POHR Actual

Transcription

1 Review Problem 2 Selling expenses $140,000 Raw materials inventory, January 1 90,000 Raw materials inventory, December 31 60,000 Utilities, factory. 36,000 Direct labour cost 150,000 Depreciation, factory 162,000 Purchases of raw materials 750,000 Sales 2,500,000 Insurance, factory 40,000 Supplies, factory 15,000 Administrative expenses 270,000 Indirect labour 300,000 Maintenance, factory 87,000 Work in process inventory, January 1 180,000 Work in process inventory, December ,000 Finished goods inventory, January 1 260,000 Finished goods inventory, December , sales Beg. Inv add: purchases Goods available for sale Less: ending inv COGS Gross margin Less: expenses selling exp admin exp Total expenses Net income POHR Actual

2 4-2 units beginning inv ending inv Cost of transferred units cost of ending WIP TOTAL Litres Work in process, May 1 80,000 Litres started in process 760,000 Litres transferred out 790,000 Work in process, May 31 50,000 Cost added during May Answer: Materials

3 4-9 Products transferred Ending inv 3000 cost per equivalent units 4-12 Prodcut Work in process, May 1 5,000 Started into production 29,000 Transferred to next department 30,000 Work in process, May 31 4,000 Equivalent units Material C Units Work in process, Jan. 1 (materials 100% complete; conversion 20,000 80% complete) Started into production 800,000 Costs added during the year Units completed during the year 790,000 Equivalent Materials Equivalent units of production Wip Materials

4 $ 33,000 Total cost of ending WIP $ 78, Driver and guard wages $840,000 Vehicle operating expense 270,000 Vehicle depreciation 150,000 Customer representative salaries and expenses 180,000 Office expenses 40,000 Administrative expenses 340,000 Total cost $1,820, Activity Cost Pool Activity Rates Supporting direct labour $7.00 per direct labour-hour Machine processing $3.00 per machine-hour Machine setups $40.00 per setup Production orders $ per order Shipments $ per shipment Product sustaining $ per product 5-5 Activity Cost Pool Activity Rates Supporting manufacturing $22 per direct labour-hour Order processing $212 per order Custom design processing $243 per custom design Customer service $307 per customer sales Number of orders 1060 Number of custom designs 729 Direct labour-hours per jet ski 1260

5 Direct materials cost per jet ski Operationg income 5-10 Activity Cost Pool Order size Customer orders Product testing Selling Activity Measure Number of direct labour-hours Number of customer orders Number of testing hours Number of sales calls 150 DLH hours product testing sales calls Total cost for recent order $ 8, Activity Cost Pool Supporting direct labour Batch processing Order processing Customer service Activity Measure Number of direct labour-hours Number of batches Number of orders Number of customers single order 3200 skate board 2240 produced 27 batches DLH 173 $125/skateboard selling price 1320 DM $ DL $ chapter 7 sales $ 3,129 Variable expense $ 756 CM $ 2,373 Fixed expense 1300 Operating income $ 1,073

6 Break even point in sales unit Break even point in sales dollar Target profit Margin of safety Break even point in sales units sales 7-3 sales (40000) VE CM FE Operating income ) CM ratio= 20% 2) sales (40000) VE CM FE Operating income ) 7-5 Per Unit Selling price $90 Variable expenses 63 Contribution margin $27 Fixed expenses Operating income Per Unit Selling price $90 Variable expenses 63 Contribution margin $27 Fixed expenses Operating income Selling price $8 VE $6 CM $2

7 FE ) BE point equation methid $8=$ ) BE in $ sales =5500/.25 3) =5500/27 4) 5500/ Selling price $25 per unit Variable expense $15 per unit CM 10 Fixed expense $8,500 per month Unit sales 1,000 units per month BE point in units= 850 Margin of safety= 150 Margin of safety %- 15% 7-8 Amount Sales $120,000 Variable expenses 84,000 Contribution margin 36,000 Fixed expenses 24,000 Operating income $12,000 1) 3 Degree of operating leverage 2) 10% increase in sales 30% 3) Amount Sales $132,000 Variable expenses 92,400 Contribution margin 39,600 Fixed expenses 24,000 Operating income $15, Units in beginning inventory 0 Units produced 10,000 Units sold 8,000

8 Units in ending inventory 2,000 Variable costs per unit: Direct materials R120 Direct labour R140 Variable manufacturing overhead R50 Variable selling and administrative R20 Fixed costs: Fixed manufacturing overhead R600,000 Fixed selling and administrative R400, Sales (8,000 units R500 per unit) Cost of goods sold: Beginning inventory R 0 Add cost of goods manufactured (10,000 units R? per un 3,700,000 Goods available for sale 3,700,000 Less ending inventory (2,000 units R? per unit) 740,000 Gross margin Selling and administrative expenses: Variable selling and administrative 160,000 Fixed selling and administrative 400,000 Operating income 1) was defered inventory to next perio 2) Sales COGS Begin. Inv 0 Add COGM Less ending inv Gross margin Selling and administrative expenses: Variable selling and administrative Fixed selling and administrative Fixed manufacturing OH Total fixed costs Operating income 8-3 Year 1 Inventories: Beginning (units) 180 Ending (units) 150 Change in in ventorires 30 Variable costing operating income $292,400 Add fixed MFG OH

9 Deduct fixed MFG OH Fixed mfg OH per unit $ 278, ) Year 1 Variable costing operating income $16,847 Absorption costing operating income $16,847 Inventory same 2) Year 1 Variable costing operating income (loss) $16,847 Absorption costing operating income $16,847 same 8-7 Variable costs per unit: Manufacturing: Direct materials $25 Direct labour $12 Variable manufacturing overhead $3 Variable selling and administrative $5 Fixed costs per year: Fixed manufacturing overhead $200,000 Fixed selling and administrative expense $110,000 b) sales begin. Inv 0 Variable MFG OH Goods available for sale Less: ending inv Variable COGS Variable selling and admin CM Less fixed costs Fixed manufacturing overhead $200,000 Fixed selling and administrative expense $110,000 Operating income sales Beginning inv 0 COGM Less ending inv

