
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(B)
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192,000
|
|
Ending inventory
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5,000
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3,000
|
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Cost of goods sold
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115,000
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(F)
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|
Gross Margin
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185,000
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124,000
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Selling and Administrative Expenses
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(C)
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90,000
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Operating Income
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32,000
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(G)
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5) Getting to school for your 8 a.m. class doesn't leave much time for breakfast, and you are quite hungry by the time class ends. It is a long walk to the cafeteria, the lines are long once you get there, and you find yourself having to decide between having breakfast and getting to your next class on time. Many of your friends have expressed the same problem. The administration has agreed to let you set up a table just outside the building where you will sell various snacks for $1 each. You have agreed to pay the administration $400 per month and salaries to your friends to run the business will be another $400 per month. It will cost you 60 cents each to buy the pre-packaged snacks. You believe you can sell 2,500 snack packs per month.
a. What are the total fixed costs per month?
b. What are the total variable costs per month?
c. What is the fixed cost per snack pack?
d. What is the variable cost per snack pack?
e. What is the average cost per snack pack?
f. What is the average profit margin per snack pack?
g. Based on your analysis, should you start the snack pack business?
6) How are average cost and marginal cost computed?
7) Stacy's Manufacturing Company manufactures parts to accommodate the needs of bicycle shops. The managerial accountant reported the following data:
Compute the average manufacturing cost per unit. What is the amount of ending finished goods inventory?