ACC 560 – Homework Chapter 5 & 6
Chapter 5: Exercises 8, 13, 14, and 17; Problems 1 and 5
Chapter 6: Exercises 5, 10, 13, and 14; Problems 1 and 5
Exercise 58 

All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.
Depreciation 
$1,400 
per month 

Advertising 
$200 
per month 

Insurance 
$2,000 
per month 

Weed and feed materials 
$12 
per lawn 

Direct labor 
$10 
per lawn 

Fuel 
$2 
per lawn 
All That Blooms charges $60 per treatment for the average singlefamily lawn.
Determine the company’s breakeven point in (a) number of lawns serviced per month and (b) dollars.
(a) 
Breakeven point 

$ 



$ 
$ 



$ 
$ 



$ 
$ 



$ 
(b) Prepare an analysis showing the total contribution margin if the additional hours are:
(1) Divided equally between the products
(2) Allocated entirely to the product identified in part (b)
Exercise 614 

The CVP income statements shown below are available for Armstrong Company and Contador Company.
Armstrong Co. 
Contador Co. 

Sales 
$500,000 
$500,000 

Variable costs 
240,000 
50,000 

Contribution margin 
260,000 
450,000 

Fixed costs 
160,000 
350,000 

Net income 
$100,000 
$100,000 
(a) 

Compute the degree of operating leverage for each company. (Round answers to 3 decimal places, e.g. 1.150.)
Degree of Operating Leverage 

Armstrong 
The following CVP income statements are available for Viejo Company and Nuevo Company.
Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.)
(a) Compute the breakeven point in dollars and the margin of safety ration for each company. (b) Compute the degree of operating leverage for each company and interpret your results (c) Assuming that sales revenue increase by 20%, prepare a CVP income statement for each company. (d) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company (e) Discuss how the cost structure of these two companies affects their operating leverage and profitability.
ACC560 – Week 4 homework chapter 5 & 6 Q
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