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 31 100,000 Finished goods inventory, January 1 260,000 Finished goods inventory, December 31 210,000 2-3 sales Beg. Inv 140000 add: purchases 2550000 Goods available for sale 2690000 Less: ending inv 180000 COGS Gross margin Less: expenses selling exp 110000 admin exp 470000 Total expenses Net income 3-3 14.65 POHR 10.08292683 Actual
4-2 units beginning inv. 25000 ending inv. 15000 205000 4-4 Cost of transferred units cost of ending WIP 53144 TOTAL 10400 4-6 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 68600 907200 975800 820000 1.19
4-9 Products transferred 25000 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 30000 3000 33000 4-14 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 790000 30000 Equivalent units of production 820000 Wip Materials
$ 33,000 Total cost of ending WIP $ 78,000 5-2 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 $1,820,000 5-4 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 $160.00 per order Shipments $120.00 per shipment Product sustaining $800.00 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
Direct materials cost per jet ski 60800 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 2640 18 hours product testing 360 3 sales calls 1422 4482 Total cost for recent order $ 8,904 5-12 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 2646 0.7 DLH 173 $125/skateboard selling price 1320 DM $77.50 248000 DL $17.50 56000 chapter 7 sales $ 3,129 Variable expense $ 756 CM $ 2,373 Fixed expense 1300 Operating income $ 1,073
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) 300000 VE 240000 CM 60000 FE 45000 Operating income 15000 1) CM ratio= 20% 2) sales (40000) 301500 VE 240000 CM 60000 FE 45000 Operating income 15000 7-4 1) 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
FE 5500 1) BE point equation methid $8=$6+5500 2) BE in $ sales =5500/.25 3) =5500/27 4) 5500/.25 7-7 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 $15,600 8-1 Units in beginning inventory 0 Units produced 10,000 Units sold 8,000
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 R400,000 8-2 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) 12333.3 was defered inventory to next perio 2) Sales COGS Begin. Inv 0 Add COGM 3100000 Less ending inv 620000 Gross margin Selling and administrative expenses: Variable selling and administrative 160000 Fixed selling and administrative 400000 Fixed manufacturing OH 600000 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
Deduct fixed MFG OH 13500 Fixed mfg OH per unit $ 278,900 8-4 1) 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 1000000 Goods available for sale 1000000 Less: ending inv 160000 Variable COGS 840000 Variable selling and admin 105000 CM Less fixed costs Fixed manufacturing overhead $200,000 Fixed selling and administrative expense $110,000 Operating income sales Beginning inv 0 COGM 1200000 Less ending inv 192000
Gross margin Variable selling and admin $105,000 Fixed selling and administrative expense $110,000 9-1 August Budgeted sales (all on account) 70000 17500 17500 9-2 July Sales 30000 Add desired ending inv 4500 total needs 34500 less ending inv 3000 total production 31500 9-3 First Budgeted production, in calculators 120,000 3 Total cheps 360000 Add desired ending inv 114000 Total needs 474000 Less beginning inv 72000 Total purchases 402000 Total price $ 804,000 9-4 1st Quarter 1) Units to be produced 5,000 0.4 Labour requirements 2000 Labout costs $ 22,000 2) 1st Quarter Units to be produced 5,000
0.4 Labour requirements 2000 Guaranteed payment 1800 Difference 200 payment $ 23,100 9-5 9-6 10-4 1st Quarter Budgeted direct labour-hours 5,000 Variable MFG OH 1.75 Total variable cost 8750 ADD:fixed mfg OH 35000 Total cost 43750 Less: non cash items 15000 cash disbursement $ 28,750 1st Quarter Budgeted unit sales 12,000 variable selling and admin 2.75 Total variable cost 33000 Fixed selling and admin 12000 executive salaries 40000 insurance payment property tax dpreciation 16000 total costs 101000 Less: depreciation 16000 Total selling and admin cost $ 85,000 5700 5700 1.25 1.3 7125 7410-285 F 3 10-6 Indirect labour $0.90 Supplies $0.15 Electricity $0.05 Total variable cost 1.1 Indirect labour $42,000
Supplies $6,900 Electricity $1,800 Budgeted direct labour-hours 42,000 Actual direct labour-hours 44,000 Standard direct labour-hours allowed 45,000 10-9 Standard Quantity or Hours Direct materials 7.2 grams Direct labour 0.4 hours 20000 grams materials purchased at 2.40 and all used to make 2500 bottles 900 labour hour at $10800 20000 20000 2.4 2.5 48000 50000-2000F 30 11-1 Product CD Selling price per pack $8.00 Variable expenses per pack $3.20 Traceable fixed expenses per year $138,000 common fixed expenses 105000 sales 37500 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
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 120000 CM ratio 0.7 incremental CM 84000 less add expense 25000 increas in income 59000 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