10 Gross margin Variable selling and admin $105,000 Fixed selling and administrative expense $110, August Budgeted sales (all on account) July Sales Add desired ending inv 4500 total needs less ending inv 3000 total production First Budgeted production, in calculators 120,000 3 Total cheps Add desired ending inv Total needs Less beginning inv Total purchases Total price $ 804, st Quarter 1) Units to be produced 5, Labour requirements 2000 Labout costs $ 22,000 2) 1st Quarter Units to be produced 5,000

11 0.4 Labour requirements 2000 Guaranteed payment 1800 Difference 200 payment $ 23, st Quarter Budgeted direct labour-hours 5,000 Variable MFG OH 1.75 Total variable cost 8750 ADD:fixed mfg OH Total cost Less: non cash items cash disbursement $ 28,750 1st Quarter Budgeted unit sales 12,000 variable selling and admin 2.75 Total variable cost Fixed selling and admin executive salaries insurance payment property tax dpreciation total costs Less: depreciation Total selling and admin cost $ 85, F Indirect labour $0.90 Supplies $0.15 Electricity $0.05 Total variable cost 1.1 Indirect labour $42,000

12 Supplies $6,900 Electricity $1,800 Budgeted direct labour-hours 42,000 Actual direct labour-hours 44,000 Standard direct labour-hours allowed 45, Standard Quantity or Hours Direct materials 7.2 grams Direct labour 0.4 hours grams materials purchased at 2.40 and all used to make 2500 bottles 900 labour hour at $ F Product CD Selling price per pack $8.00 Variable expenses per pack $3.20 Traceable fixed expenses per year $138,000 common fixed expenses sales Sales $ 300,000 variable expenses $ 120,000 CM $ 180,000 traceable fixed costs $ 138,000 incremental segment margin $ 42,000 common fixed cost operating income 11-2 Sales $2,000,000 Variable expenses 792,000 Contribution margin 1,208,000 Fixed expenses 1,305,000 Operating loss -$97,000

13 Geographic Market South Sales $600,000 Variable expenses as a percentage of sales 52% Traceable fixed expenses $320,000 1) Geographic Market South Sales $600,000 Variable expenses as a percentage of sales $ 312,000 CM $ 288,000 Traceable fixed expenses $320,000 incremental semgent margin -$ 32,000 fixed expenses 2) The company's sales manager believes that sales in the Central geographic market could be incr Would you recommend the increased advertising? Show computations to support your answer 11-4 sales CM ratio 0.7 incremental CM less add expense increas in income The company would like to initiate an intensive advertising campaign in one of the two markets du The campaign would cost $8,000. Marketing studies indicate that such a campaign would increa 11-5 Selling price per unit on the outside market $40 Variable costs per unit $21

14 Fixed costs per unit (based on capacity) $9 Capacity in units 60,000 motor division units purchases each $38 electrical division now selling transformers each year to outside customers a) bigger than $21 b) anything less than $38 c) yes it is possible d) no it is adviseable to buy from out side that way the company saves $2 per transformers 11-8 Sales Operating income Average operating assets 1) margin= 0.3 2) turnover= 0.5 3) ROI= Division Eastern Sales $800,000 Average operating assets $300,000 Operating income $70,000 Property, plant, and equipment $125,000 1) margin= turnover= ROI= Division Perth Sales $9,000,000 Operating income $630,000 Average operating assets $3,000,000 ROI= 0.21 Risidual= $150,000

15 12-2 Total Revenues $900,000 Variable expenses 490,000 Contribution margin 410,000 Fixed expenses: Depreciation 68,000 Liability insurance 42,000 Program administrators' salaries 115,000 General administrative overhead* 180,000 Total fixed expenses 405,000 Operating income (loss) $5,000 *Allocated on the basis of program revenues. 1) yes it should be kept because by dropping it the operating loss will be Per Units Direct materials $12 Direct labour 10 Variable manufacturing overhead 3 Fixed manufacturing overhead, traceable 8* Fixed manufacturing overhead, common, but allocated 16 Total cost $49 *25% supervisory salaries; 75% depreciation of special equipment (no resale value). unit total bangles V OH 70 DM 1430 DL 860 Filigree 60 total variable cost 2420 CM Fixed cost 465 operating icome A Selling price $60 Variable costs: Direct materials 27

16 Direct labour 12 Variable manufacturing overhead 3 Total variable cost 42 Contribution margin $18 Contribution margin ratio 30% 1) Contribution margin $18 Direct labour 12 DL rate per hour 8 DL hours required per unit 1.5 CM per DL hour $ Product Additional Processing Costs X $42,000 Y $48,000 Z $14,400 X sales after further processing $96,000 sales at the split off $60,000 incremental revenue $36,000 cost of further processing $42,000 profit (loss) from porcessing -$6,000 Products Y and Z should be processed further but not prodcut X net present value Year Cash flows now net present value

17 Sch DM Beginning. Inv Add: purchases Material for sale Less:EI Material used for prod DL MOH Utilities, factory. 36,000 Depreciation, factory 162,000 Insurance, factory 40,000 Supplies, factory 15,000 Indirect labour 300,000 Maintenance, factory 87,000 Add: WIP beginning Deduct WIP ending COGM $ , under applied cash

18 wip materials conversion 90% 60% 70% 50% 100% 100% MATERIAL CONVERSION Materials Conversion %-age Materials $68,600 $78,000 80% $907,200 $962,000 60% Conversion Equivalent units

