A company has a contribution margin ratio of 40% and its fixed costs are $500,00

Question

A company has a contribution margin ratio of 40% and its fixed costs are $500,000. T breakeven, the sales in dollars must be s- If the actual sales of the company above is $1,475,000, what is the margin of safety in dollars? _ What would be the margin of safety ratio for this company? %? (round to two decimal places) What are the two methods of preparing a statement of cash flows? A company sold machinery and reported a $6,500 gain on its income statement. The book value of the machinery was $29,000. How would this transaction be reported in the investing activities section of the statement of cash flows? A company sold $60,000 of merchandise to a customer on account. How would this be reported on the statement of cash flows? A company acquired a parcel of land by issuing 5,000 share of its corporate stock. How would this be reported on the statement of cash flows? A manufacturing company uses activity based costing to allocate its overhead costs. Utility costs are allocated to products based on the square footage of plant capacity used to manufacture them. The budgeted utility cost for 2017 is $80,000 and the total plant space is 60,000 square feet. Product A is manufactured in an area occupying 21,000 square feet and in March 2017 the total utility cost was $6,200. How much of this should be allocated to Product A? What would be an equitable means of allocating thecost of setting up equipment? A company had $30,000 in inventory on 1/1/16 and $38,000 on 12/31/16. It had accounts payable of $25,0000on 1/16 and $29,000 on 1231/16. Cost of Goods Sold during the year was $180,000 How much inventory was purchased during the year? $ How much cash was paid out to the merchandise suppliers in 2016 $ How is the increase in accounts payable reported using the indirect method? A company has a sales mix of 70% for product X and 30% for Product Y. Selling The fixed costs are $111,000. How many units of Y must be sold in order to break even? How much sales revenue must Product X generate in order to breakeven $ prices are $125 for X and $80 for Y and variable costs are $85 for X and $50 tor Y Once the cost of goods manufactured is calculated, how does a company calculate the cost of goods sold? Six Sigma was developed by what company? manufacturing is based on traditional accounting methiods where products are manufactured based on estimated sales manufacturing is based on lean accounting where products are made as needed. What are they? In a lean manufacturing accounting system, there are only two inventories. A company' production department requisitioned $18,000 of direct materials and $5,700 of indirect materials. To record this transaction, would be debited for $18,000 would be debited for $5,700 would be credited for $23,700 (source document) by a

Explanation / Answer

1) Break even Sales = Fixed cost/Contibution margin ratio = $500,000/40% = $1,250,000

2) Margin of safety sales = Sales - Break even sales = $1,475,000-$1,250,000 = $225,000

3) Margin of safety ratio = Margin of safety/Total sales = $225,000/$1,475,000 = 0.15

4) Two method of statement of cash flows = Direct method and indirect method

5) This transaction would be reported under investing activities in statement of cash flows as follows:-

Cash flow from sale of machinery = $35,500 ($29,000+$6,500)

6) As goods are sold to customer on account, there is no cash flow in this transaction. Therefore this transaction would not be reported on statement of cash flows.

7) Land is acquired by issue of shares there is no cash flow in this transaction also. Therefore this transaction would not be reported on statement of cash flows.

8) Total utility cost of $6,200 should be allocated to product on the basis of square footage of plant capacity used. the allocation is shown as follows:-

Allocated cost to Product A = $6,200*21,000/60,000 = $2,170

9) The Number of set ups used for different products can be a equitable means for allocating the cost of setting up equipment.

10) Purchase of Inventory = Cost of goods sold+Closing Inventory-Opening Inventory

= $180,000+$38,000-$30,000 = $188,000

11) Cash paid out to merchandise suppliers = Opening Accounts payable+Purchases during the year-Closing Accounts Payable

= $25,000+$188,000-$29,000 = $184,000

12) Increase in accounts payable is add in the operating profit before working capital changes under operating activities in statement of cash flows. shown as follows:-

Add: Increase in Accounts Payable ($29,000-$25,000) $4,000

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