The following is budgeted information for the Sophia Corporation: Product A Product B Monthly production & sales 10,000 5,000 Projected selling price $20 $23 Production Cost Information P

The following is budgeted information for the Sophia Corporation:

Product A Product B

Monthly production & sales 10,000 5,000

Projected selling price $20 $23

Production Cost Information

Parts (per unit) $5.50 $6.40

Direct Labor (per unit) $3.50 $4.20

VMOH (per unit) $1.40 $1.40

Additional information:

• Fixed manufacturing overhead costs are budgeted to be $71,000.

• Selling & administrative costs are budgeted to be $60,000.

Assuming the budgeted sales mix remains intact, how many units of each product does Sophia need to sell in order to break even?

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Jessica Camilo
ACT 5060 – HW #2
May 5, 2013
Question #1
Assume the CFO of your organization approaches you to ask your advice about implementing
the Balanced Scorecard at your organization.
a)
What steps would you encourage him or her to take in order to successfully implement
the Scorecard?
Be specific.
The steps I would encourage the CFO to take in order to successfully implement the scorecard
would be understanding the financial, customer, business process and learning and growth aspect
of the organization.

Financial- will allow them to measure the success of the shareholders along with
increasing their value.

Customer- will help in increase customer satisfaction, retention and acquisition

Business process- will help meet the expectation of the business from a customer’s point
of view

Learning and Growth- the development and improvement of the process and customer
relationship; training and development for employees
b)
What roadblocks would you encourage him or her to avoid in order to successfully
implement the Scorecard?
Be specific.
Roadblocks that should be avoided in order to successfully implement the scorecard are poorly defined
metrics, insufficient data collection and reporting. Along with inconsistent reviews of the scorecard
Question #2
The following is budgeted information for the Sophia Corporation:
Product A
Product B
Monthly production & sales
10,000
5,000
Projected selling price
$20
$23
Production Cost Information
Parts (per unit)
$5.50
$6.40
Direct Labor (per unit)
$3.50
$4.20
VMOH (per unit)
$1.40
$1.40
Additional information:

Fixed manufacturing overhead costs are budgeted to be $71,000.

Selling & administrative costs are budgeted to be $60,000.
Assuming the budgeted sales mix remains intact, how many
units of each product
does Sophia
need to sell in order to break even?

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Question #3
Consider the following information, prepared based on monthly production and sales of 20,000
units:
Category
Cost per Unit
Direct materials
$1.00
Direct manufacturing labor
$1.20
Variable manufacturing overhead
$0.80
Fixed manufacturing overhead
$0.50
Variable marketing
$1.50
Fixed marketing
$0.90
In addition, the firm currently sells the product for $6 per unit.
Consider each of these scenarios independent of each other.
a) The company is currently producing 15,000 units per month. A potential customer has
contacted the firm and offered to purchase 5,000 units this month only at a price of $4.25 per
unit. There would be no variable marketing costs incurred on the contract. Should the
company accept the special order? Why or why not?
Be specific.
b) Assume the same facts as in part a, except that the company is producing 20,000 units per
month. Should the company accept the special order? Why or why not?
Be specific.
c) The company is considering selling 1,000 units that are in danger of becoming obsolete. What
is the minimum price it would be willing to take for the 1,000 units?
d) Assume the company is producing and selling 20,000 units per month. It is considering an
arrangement where an outside manufacturer would produce and ship the product directly to
customers. Under this arrangement, variable marketing costs would decrease 20% per unit
and fixed manufacturing costs would decrease 50%. Fixed marketing costs would not change.
What is the maximum amount per unit the company would be willing to pay to the outside
manufacturer?

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