19 Materials Conversion Total 80% 60% $ Total cost Materials Conversion %-age Materials 90% 80% 75% 50% conversion Material conversion $ 2.00 $ 1.10 Costs Materials $22,000 $48,000 Conversion $880,000 $2,367,000 Conversion Materials $ 22, $ 880, $ 902,000 $ Conversion FG

20 $ 45,000 $ 205,000 Travel Driver and guard wages 40% Vehicle operating expense 75% Vehicle depreciation 70% Customer representative s 0% Office expenses 0% Administrative expenses 0% Travel Driver and guard wages $336,000 Vehicle operating expense $202,500 Vehicle depreciation $105,000 Customer representative s $0 Office expenses $0 Administrative expenses $0 Total $643,500 Total Expected Act J78 Direct labour-hours 1,000 Machine-hours 3,200 Machine setups 5 Production orders 5 Shipments 10 Product sustaining 1 Total Standard Model Number of jet skis 16 Number of orders 2 Number of custom designs 0 Direct labour-hours per jet 24.5 Selling price per jet ski $10,600 Direct materials cost per je $7,

21 Activity Rate R17.60 per direct labour-hour R360 per customer order R79 per testing hour R1,494 per sales call Activity Rate $14 per direct labour-hour $98 per batch $173 per order $1,320 per customer sales expesnes DM DL Supporting DL batching process 2646 Order processing 173 # customer service 1320 Total expenses Operating income (loss) Ratio

22 =Fixed expense/cm per unit =Fixed expense/cm ratio $ 1,714 =Fixed expense+target/cm per unit % % % % Percentage of Sales 100% $247,500 70% % $74,250 $65,000 $9,250 New income statement $247,500 $259,500 5% increase in sale $74,250 $77,850 $65,000 $70,000 $9,250 $7,850 -$1,

23 2750 units $ 22, units $ 22, % 60% 40% Percentage of Sales 100% 70% 30% increase in operating income Percentage of Sales 100% % 30%

24 Absorption R4,000,000 2,960,000 1,040,000 R 480, ,000 d Year 2 Year $269,200 $251,

25 $ 273,700 $ 269,800 Year 2 Year 3 $16,847 $16,847 $29,378 $6,018 increased decreased Year 2 Year 3 -$18,153 -$53,153 $17,583 $18,318 increased increased $310,000 $110,

26 $215,000 $142,000 September October November $400,000 $800, $100, $200, $280, $489, Aug sept Total Year 2 Second Third Fourth 190, , , $ 1,272,000 $ 1,680,000 $ 1,152,000 2nd Quarter 3rd Quarter 4th Quarter 4,400 4,500 4, $ 19,360 $ 19,800 $ 21,560 2nd Quarter 3rd Quarter 4th Quarter 4,400 4,500 4,900

27 $ 19,800 $ 19,800 $ 22,440 2nd Quarter 3rd Quarter 4th Quarter 4,800 5,200 5, $ 28,400 $ 29,100 $ 29,450 2nd Quarter 3rd Quarter 4th Quarter 14,000 11,000 10, $ 96,500 $ 88,250 $ 85, U U $42,000 $39,600 $40,500 $6,900 $6,600 $6,750 $1,800 $2,200 $2,

28 Standard Price or Rate Standard Cost $2.50 per gram $18.00 $10.00 per hour $ U 5000 U DVD $20.00 $10.50 $45, Total $ 360,000 $ 660,000 $ 189,000 $ 309,000 $ 171,000 $ 351,000 $ 45,000 $ 183,000 $ 126,000 $ 168,000 $ ,000

29 Central North $800,000 $600,000 30% 40% $530,000 $300,000 Central North Total $800,000 $600,000 $2,000,000 $ 240,000 $ 240,000 $ 792,000 $ 560,000 $ 360,000 $ 1,208,000 $530,000 $300,000 $1,150,000 $ 30,000 $ 60,000 $ 58,000 -$ ,000 reased by 15% if monthly advertising was increased by $25,000. r. construction landscaping uring the next month. ase sales in the construction market by $70,000 or increase sales in the landscaping m

30 $12,000,000 $3,600,000 ROI=operating icome/avg operating asset $24,000,000 margin=operating income/sales turnover=sales/avg operating asset 0.15 Western $1,850,000 $400,000 $115,000 $200, Darwin $20,000,000 $1,800,000 $10,000,000 16% min req 0.18 $200,000

31 Home Nursing Meals on Wheels House-keeping $260,000 $400,000 $240, , , , , ,000 80,000 8,000 40,000 20,000 20,000 7,000 15,000 40,000 38,000 37,000 52,000 80,000 48, , , ,000 $20,000 $25,000 -$40,000 12,000 Unit per Year make $144, , , , , $588, Product B C $90 $

32 $36 $20 40% 25% $36 $ $9 $10 Sales Value sales value at the split off $96, $180, $90, Y Z $180, $108, $72,000 $18, $24,000 $3,600 Factor 11% present value

33 hedule of COGM Cost of goods so B INV 90,000 COGM 750,000 Goods available for sale 840,000 Less: EI FG 60,000 COGS 780, , ,000 1,570, , ,000 1,650,000 Accts recev

34 oh %-age conversion 75% 20%

35 $ 427, $ , Total cost of production %-age conversion cost per equivalent units Conversion $ 48,000 $ 2,367,000 $ 2,415,000 $ $ 4.10 unit cost

36 Pickup and Delivery Customer Service Other Totals 45% 10% 5% 100% 5% 0% 20% 100% 10% 0% 20% 100% 0% 85% 15% 100% 25% 35% 40% 100% 5% 55% 40% 100% First stage allocation Pickup and Delivery Customer Service Other Totals $378,000 $84,000 $42,000 $840,000 $13,500 $0 $54,000 $270,000 $15,000 $0 $30,000 $150,000 $0 $153,000 $27,000 $180,000 $10,000 $14,000 $16,000 $40,000 $17,000 $187,000 $136,000 $340,000 $433,500 $438,000 $305,000 $1,820,000 tivity W52 J78 W52 40 $ 7,000 $ $ 9,600 $ 90 1 $ 200 $ 40 1 $ 800 $ $ 1,200 $ $ 800 $ 800 $ 19,600 $ 1,490 $ 21,090 Custom Design Standard Model Custom Design $13,200 $21,200 $39,600 $9,240 $15,900 $27,720

37

38 margin of safety $ 300 increase es and $5000 in ad exp no it decreases the income statement by 1400

39

40 variable costing

41

42 December Total $700,000 $1,900,000 $175, $560,000.0 $20, oct $ Total Year 3 First 810, , ,908, Total $ 82,720 Total

43 $ 85,140 total 20, $ 8.61 predetermined OH rate Total $ 355,250

44

45 market by $60,000.

