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

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!!!

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BRAF=CPA Contributor
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 Contributor
Joined: 03 Jun 2010
Online Status: Offline 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
__________________ BEC  84
REG  79
AUD  92
FAR  82
I did it!

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

Posted: 24 Jun 2010 at 16:42  IP Logged



[/QUOTE]
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
[/QUOTE]
Thanks so much, it does not look that hard with your explanation!!!

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Alex2008 Regular
Joined: 31 Aug 2009
Online Status: Offline 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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