ACCT 346 Quiz Week 6 Managerial Accounting Solutions, DeVry University, Chicago (Already Graded A)

1. Incremental drop in revenue ($1,200,000) Incremental cost savings: Cost of sales 700,000 Salaries 175,000 Other 60,000 Incremental increase in serving pieces (13% x $800,000) 104,000 Incremental increase in serving pieces variable costs (13% x $500,000) (65,000) Incremental increase in profit ($226,000) 2. A) Break-even point in sales = fixed costs / ($1-variable cost per dollar) = 115,600 / (1- 0.38) = 115,600/0.62 = $186,451.61 B) Level of sales needed to reach monthly profit of $67,000 = (fixed costs + target profit) / ($1-variable cost per dollar)=(115,600 + 67,000) / (1-0.38) = 182,600/0.62 = $294,516.13 C)Profit = (sales x ($1-variable cost per dollar)) – fixed costs = ($585,000 x (1-0.38)) - $115,600 = 362,700 - $115,600 = $247,100.00 3. Total Service Costs = $8,500,000 Total Sea Miles = 24,000,000 Service Costs, Mediterranean: $8,500,000/24,000,000 * 6,000,000 = $2,125,000 6/24=25% Service Costs, Trans-Atlantic: $8,500,000/24,000,000 * 18,000,000 = $6,375,000 8/24=75% 4. (a) Determine the net present value of the investment in the service center. Should Munster invest in the service center? 97,842.40 NPV yes the NPV is positive (b) Calculate the internal rate of return of the investment to the nearest ½ percent. 14.5% (c) Calculate the payback period of the investment