46

47 80,000 15,000 37,000 52,000 28,000 lost to the company buy from outside more expensive to buy

48 processing cost

49 old 260,000 1,650,000 1,910, ,000 1,700,000 raw materials

50

51 13-1 Year cash flows 11% factor now Net present value ) the total annual cash inflow is $9000 2) the internal rate is 5% 3) initial cost life of project 6 annual cost savings 9000 salvage value item years amount of cash flow 2% factor annual cost savings initial investment now salvage value item years cash flow 15% factor annual savings investment now present value 1) the intangible values must be greater than $ Investment Proposal A B C Investment required -$85,000 -$200,000 -$90,000 Present value of cash inflows 119, , ,000 Net present value $34,000 $50,000 $45,000 Life of the project 5 years 7 years 6 years 1) profitability index $1.40 $1.25 $ 1.5 2) project C Project A Project D Project B 13-5 Year Investment Cash Inflow Please show the c 1 $28,000 $2,000 I think some thing 2 $4,000 $3,000

52 3 $6,000 4 $8,000 5 $9,000 6 $8,000 7 $6,000 8 $5,000 9 $4, $4,000 S o 13-6 initial investment old machine cost simple rate= new machine cost old machine residual 5000 depreciation on new mach Invest in Project A Invest in Project B Investment required $15,000 $15,000 Annual cash inflows $4,000 $0 Single cash inflow at the end o $60,000 Life of the project 10 years 10 years Project A item year cash flow 16% factor investment now annual cash inflow present value Project B item year cash flow 16% factor investment now annual cash inflow Single cash inflow at the end o present value the company should invest on project A initial investment increase cash flow yearly depreciation ) internal rate= % 2) item year cash flow 10% factor investment now

53 annual cash inflow present value 3) initial investment increase cash flow internal rate= % initial investment increase cash flow internal rate the machine needs to be used for 12 year

54 Presesnt value present value of cash flows I'm not sure about the salvage value calculation please advise thanks present value cash $ 501,900 $ 750,000 -$ 248,100 1) profitability index 6 years Profitability Present value of net cash inflo D index Investment requir -$170, ,000 $51,000 2) payback $1.30 Payback period = Investment Net annual ca calculation using the payback formula g is not right with the formula

55 Simple rate of return = Incremental - Incremental expenses, revenues including depreciation Initial investment * (' )/75000= 20% present value of cash flows $ 15,000 $ 19,332 $ 4,332 present value of cash flows $ 15,000 $ - $ 13,620 -$ 1,380 PV factor for the internal rate of return = Investment required Net annual cash flows present value of cash flows $ 97,900

56 $ $ 97,903 3 rs

57 ows red required cash inflow

58

59 July August September Total October Sales units Add desired ending inv Total needs less: beginig inv Required production Budgeted production, in calculators Year 2 Year 3 First Second Third Fourth First 120, , , , , Total Total cheps 360, , , ,000 2,430,000 Add: ending inventory total available cheps 474, ,000 1,020, ,000 2,940,000 Less: beginning inv 72, , , , ,000 Total Purchase 402, , , ,000 2,454,000 Total price $ 804,000 $ 1,272,000 $ 1,680,000 $ 1,152, st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Units to be produced 5,000 4,400 4,500 4,900 18,800 DL hour per unit Labour hour required Hourly wage rate $ 22,000 $ 19,360 $ 19,800 $ 21,560 $ 82,720 2). 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Units to be produced 5,000 4,400 4,500 4,900 18,800 DL hour per unit Labour hour required Guaranteed labour hour labour hours paid Hourly wage rate $ 23,100 $ 19,800 $ 19,800 $ 22,440 $ 85,

60 f 585 u 300 U 10-6 Bugeted Actual Standard indirect LB supplies electricity Actual cost incured Total cost Product CD DVD Selling price per pack $8.00 $20.00 Variable expenses per pack $3.20 $10.50 Traceable fixed expenses per year $138,000 $45,000 Common fixed expenses in the company total $105,000 annually. Last year the company produced and sold CD DVD Total Sales VE CM traceable ex Segment margin common fixed cost Operating income

61 480, normal 16.5 overtime

62 U F F U 37,500 CD packs and 18,000 DVD packs.

63 12-1 Case 1 Case 2 Item Relevant Not Relevant Relevant Not Relevant 1. Sales revenue x x 2. Direct materials x x 3. Direct labour x 4. Variable manufacturing x overhead x 5. Book value Model x A3000 machine x 6. Disposal value Model x A3000 machine x 7. Depreciation Model x A3000 machine x 8. Market value Model x B3800 machine (cost) x 9. Fixed manufacturing x overhead (general) x 10. Variable selling expense x x 11. Fixed selling expense x x 12. General administrative x overhead x 12-2 Total Home Nursing Meals on Wheels Housekeeping Revenues $900,000 $260,000 $400,000 $240,000 Variable expenses 490, , , ,000 Contribution margin 410, , ,000 80,000 Fixed expenses: Depreciation 68,000 8,000 40,000 20,000 Liability insurance 42,000 20,000 7,000 15,000 Program administrators' salaries 115,000 40,000 38,000 37,000 General administrative overhead* 180,000 52,000 80,000 48,000 Total fixed expenses 405, , , ,000 Operating income (loss) $5,000 $20,000 $25,000 -$40,000 if the house keeping services dropped the company will incur a $28000 loss on the operating in 12-3 Per Units 12,000 Unit per Year make un

