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

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

Total overhead $68,470

Cost drivers

Number of labor hours 3,000

Number of machine hours 41,000

Requirement 1:

Suppose the Rawlings Corp. uses a traditional costing system with number of labor hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A requires 62% of the labor hours and Product B requires 38%.

Requirement 2:

Suppose Rawlings uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A consumes 17,800 machine hours and Product B consumes 23,200.

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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 $40 $69

Direct labor cost per unit $20 $31

Sales price per unit $352 $579

Expected production per month 700 units 430 units

Landon has monthly overhead of $185,540, which is divided into the following cost pools:

Setup costs $78,720

Quality control $59,220

Maintenance $47,600

Total $185,540

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

Castle Mansion Total

Number of setups 43 53 96

Number of inspections 300 330 630

Number of machine hours 1,500 1,300 2,800

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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2. Matson Company manufactures automobile floor mats (A+)

Matson Company manufactures automobile floor mats. It currently has 2 product lines, the Standard and the Deluxe. Suppose that Matson has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information breaking total overhead into three cost pools

Activity Pools

Cost Driver

Cost Assigned to Pool

Quantity/ Amount Consumed by Standard Floor Mat Line

Quantity/ Amount Consumed by Deluxe Floor Mat Line

Material Handling

# Moves

$3,008

39 Moves

55 Moves

Quality Control

# Inspections

$8,960

540 Inspections

740 Inspections

Machine Maintenance

#Machine Hrs

$13,471

3,040 Machine Hours

4,050 Machine Hours

Requirement 1:

Calculate the activity rates for each cost pool assuming Matson uses an ABC system.

Requirement 2:

Calculate the amount of overhead that Matson will assign to the standard floor mat line.

Requirement 3:

Determine the amount of overhead Matson will assign to the deluxe product line

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Matson Company manufactures automobile floor mats (A+)

Matson Company manufactures automobile floor mats. It currently has 2 product lines, the Standard and the Deluxe.

Matson has a total of $25,840 in overhead. It currently used a traditional cost system with overhead applied to the product on the basis of either direct labor (DL) hours or machine hours. Matson has compiled the following information about possible cost drivers and its two product lines.

Matson Company Total

Quantity/Amount

Consumed by

Standard Floor Mat Line

Quantity/ Amount Consumed by Deluxe Floor Mat Line

980 DL hours

590 DL hours

390 DL hours

6,990 machine hours

2,980 machine hours

4,010 machine hours

Requirement 1:

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

Requirement 2:

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

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2. 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 $67,260

Machine maintenance $17,940

Cost drivers

Number of material moves 590

Number of machine hours 46,000

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 240 350

Number of machine hours 17,700 28,300

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

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

Total overhead $74,250

Cost drivers

Number of labor hours 2,700

Number of machine hours 45,000

Requirement 1:

Suppose the Rawlings Corp. uses a traditional costing system with number of labor hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A requires 76% of the labor hours and Product B requires 24%.

Requirement 2:

Suppose Rawlings uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A consumes 16,900 machine hours and Product B consumes 28,100.

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