# Managerial Accounting

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Exercise 18-16
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Glacial Company estimates that variable costs will be60% of sales, and fixed costs will total \$926,000. The selling price of the product is \$5.
Compute the break-even point in (1) units and (2) dollars.

(1)Break-even sales.wileyplus.com/edugen/art2/common/pixel.gif”>units
(2)Break-even sales\$.wileyplus.com/edugen/art2/common/pixel.gif”>

Compute the margin of safety in (1) dollars and (2) as a ratio, assuming actual sales are \$2,930,380.(Round ratio to 0 decimal places, e.g. 20%.)

(1)Margin of safety\$.wileyplus.com/edugen/art2/common/pixel.gif”>
(2)Margin of safety ratio.wileyplus.com/edugen/art2/common/pixel.gif”>%

Problem 18-1A
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Telly Savalas owns the Bonita Barber Shop. He employs6barbers and pays each a base rate of \$1,300per month. One of the barbers serves as the manager and receives an extra \$520per month. In addition to the base rate, each barber also receives a commission of \$5.90per haircut.
Other costs are as follows.

Rent\$960per month
Barber supplies\$0.40per haircut
Utilities\$170per month plus \$0.20per haircut
Magazines\$20per month

Telly currently charges \$11.70per haircut.

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Determine the variable cost per haircut and the total monthly fixed costs.(Round variable costs to 2 decimal places, e.g. 2.25.)

Total variable cost per haircut\$.wileyplus.com/edugen/art2/common/pixel.gif”>
Total fixed\$.wileyplus.com/edugen/art2/common/pixel.gif”>

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Compute the break-even point in units and dollars.(Round answers to 0 decimal places, e.g. 1,225.)

Break-even point.wileyplus.com/edugen/art2/common/pixel.gif”>haircuts
Break-even point\$.wileyplus.com/edugen/art2/common/pixel.gif”>

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Determine net income, assuming2,370haircuts are given in a month.

Net income\$.wileyplus.com/edugen/art2/common/pixel.gif”>

Problem 18-3A
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Dousmann Corp.s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling618,000units of product: sales \$2,472,000; total costs and expenses \$2,616,200; and net loss \$144,200. Costs and expenses consisted of the amounts shown below.

TotalVariableFixed
Cost of goods sold\$2,163,000\$1,483,200\$679,800
Selling expenses247,20074,160173,040
\$2,616,200\$1,606,800\$1,009,400

Management is considering the following independent alternatives for 2015.

1.Increase unit selling price24% with no change in costs, expenses, and sales volume.
2.Change the compensation of salespersons from fixed annual salaries totaling \$154,500to total salaries of \$61,800plus a6% commission on sales.

(a)Compute the break-even point in dollars for 2014.(Round final answer to 0 decimal places, e.g. 1,225.)

Break-even point\$.wileyplus.com/edugen/art2/common/pixel.gif”>

(b)Compute the contribution margin under each of the alternative courses of action.(Round final answer to 0 decimal places, e.g. 1,225.)

Contribution margin for alternative 1.wileyplus.com/edugen/art2/common/pixel.gif”>%
Contribution margin for alternative 2.wileyplus.com/edugen/art2/common/pixel.gif”>%

Compute the break-even point in dollars under each of the alternative courses of action.(Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

Break-even point for alternative 1\$.wileyplus.com/edugen/art2/common/pixel.gif”>
Break-even point for alternative 2\$.wileyplus.com/edugen/art2/common/pixel.gif”>

Which course of action do you recommend?.wileyplus.com/edugen/art2/common/pixel.gif”>Alternative 1Alternative 2

Exercise 18-9
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The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at \$75a night. Operating costs are as follows.

Salaries\$8,547per month
Utilities\$1,832per month
Depreciation\$1,221per month
Maintenance\$610per month
Maid service\$9per room
Other costs\$36per room

Determine the inns break-even point in (1) number of rented rooms per month and (2) dollars.

(1)Break-even point.wileyplus.com/edugen/art2/common/pixel.gif”>rooms
(2)Break-even point\$.wileyplus.com/edugen/art2/common/pixel.gif”>

Exercise 18-11
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Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent months activity in the form of a cost-volume-profit income statement is shown below.

Fare revenues (1,400fares)\$35,000
Variable costs
Fuel\$6,300
Tolls and parking3,150
Maintenance1,05010,500
Contribution margin24,500
Fixed costs
Salaries12,495
Depreciation1,176
Insurance1,02914,700
Net income\$9,800

(a)Calculate the break-even point in (1) dollars and (2) number of fares.

(1)Break-even point\$.wileyplus.com/edugen/art2/common/pixel.gif”>
(2)Break-even point.wileyplus.com/edugen/art2/common/pixel.gif”>fares

(b)Without calculations, determine the contribution margin at the break-even point.

Contribution margin at the break-even point\$.wileyplus.com/edugen/art2/common/pixel.gif”>

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