64 Direct materials $12 $144, $144,000 Direct labour , ,000 Variable manufacturing 3 36,000 overhead 3 36,000 Fixed manufacturing 8* 96,000 overhead, traceable 2 24,000 Fixed manufacturing ,000 overhead, common, but allocated 0 0 Total cost $49 $588, $ 324,000 *25% supervisory salaries; 75% depreciation of special equipment (no resale value). 1) the company should not buy from outside because it will cost the company $60000 more 2) = =18000 if the new product generate $78000 extra margin for the company the company should buy fro although it cost $60000 more to purchase from outside but the new marginal segment of Direct materials $ Direct labour Manufacturing overhead Unit product cost $ unit total bangles V OH 70 DM 1430 DL 860 Filigree 60 total variable cost 2420 CM Fixed cost 465 operating icome $ Yes the order should be accepted because it increases t Product A B C Selling price $60 $90 $80 Variable costs: Direct materials Direct labour

65 Variable manufacturing overhead Total variable cost Contribution margin $18 $36 $20 Contribution margin ratio 30% 40% 25% 2) the company should work 1200 hours on B, 7200 hours on A and 6000 hours on C 12-6 Additional Product Processing Costs Sales Value split off sales value X $42,000 $96,000 $ 60,000 Y $48,000 $180,000 $ 108,000 Z $14,400 $90,000 $ 72,000 X Y Z sales after processing $96,000 $180,000 $ 90,000 sales at the split off $60,000 $108,000 $ 72,000 incremental revenue $36,000 $72,000 $18,000 cost of further processing profit/loss from further processing -$6,000 $24,000 $3, Product Y and Z should be processed further while product X should be sold at the split point Insurance $1, Licences $ Taxes (vehicle) $ Garage rent for parking $1,350 (per truck) 1350 Depreciation ($30,000 $6,000 5 years) 6000 Gasoline, oil, tires, and repairs $0.16/km 8000 $ 17,500 $ 0.35 per KM Relevant 2) Insurance x Licences x Taxes (vehicle) Garage rent for parking (per truck) x Irelavent x

66 Depreciation ($30,000 5 years) x Gasoline, oil, tires, and repairs x 12-8 Department Total Design Copying Sales $1,000,000 $200,000 $800,000 Variable expenses 380,000 60, ,000 Contribution margin 620, , ,000 Fixed expenses 540, , ,000 Operating income (loss) $80,000 -$40,000 $120,000 if the design departmen is dropped it will decrease the operating income for the company and

67 80,000 lost CM 15,000 preventable cost 37,000 preventable cost 52,000 total perventable cost 28,000 lost to the company ncome, therefore, it is adviseable to keep the house keeping service nits buy

68 $ 384,000 $ 384,000 $ 60,000 om outside 0 will increase the company's operating income by $18000 the operating income by Product A B C Contribution $18 $36 $20 margin CM per minute

69 Allocation of 3000 for the 3 product LBH rate Total cost

70 Droping desgin dep. Copying $760, $440, $6,000 total operating income will be $6000

71 review problem 1: Total Revenues from clients $1,000,000 Variable expenses 220,000 Contribution margin 780,000 Traceable fixed 670,000 expenses Segment margin 110,000 Common fixed 60,000 expenses Operating income $ 50,000 review problem 2: Capacity in units 100,000 Selling price to outside customers on the $15 intermediate market Variable costs per unit 8 Fixed costs per unit (based on capacity 5 $8< transfere price <$14 2) vc $10 review problem 3: New South Queensland Wales Sales $4,000,000 $7,000,000 Average total operating assets $2,000,000 $2,000,000 Operating income $360,000 $420,000 Property, plant, and equipment (net) $950,000 $800,000

72 1) Queensland margin 0.09 turn 2 ROI= % new south wales margin 0.06 turn 3.5 ROI % 2) residual income= $60,000 residual income= $120, Product CD DVD Selling price per pack $8.00 $20.00 Variable expenses per pack $3.20 $10.50 Traceable fixed expenses per year $138,000 $45,000 Common fixed expenses in the company total $105,000 annually. Last year the company produced and so Total CD sales Variable expense CM traceable fixed expenses Segment Margin Commong fixed expenses Operating income Sales $2,000,000 Variable expenses 792,000 Contribution margin 1,208,000 Fixed expenses 1,305,000 Operating loss $ (97,000) Geographic Market South Central Sales $600,000 $800,000 Variable expenses as a percentage of sales 52% 30% Traceable fixed expenses $320,000 $530,000

73 1). South Central Sales $600,000 $800,000 Variable expenses $312,000 $240,000 CM $288,000 $560,000 Traceable fixed expenses $320,000 $530,000 Segment margin -$32,000 $30,000 Commom fixed cost 2). 2.The company's sales manager believes that sales in the Central geographic market could be in to support your answer. sales increase Central CM ratio 0.7 incremental CM less: add expense increased Segment Margin Yes it would increase the segment CM by $

