Accounting Assignment

(1) Here are some of the costs that a snowboard factory, Terrian Park Boards, would incur.
a. The materials cost of each snowboard (wood cores, fiberglass, resins, metal screw holes, metal
edges, and ink) is $30.
b. The wage costs (to trim and shape each board using jig saws and band saws) are $40.
c. Depreciation on the factory building and equipment (for example, presses, grinding machines,
and lacquer machines) used to make the snowboards is $25,000 per year.
d. Property taxes on the factory building (where the snowboards are made) are $6,000 per year.
e. Advertising costs (mostly online and catalog) are $60,000 per year.
f. Sales commissions related to snowboard sales are $20 per snowboard.
g. Salaries for factory maintenance employees are $45,000 per year.
h. The salary of the plant manager is $70,000.
i. The salary of the factory president is $100,000.
i. The cost of shipping is $8 per snowboard.
j. Utilities of the factory is $2,000.
Instructions:
i) Calculate the amount of product and period costs.
ii) Calculate the factory overhead costs.
(2) Prepare a cost of goods manufactured statement, cost of goods sold statement, and income
statement for 2023 from the following information for Peterson company:
Inventories: 1.1.2023 31.12.2023
Finished goods………………………….$20000 $28000
Work-in process………………………….60000 36000
Materials…………………………………40000 48000
Purchase of Materials…………………………………………………………………$600000
Direct labor………………………………………………………………………….….400000
Depreciation of factory machinery……………………………………………………..160000
Factory insurance………………………………………………………………………..59000
Plant supervisors' salaries……………………………………………………… ………38000
Advertising expense……………………………………………………………..……….120000
Sales commissions………………………………………………………………………..68700
Depreciation of office equipment…………………………………………………….…48000
Executive salaries………………………………………………………………………..75000
Indirect materials………………………………………………………………………...28400
Indirect labor…………………………………………………………………………….21300
Rent (factory)……………………………………………………………………………23000
Rent (office)……………………………………………………………………………...32400
Insurance, office building………………………………………………………………..37000
Sales persons’ salaries……………………………………………………………………45000
Lease cost, factory equipment……………………………………………………………16000
Factory supervision………………………………………………………………………40000
Delivery expense…………………………………………………………………………27000
Factory utilities……………………………………………………………………………13000
Office utilities……………………………………………………………………………..15000
Travel expenses for sales staff…………………………………………………………….27000
Travel expenses for management………………………………………………………….42800
Legal and accounting fees…………………………………………………………………51400
Sales revenue…………………………………………………………………………….1800000
(3) Howell Corporation distributes a single product. The company’s sales and expenses for last
month follow:
Total Per unit
Sales (15000 units) $630000 $42
Variable expense 285000 19
Fixed expense 313000
Required:
1. Calculate contribution margin and contribution margin ratio for Howell Corporation.
2. What is the monthly break-even point in unit sales and in dollar sales?
3. How many units would have to be sold each month to earn a target profit of $90,000?
4. Compute the company’s margin of safety in both dollar and percentage terms.
5. Calculate the net income for this company. If sales increase by 3000 units and there is no
change in fixed expenses, by how much would you expect monthly net operating income to
increase?
(4) A high-capacity battery for laptop computers—PEM Inc. has been experiencing difficulty for
some time due to erratic sales of its sole product. The company’s contribution format income
statement for the most recent month is given below:
Amount
Sales (17500 units*$30) $525000
Variable cost 367500
Contribution margin $157500
Fixed cost 175000
Net operating loss $(17500)
Required:
a. Compute the company’s CM ratio and its break-even point in both unit sales and dollar sales.
b. The president believes that a $16,000 increase in the monthly advertising budget, combined with
an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the
president is right, what will be the effect on the company’s monthly net operating income or loss?
Will it increase or decrease?
c. Refer to the original data. The Marketing Department thinks that a fancy new package for the
laptop computer battery would help sales. The new package would increase variable costs by $1
per unit. Assuming no other changes, how many units would have to be sold each month to earn a
profit of $9,750?
d. Refer to the original data. By automating, the company could reduce variable expenses by $4
per unit. However, fixed expenses would increase by $72,000 each month.
i) Compute the new CM ratio and the new break-even point in both unit sales and dollar sales.
ii) Assume that the company expects to sell 26,000 units next month. Prepare two contribution
format income statements, one for the current condition and one assuming that operations are
automated.
iii) Would you recommend that the company automate its operations? Explain.

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(1) Here are some of the costs that a snowboard factory, Terrian Park Boards, would incur.

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