Posted: November 29th, 2024

Big Time Investor Group is opening an office in Dallas. Fixed monthly costs are office rent ($8,200)

1. Big Time Investor Group is opening an office in Dallas. Fixed monthly costs areoffice rent ($8,200), depreciation on office furniture ($1,500), utilities ($2,300), specialtelephone lines ($1,300), a connection with an online brokerage service ($2,900) and thesalary of a financial planner ($11,800). Variable costs include payment to the financialplanner (9% of revenue), advertising (12% of revenue), supplies and postage (4% ofrevenue) and usage fees for telephone lines and computerized brokerage service (5% ofrevenue).Requirements1. Use the contribution margin ratio CVP formula to compute Big Time’s break­even revenue in dollars. If the average trade leads to $800 in revenue for BigTime how many trades must be made to break even?2. Use the income statement equation approach to compute the dollar revenuesneeded to earn a target monthly operating income of $11,200.3. Graph Big Time’s CVP relationships. Assume that an average trade leads to $800in revenue for Big Time. Show the breakeven point, the sales revenue line, thefixed cost line, the total cost line, the operating lost area, the operating incomearea and the sales in units (trades) and dollars when monthly operating income of$11,200 is earned. The graph should range from 0­80 units.4. Suppose that the average revenue that Big Time earns increases to $900 per trade.Compute the new breakeven point in trades. How does this effect the newbreakeven point?2. Roots Exteriors produces exterior sidings for homes. The preparation departmentbegins with wood, which is chopped into small bits. At the end of the process andadhesive is added. Then the wood/adhesive mixture goes on to the compressiondepartment where the wood is compressed into sheets. Conversion costs are added evenlythroughout the preparation process. March Data for the preparation process is as follows:SheetsCostsBeginning work inprocess inventoryStarted ProductionEnding Work inProcess inventory(45% of the waythrough thepreparation process)3,300 sheetsBeginning work in $0process inventoryCosts adding duringMarch:Wood2,6001,900 sheetsAdhesives1,365Direct LaborManufacturingOverhead6402,445Total CostsCompleted andtransferred out toCompression inMarch0 sheets$7,050______________1,400 sheets1. Draw a time line for the preparation department2. Use the timeline to help you compute the equivalent. ( Hint: Each direct materialadded at a different point in the production process requires it’s own equivalentunit computation.3. Compute the total cost’s of the units (sheets)a. Completed and transferred out to the Preparation Departmentb. In the Preparation Departments ending work and process inventory4. Prepare the journal entry to record the cost of the sheets completed andtransferred out to the Compression Department5. Post the journal entries to the work in process inventory ­­­­­Preparation T­Account. What is the ending balance?

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