74 The company would like to initiate an intensive advertising campaign in one of the two markets increase sales in the construction market by $70,000 or increase sales in the landscaping marke construction landscaping sales increase CM ratio incremental CM Less: costs increased segment margin ) Advertising should be done on landscaping 2) the $90000 is devided between the two segment and as not traceable 11-5 Selling price per unit on the outside market $40 Variable costs per unit $21 Fixed costs per unit (based on capacity) $9 Capacity in units 60,000 purchasing $38 a) bigger than $21 b) anything less than $38 c) yes it is possible d) no it is adviseable to buy from out side that way the company saves $2 per transformers 11-6 Case A B Division X: Capacity in units 100, ,000 Number of units being sold to outside customers 100,000 80,000 Selling price per unit to outside customers $50 $35 Variable costs per unit $30 $20 Fixed costs per unit (based on capacity) $8 $6 Division Y: Number of units needed for production 20,000 20,000 Purchase price per unit now being paid to an outside supplier $47 $34 1) Refer to the data in Case A above. Assume that $2 per unit in variable selling costs can be avoid

75 If the managers are free to negotiate and make decisions on their own, will a transfer take place transfere price=28+[(50-28)*20000/20000]=50 2) 11-8 in Case A even with the $2 reduction in the variable cost the transfere price will not take place b Case B with no change in price since division B has capacity to cover for the units of division Y and the variable cost fo the transfere can take place and it will be higher than $20 but lower than $34 Sales $12,000,000 Operating income $3,600,000 Average operating assets $24,000,000 1) Margin=operating income/sales 2) Turnover=sales/Avg operating asset 3) ROI= margin*turnover % % operating income $ 600,000 sales $ 2,400,000 average operating assets $ 4,400,000 min rate of return 0.09 Residual income= ( *.09)= $ 204, Division Eastern Western Sales $800,000 $1,850,000 Average operating assets $300,000 $400,000 Operating income $70,000 $115,000 Property, plant, and equipment $125,000 $200,000 1) Eastern margin= Turnover= ROI= Western margin=

76 Turnover= ROI= ) Western division is doing a better job but it is because it has bigger sales and operating assets comparing to eastern division Division Perth Darwin Sales $9,000,000 $20,000,000 Operating income $630,000 $1,800,000 Average operating assets $3,000,000 $10,000,000 1) Perth ROI= 0.21 Darwin ROI= ) Perth Residual income= $150, Darwin Residual income= $200,000.00

77 Family Law Commercial Law Total Family Law $400,000 $600,000 Revenues from clients $1,000,000 $400, , ,000 Variable expenses 220, , , ,000 Contribution 780, ,000 margin 280, ,000 Traceable fixed 670, ,000 expenses 20,000 90,000 Segment margin 110,000 20,000 24,000 36,000 Common fixed 60,000 expenses -$4,000 $ 54,000 Operating income $ 50,000 purchasing $14 margin=operating income/sales turnover=sales/avg operating asset

78 0.18 old 37,500 CD packs and 18,000 DVD packs. DVD North Total $600,000 $2,000,000 40% $300,000

79 North Total $600,000 $2,000,000 $240,000 $792,000 $360,000 $1,208,000 $300,000 $1,150,000 $60,000 $58, $97,000 ncreased by 15% if monthly advertising was increased by $25,000. Would you recommend the incr Total Toronto Vancouver

80 s during the next month. The campaign would cost $8,000. Marketing studies indicate that such a c et by $60,000. ded on intracompany sales.

81 ce? If so, within what range will the transfer price fall? Explain. because it is $3 more expensive to buy from the company. or division X for case B is 20 it is way cheaper than unit purchase price of $34 for division Y

82

83 Commercial Law $600, , , ,000 90,000

84

85 reased advertising? Show computations

86 campaign would

87 10-1 1) 2) 3) U -475 F 100 U 1) $11400 should have been incured to prepare the 6000 meals and it differs by $575 unfavourable 2) ) F 585 U 300 U $6825 should have been incured for the but it actually incured $300 more F U F 1)? Please advise the solution for this problem. Thanks 2)?

88 10-6 Actual DL hours(1) Budgeted DL hours(2) Standar DL hours(3) Actual cost incured: indirect LH indirect LH $ 0.90 $ 39, $ 40, supplies 6900 supplies $ 0.15 $ 6, $ 6, electricity 1800 electricity $ 0.05 $ 2, $ 2, order delivered paid returns 2000

89

90 Variancce (1-2) Variancce (1-3) Variancce (2-3) 0 U F F $ 2, U $ 1, U -$ F $ U $ U -$ F -$ F -$ F -$ F

91 9-1 August September October Budgeted sales (all on account) $400,000 Cash collected $100, Total $229,500 2) Accts receivable as of September 30 is $ July August September Sales units Add desired ending inv Total needs less: beginig inv Required production Year 2 First Second Third Budgeted production, in calculators 120, , ,000 Number of cheps per calculator Total cheps 360, , ,000 Add: ending inventory total available cheps 474, ,000 1,020,000 Less: beginning inv 72, , ,000 Total Purchase 402, , ,000 Total price $ 804,000 $ 1,272,000 $ 1,680, st Quarter 2nd Quarter 3rd Quarter Units to be produced 5,000 4,400 4,500 DL hour per unit Labour hour required Hourly wage rate $ 22,000 $ 19,360 $ 19,800 2). 1st Quarter 2nd Quarter 3rd Quarter Units to be produced 5,000 4,400 4,500

92 DL hour per unit Labour hour required Guaranteed labour hour labour hours paid Hourly wage rate $ 23,100 $ 19,800 $ 19, st Quarter 2nd Quarter 3rd Quarter Budgeted direct labour-hours 5,000 4,800 5,200 Variable mfg OH Total variable mfg OH Fixed mfg OH Total OH cost less: non cash cost Cash disbursement for mfg OH ) the company's predetermine rate is $ st Quarter 2nd Quarter 3rd Quarter Budgeted unit sales 12,000 14,000 11,000 variable selling and admin total variable selling and admin fixed selling and admin Total selling and admin Less: depreciation cash disburesemnet for selling and admin $ 85,000 $ 96,500 $ 88, Quarter Cash balance, beginning. $6 5 5 Add collections from customers Total cash available Less disbursements: Purchases of inventory Operating expenses Equipment purchases Dividends Total disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments (including interest)* 0 0 4

