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Godgift
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Joined: 15 Oct 2009
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Posted: 23 Jun 2010 at 17:23 \| IP Logged

I need the steps to the solution of the below questions, i do not know how AICPA arrived to the answer, can someone please explains:

Q1:

CPAA

company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a

sales price of $85 per unit. After learning that its variable costs will increase by 20%, the company is

considering an increase in production to 12,000 units. Which of the following statements is correct

regarding the company's next steps?

a. If production is increased to 12,000 units, profits will increase by $50,000.

b. If production is increased to 12,000 units, profits will increase by $100,000.

c. If production remains at 10,000 units, profits will decrease by $50,000.

d. If production remains at 10,000 units, profits will decrease by $100,000.

Choice "d" is correct but with my calculation C is suppose to be correct

Q2:

CPAA

delivery company is implementing a system to compare the costs of purchasing and operating different

vehicles in its fleet. Truck 415 is driven 125,000 miles per year at a variable cost of $0.13 per mile. Truck

415 has a capacity of 28,000 pounds and delivers 250 full loads per year. What amount is the truck's

delivery cost per pound?

a. $0.00163 per pound.

b. $0.00232 per pound.

c. $0.58036 per pound.

d. $1.72000 per pound.

Choice "b" is correct. I am clueless on this one!!!

BRAF=CPA
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Joined: 03 Jun 2010
Online Status: Offline
Posts: 54

Posted: 23 Jun 2010 at 18:46 \| IP Logged

Godgift wrote:

I need the steps to the solution of the below questions, i do not know how AICPA arrived to the answer, can someone please explains:

Q1:

CPAA

company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a

sales price of $85 per unit. After learning that its variable costs will increase by 20%, the company is

considering an increase in production to 12,000 units. Which of the following statements is correct

regarding the company's next steps?

a. If production is increased to 12,000 units, profits will increase by $50,000.

b. If production is increased to 12,000 units, profits will increase by $100,000.

c. If production remains at 10,000 units, profits will decrease by $50,000.

d. If production remains at 10,000 units, profits will decrease by $100,000.

Choice "d" is correct but with my calculation C is suppose to be correct

Your not considering the swing. The original calculation reports a profit of $50,000. The second calculation reports a loss of ($50,000). That is a swing of ($100,000)

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BRAF=CPA
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Joined: 03 Jun 2010
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Posts: 54

Posted: 23 Jun 2010 at 18:56 \| IP Logged

Godgift wrote:

Q2:

CPAA

delivery company is implementing a system to compare the costs of purchasing and operating different

vehicles in its fleet. Truck 415 is driven 125,000 miles per year at a variable cost of $0.13 per mile. Truck

415 has a capacity of 28,000 pounds and delivers 250 full loads per year. What amount is the truck's

delivery cost per pound?

a. $0.00163 per pound.

b. $0.00232 per pound.

c. $0.58036 per pound.

d. $1.72000 per pound.

Choice "b" is correct. I am clueless on this one!!!

I dont know a standard formula but you get the answer by first finding the variable cost (total miles times cost per mile) or (125,000 per year x .13 per mile = 16,250 per year). Then take the VC per year divided by total pay loads or $16,250/250 = $65/load. Finally, take $65 per load / 28,000 lbs = $0.00232

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Godgift
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Joined: 15 Oct 2009
Online Status: Offline
Posts: 100

Posted: 24 Jun 2010 at 16:42 \| IP Logged

[/QUOTE]

Thanks so much, it does not look that hard with your explanation!!!

Alex2008
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Joined: 31 Aug 2009
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Posts: 174

Posted: 24 Jun 2010 at 21:13 \| IP Logged

Hi Godgift: The first question was asked yesterday.

http://www.cpanet.com/cpa_forum/forum_posts.asp?TID=33454&am p;am p;PN=2

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