2. Peggy’s Ribbon World makes award rosettes (A+)

Peggy’s Ribbon World makes award rosettes. Following is information about the company:

Variable cost per rosette $1.30

Sales price per rosette $2.30

Total fixed costs per month $885.00

Requirement 1:

Determine how many rosettes Peggy’s must sell to break even.

Requirement 2:

Calculate the break-even point in sales dollars.

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4. Pizza Pizazz is a local restaurant. Price and cost information follows (A+)

Pizza Pizazz is a local restaurant. Price and cost information follows:

Price per pizza $13.81

Variable cost per pizza

Ingredients $2.25

Direct labor $1.16

Overhead (box, etc) $.16

Fixed cost per month $4,198.40

Requirement 1:

Calculate Pizza Pizazz’s new break-even point under each of the following independent scenarios

a. Sales price increases by $2.00 per pizza.

b. Fixed costs increase by $465.00 per month.

c. Variable costs decrease by $.34 per pizza.

d. Sales price decreases by $.40 per pizza.

Requirement 2:

Assume that Pizza Pizazz sold 440 pizzas last month. Calculate the company’s degree of operating leverage.

Requirement 3:

Using the degree of operating leverage, calculate the impact on profit caused by a 8.00 percent increase in sales revenue.

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3. Pizza Pizazz is a local restaurant (A+)

Pizza Pizazz is a local restaurant. Price and cost information follows:

Price per pizza $13.21

Variable cost per pizza

Ingredients $2.25

Direct labor $1.02

Overhead (box, etc) $0.25

Fixed cost per month $3,876.00

Requirement 1:

Determine Pizza Pizazz’s break-even point in units and sales dollars.

Requirement 2:

Determine the restaurant’s margin of safety if it currently sells 480 pizzas per month.

Requirement 3:

Determine the number of pizzas that Pizazz must sell to generate $2,500 in profit.

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BlueStar makes three models of camera lens (A+)

BlueStar makes three models of camera lens. Its sales mix and contribution margin per unit follow:

Percentage of

Total sales CM per unit

Lens A 27 % $35

Lens B 43% $27

Lens C 30% $40

Requirement 1:

Determine the weighted average contribution margin.

Requirement 2:

Determine the number of units of each product that BlueStar must sell to break even if fixed costs are $177,000.

Requirement 3:

Determine how many units of each product must be sold to generate a profit of $66,000.

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Longview Company is considering automating its manufacturing facility (A+)

Longview Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows:

Before Automation After Automation

Sales revenue $196,000 $196,000

– Variable cost $94,000 $50,000

Contribution margin $102,000 $146,000

– Fixed cost $14,000 $62,000

Net income $88,000 $84,000

Requirement 1:

Calculate Longview’s break-even sales dollars before and after automation.

Requirement 2:

Compute Longview’s degree of operating leverage before and after automation.

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Peggy’s Ribbon World makes award rosettes (A+)

Peggy’s Ribbon World makes award rosettes. Following is information about the company:

Variable cost per rosette $1.16

Sales price per rosette $2.20

Total fixed costs per month $896.00

Requirement 1:

Determine how many rosettes Peggy’s must sell to break even.

Requirement 2:

Calculate the break-even point in sales dollars.

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2. Pizza Pizazz is a local restaurant (A+)

Pizza Pizazz is a local restaurant. Price and cost information follows:

Price per pizza $13.21

Variable cost per pizza

Ingredients $2.20

Direct labor $1.07

Overhead (box, etc.) $.13

Fixed cost per month $4,218.30

Requirement 1:

Calculate Pizza Pizazz’s new break-even point under each of the following independent scenarios (Round your intermediate calculations to 2 decimal places and final answer up to next whole number.):

a. Sales price increases by $1.60 per pizza.

b. Fixed costs increase by $515.00 per month.

c. Variable costs decrease by $.33 per pizza.

d. Sales price decreases by $.50 per pizza.

Requirement 2:

Assume that Pizza Pizazz sold 445 pizzas last month. Calculate the company’s degree of operating leverage.

Requirement 3:

Using the degree of operating leverage, calculate the impact on profit caused by a 15.00 percent increase in sales revenue

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Pizza Pizazz is a local restaurant (A+)

Pizza Pizazz is a local restaurant. Price and cost information follows:

Price per pizza $14.01

Variable cost per pizza

Ingredients $.30

Direct labor $1.01

Overhead (box, etc) $0.20

Fixed cost per month $3,675.00

Requirement 1:

Determine Pizza Pizazz’s break-even point in units and sales dollars.

Requirement 2:

Determine the restaurant’s margin of safety if it currently sells 390 pizzas per month.

Requirement 3:

Determine the number of pizzas that Pizazz must sell to generate $2,800 in profit.

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2. Landon Company makes two models of children’s playhouses, the Castle and the Mansion (A+)

Landon Company makes two models of children’s playhouses, the Castle and the Mansion.

Basic production information follows:

Castle Mansion

Direct materials cost per unit $41 $69

Direct labor cost per unit $24 $33

Sales price per unit $356 $580

Expected production per month 610 units 460 units

Landon has monthly overhead of $178,150, which is divided into the following cost pools:

Setup costs $81,600

Quality control $65,550

Maintenance $31,000

Total $178,150

The company has also compiled the following information about the chosen cost drivers:

Castle Mansion Total

Number of setups 39 57 96

Number of inspections 320 370 690

Number of machine hours 1,300 1,800 3,100

Requirement 1:

Suppose Landon used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.

Requirement 2:

Calculate the production cost per unit for each of Landon’s products under a traditional costing system.

Requirement 3:

Calculate Landon’s gross margin per unit for each product under the traditional costing system.

Requirement 4:

Select the appropriate cost driver for each cost pool and calculate the activity rates if Landon wanted to implement an ABC system.

Requirement 5:

Assuming an ABC system, assign overhead costs to each product based on activity demands.

Requirement 6:

Calculate the production cost per unit for each of Landon’s products in an ABC system.

Requirement 7:

Calculate Landon’s gross margin per unit for each product under an ABC system.

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4. Rawlings Corp. has two product lines, A and B (A+)

Rawlings Corp. has two product lines, A and B. Rawlings has identified the following detailed information about its cost pools and cost drivers.

Cost pools

Material handling $68,200

Machine maintenance $10,750

Cost drivers

Number of material moves 550

Number of machine hours 43,000

Requirement 1:

Calculate Rawlings’ activity rate for each cost pool.

Requirement 2:

Determine the total amount of overhead assigned to Rawlings’ products if they have the following requirements:

Product A Product B

Number of material moves 240 310

Number of machine hours 16,600 26,400

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