93 Total financing Cash balance, ending *Interest will total $4,000 for the year. 9-8 AUTOLAV INC. Flexible Budget Monthly Activity (cars w Per Car 7,000 8,000 Sales $80,000 Variable expenses: Cleaning supplies ,000 Utilities ,800 Maintenance ,200 Total variable expenses ,000 Contribution margin Fixed expenses: Operator wages 10,000 10,000 Depreciation 20,000 20,000 Rent 8,000 8,000 Insurance 1,000 1,000 Selling and administrative 4,000 4,000 Total fixed expenses 43,000 43,000 Operating income $ 16,500 $ 25, Flexible data Actual Data for 7800 cars for 7,800 Cars Sales $78,000 Variable expenses: Cleaning supplies ,725 Utilities ,795 Maintenance ,400 Total variable cost CM Fixed expenses: Operator wages ,270 Depreciation ,100 Rent ,000 Insurance ,090 Selling and administrative ,750 Total Fixed cost Total OH cost

94 November December Total $800,000 $700,000 $1,900,000 $280,000 $175,000 $200,000 $560, $20, $489,000 $755, October Year 3 Fourth First 200, ,000 Total for the year ,000 2,430, ,000 2,526, , ,000 2,454,000 $ 1,152,000 $ 4,908,000 4th Quarter Total 4,900 18, $ 21,560 $ 82,720 4th Quarter 4,900

95 $ 0.4 $ 11.0 per hour 1960 $ 16.5 over time ,440 4th Quarter 5,400 20, =175700/ th Quarter Toal 10,000 47, $ 85,500 $ 355,250 4 Year 7 $? ? 35?? 113? 36 2?????? -17 (?)

96 ?? $? $? washed) 9, ,000 20,000 8,000 1,000 4,000 43,000 $ 33,500 Variances $0 -$125 F $115 U $230 U $220 U -220 U $0 U $0 U $0 U $0 U $0 F $0 $220 U

97 8-5 units beginning inv 0 units produced units sold 9000 units ending inv 1000 variable costs per unit $40 DL $35 variable manufacturing OH $10 variable selling and admin $25 total variable cost per unit $110 fixed costs fixed manufacturing OH $300,000 fixed selling and admin $450,000 total fixed cost $750, ). absorption costing DL 35 DM 40 variable mfg OH 10 Fixed OH 30 Unit cost $

98 1). Unit cost under absorption costing Fixed OH 60 DM 120 DL 140 Variable OH 50 Unit cost Sales $ 4,000,000 COGS: Beginning Inv. $ - Add cog mfg (10000x 370? R per unit) $ 3,700,000 Goods available for sale $ 3,700,000 less: ending inv 2000 units 370 x R?) $ 740,000 $ 2,960,000 Gross margin $ 1,040,000 selling and admin exp variable selling and admin fixed selling & admin $ 160,000 operating income $ 400,000 Total fixed cost: $ 560,000 Operating income $ 480, Year 1 Year 2 Year 3 1). Inventories: Beginning (units) Ending (units) Change in in ventorires Variable costing operating income $292,400 $269,200 $251,800 Add fixed MFG OH Deduct fixed MFG OH Fixed mfg OH per unit $ 278,900 $ 273,700 $ 269,800 2). Year 4 variable costing operating income fixed costing operating income Inventories for year 4 increased by 60 units and fixed manufacturing OH cost was deferre

99 8-4 Year 1 Year 2 1). variable costing operating income absorption costing operating income a) were unit sales were constant from year to year? Explain answer) No it wasn't. in year one the production and sales were equal therefore the operating income is th In year 2production is greater than sales and that is why the absorption costing generated higher and in year 3 production is less than the sales and that is why variable costing operating in come i b). Year 1 Year 2 Year 3 sales = production production>sales production <sales inventory increased inventory decreased 2). Year 1 Year 2 variable costing operating income absorption costing operating income variable cost per unit manufacturing: DM 25 selling price $65 DL 12 variable mfg OH 3 variable selling & admin 5 fixed costs per year fixed mfg OH Fixed selling and admin produced sold ending inv ). absorption costing unit product cost Fixed mfg OH $ 8 a) DM 25 DL 12 variable mfg OH $ 3 48 b). sales $ 1,365,000 beginning inv 0 add COGMFG Goods available for sale

100 less ending inv $ 1,008,000 gross margin $ 357,000 variable selling and admin fixed selling and admin $ 215,000 operating income/loss: $ 142, variable cost per unit fixed costs per year DM $ 10 DL $ 5 variable mfg OH $ 2 variable selling & $ 4 fixed mfg OH $ 90,000 Fixed selling and a $ 300,000

101 absorption costing variable costing DL 35 DL DM 40 DM variable mfg OH 10 variable mfg OH Fixed OH 30 Unit cost Unit cost $ 115 Variable Contribution margin income statement Sales $ 1,800,000 Variable expenses: begin. Inv 0 Add: variable mfg cost $850,000 goods avail for sale $850,000 Less: ending inv $ 85,000 cogs: $765,000 Variable selling &admin $225,000 $990,000 CM $ 810,000 Fixed expense fixed OH fixed selling and admin $ 60,000 My solution of Absorption costing Sales $ 1,800,000 Variable expenses: begin. Inv 0 Add: variable mfg cost $1,150,000 goods avail for sale $1,150,000 Less: ending inv $ 115,000 cogs: $1,035,000 Variable selling &admin $225,000 $1,260,000 CM $ 540,000 Fixed expense fixed selling and admin Operating income $ 90,000

102 Unit cost under variable costing DM 120 DL 140 Variable OH 50 Unit cost 310 1). $ ). Sales Variable expenses $ - Beginning inv. $ - Add varaible mfg OH $ 3,700,000 less: ending inv 2000 units 370 x R?) $ 740,000 Gross margin selling and admin exp variable selling and admin fixed selling & admin $ 160,000 operating income $ 400,000 Total fixed cost: Operating income ed to the next period.

103 Year he same under both costing system. operating income is greater that absorption operating income. d Year ). Variable unit product costing DM 25 DL 12 variable mfg OH 3 $ 40 b). Sales $ 1,365,000 Variable expenses: beginning inv: 0 add variable mfg Oh goods available for sale

104 less ending inv variable COGS (21000*40) Variable selling & admin $ 945,000 CM $ 420,000 fixed mfg OH Fixed selling and admin Total fixed costs $ 310,000 Operating income $ 110,000

105 $ Break even point= Fixed expense/cm per unit CM per unit=810000/9000= $ 90 Break even point= Book solution of Absorption costing Sales $ 1,800,000 cogs: begin. Inv 0 Add: cost of goods man $1,150,000 goods avail for sale $1,150,000 Less: ending inv $ 115,000 $1,035,000 Gross margin: $ 765,000 Variable selling &admin $225,000 fixed selling and admin $675,000 Operating income $ 90,000

106 fixed manufacturing OH cost deferred to the next period $ 4,000,000 $ $ 2,960,000 1,040,000 $ $ 560, ,000

107 unit cost 7-3 Sales (40000 units) $ 300, VE $ 240,000 6 CM $ 60, FE $ 45,000 Operating income $ 15,000 1). CM ratio= 0.2 or 20% 2). Sales (40000 units) $ 300, VE $ 240,000 6 CM $ 60, FE $ 45,000 Operating income $ 15,000 the company's operating icome was increased by $ Percentage of Per Unit Sales Selling price $90 100% $247,500 Variable expenses 63 70% Contribution margin $27 30% $74,250 Fixed expense Operating income $9,250 1). Percentage of Per Unit Sales Selling price $90 100% $247,500 Variable expenses 63 70% Contribution margin $27 30% $74,250 Fixed expense Operating income $9,250 no a $5000 increase in advertising expense has reduced the operating income by $1 2) Percentage of Per Unit Sales Selling price $90 100% $247,500 Variable expenses 63 70%

108 Contribution margin $27 30% $74,250 Fixed expense Operating income $9,250 the $4 increase in VE increased the operating income by $ Mackson Products distributes a single product, a woven basket; its selling price is $8 and its v 1) selling price 8 100% VE 6 75% CM 2 25% 8Q=6Q Q=5500 Q=5500/2= 2) selling price 8 100% VE 6 75% CM 2 25% =5500/.25 3). selling price 8 100% VE 6 75% =5500/2 CM 2 25% 4). selling price 8 100% VE 6 75% =5500/.25 CM 2 25% 7-7 Selling price Variable expense Fixed expense Unit sales $25 per unit $15 per unit $8,500 per month 1,000 units per month sale price $ 25 10% VE $ 15 60% 1) CM $ 10 40%

109 2) margin of safety as % Percentage of Amount Sales Sales $120, % Variable expenses 84,000 70% Contribution margin 36,000 30% Fixed expenses 24,000 Operating income $ 12,000 =36000/ ) operating leverage: 3 2) the impact will be 30% 3) Amount 10% increase Sales $120,000 $ 132,000 Variable expenses 84,000 $ 92,400 Contribution margin 36,000 $ 39,600 Fixed expenses 24,000 $ 24,000 Operating income $ 12,000 $ 15,600

110 100% 80% 20% 100% $ 301,500 80% $ 241,200 20% $ 60,300 $ ,300 $259,500 $ $8,400 $77, $7, $297,

111 $112, $47,750.0 $38,500.0 variable cost is $6 per unit. The company's monthly fixed expense is $5, baskets $ 22, $ 22,000 =8500/10 break even 850 per unit Margin of safety 150 units =

112 6-1 Goes-Down-Smooth operates a number of smoothie bars in busy suburban malls. The fixed weekly expense of Required: 1. Fill in the following table with your estimates of total costs and cost per smoothie at the indicated levels o Smoothies Served in a Week 2,100 2,800 Fixed cost Variable cost Total cost Cost per smoothie served Does the cost per smoothie increase, decrease, or remain the same as the number of smoothies served in Answer: The cost decreases as the number of smoothies served per week increased 6-3 Month Occupancy-Days Electrical Costs January 2,604 $6,257 February 2,856 $6,550 March 3,534 $7,986 April 1,440 $4,022 May 540 $2,289 June 1,116 $3,591 July 3,162 $7,264 August 3,608 $8,111 September 1,260 $3,707 October 186 $1,712 November 1,080 $3,321 December 2,046 $5, The Rhythm Shop Income Statement Acoustic Guitar Department For the Quarter Ended March 31 Sales $1,600,000 Cost of goods sold 800,000 Gross margin 800,000 Selling and administrative expenses: Selling expenses $400,000 Administrative expenses 200, ,000 Operating income $200,000

113 Units Produced and Sold 60,000 80,000 Total costs: Variable costs $150, Fixed costs 360, Total costs $510, Cost per unit: Variable cost $ Fixed cost Total cost per hour $8.50 $7.00 Required: Month Units Shipping Total Shipped Expense January 4 $2,200 February 7 $3,100 March 5 $2,600 April 2 $1,500 May 3 $2,200 June 6 $3,000 July 8 $3, Month Blood Tests Performed Blood Test Costs January 3,125 $14,000 February 3,500 $14,500 March 2,500 $11,500 April 2,125 $10,000 May 2,250 $11,000 June 1,500 $8,500 July 1,875 $9,000 August 2,750 $12,000 September 2,875 $13,000 1) 3,500 $14,500 1,500 $8,500 2,000 6, Total cost= 2) 2300 blood test Total cost=