Fixed costs per unit (based on capacity) $9 Capacity in units 60,000 motor division 10000 units purchases each year @ $38 electrical division now selling 50000 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= 0.15 11-10 Division Eastern Sales $800,000 Average operating assets $300,000 Operating income $70,000 Property, plant, and equipment $125,000 1) margin= 0.088 turnover= 2.667 ROI= 0.233 11-11 Division Perth Sales $9,000,000 Operating income $630,000 Average operating assets $3,000,000 ROI= 0.21 Risidual= $150,000
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 3000 12-3 12-4 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 10 10 bangles 3499.5 V OH 70 DM 1430 DL 860 Filigree 60 total variable cost 2420 CM 1079.5 Fixed cost 465 operating icome 614.5 12-5 A Selling price $60 Variable costs: Direct materials 27
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 $12 12-6 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 12-8 13-1 net present value 760000 320000 440000 434000 6000 Year Cash flows now -30000 1-8 5000 net present value
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 3200000 2510000 690000 $ 580000 110,000 600650 713400 112750 under applied cash 75000 152000
126000 178000 wip 67000 134000 178000 materials conversion 90% 60% 70% 50% 100% 100% 10500 7500 205000 205000 215500 212500 MATERIAL CONVERSION 300 100 31.56 9.32 9468 932 Materials Conversion %-age Materials $68,600 $78,000 80% $907,200 $962,000 60% Conversion Equivalent units 78000 790000 962000 30000 1040000 820000 800000 1.3
Materials Conversion Total 80% 60% 9.5 7.6 $ Total cost 17.10 Materials Conversion %-age Materials 90% 80% 75% 50% conversion Material conversion 30000 9000 4400 2000 57000 30800 32000 66000 35200 33000 32000 $ 2.00 $ 1.10 Costs Materials $22,000 $48,000 Conversion $880,000 $2,367,000 Conversion Materials 790000 $ 22,000 15000 $ 880,000 805000 $ 902,000 $ 820000 1.10 Conversion FG
$ 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 $7,950 209200
63849 145351 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 248000 DL 56000 Supporting DL 31360 batching process 2646 Order processing 173 # customer service 1320 Total expenses Operating income (loss) Ratio 1.49 0.36 0.242 1.13 0.758
=Fixed expense/cm per unit 1150.4 =Fixed expense/cm ratio $ 1,714 =Fixed expense+target/cm per unit 3363 1150 2100 950 45% 7.5000 6 1.5 7.5 100% 301500 6.0 80% 241200 1.5 20% 60300 45000 15300 Percentage of Sales 100% $247,500 70% 173250 30% $74,250 $65,000 $9,250 New income statement $247,500 $259,500 5% increase in sale 173250 181650 $74,250 $77,850 $65,000 $70,000 $9,250 $7,850 -$1,400 100 0.75 0.25
2750 units $ 22,000 2750 units $ 22,000 100% 60% 40% Percentage of Sales 100% 70% 30% increase in operating income Percentage of Sales 100% 8400 70% 30% 60 120 120 140
140 50 50 310 370 Absorption R4,000,000 2,960,000 1,040,000 R 480,000 560,000 d 4000000 2480000 1520000 1160000 360000 Year 2 Year 3 150 160 160 200-10 -40 $269,200 $251,800 4500 18000
$ 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 25 25 12 12 3 3 40 8 48 1365000 945000 420000 $310,000 $110,000 1365000 1008000
357000 $215,000 $142,000 September October November 180000 $400,000 $800,000 45000 $100,000.00 $200,000.00 49000 126000 $280,000.0 3500 9000 94000 229500 $489,000.00 Aug sept Total 45000 60000 135000 6000 5000 15500 51000 65000 150500 4500 6000 13500 46500 59000 137000 Year 2 Second Third Fourth 190,000 300,000 200,000 3 3 3 570000 900000 600000 180000 120000 96000 750000 1020000 696000 114000 180000 120000 636000 840000 576000 $ 1,272,000 $ 1,680,000 $ 1,152,000 2nd Quarter 3rd Quarter 4th Quarter 4,400 4,500 4,900 0.4 0.4 0.4 1760 1800 1960 $ 19,360 $ 19,800 $ 21,560 2nd Quarter 3rd Quarter 4th Quarter 4,400 4,500 4,900
0.4 0.4 0.4 1760 1800 1960 1800 1800 1800-40 0 160 $ 19,800 $ 19,800 $ 22,440 2nd Quarter 3rd Quarter 4th Quarter 4,800 5,200 5,400 1.75 1.75 1.75 8400 9100 9450 35000 35000 35000 43400 44100 44450 15000 15000 15000 $ 28,400 $ 29,100 $ 29,450 2nd Quarter 3rd Quarter 4th Quarter 14,000 11,000 10,000 2.75 2.75 2.75 38500 30250 27500 12000 12000 12000 40000 40000 40000 6000 6000 6000 16000 16000 16000 112500 104250 101500 16000 16000 16000 $ 96,500 $ 88,250 $ 85,500 585 U 5250 1.3 6825 300 U 44000 44000 45000 $42,000 $39,600 $40,500 $6,900 $6,600 $6,750 $1,800 $2,200 $2,250 48400 48400 49500
Standard Price or Rate Standard Cost $2.50 per gram $18.00 $10.00 per hour $4.00 000 U 5000 U 18000 2.5 45000 DVD $20.00 $10.50 $45,000 18000 Total $ 360,000 $ 660,000 $ 189,000 $ 309,000 $ 171,000 $ 351,000 $ 45,000 $ 183,000 $ 126,000 $ 168,000 $ 105000 63,000
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 -$ 155000 97,000 reased by 15% if monthly advertising was increased by $25,000. r. construction landscaping 70000 60000 0.35 0.5 24500 30000 8000 8000 16500 22000 uring the next month. ase sales in the construction market by $70,000 or increase sales in the landscaping m
$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 $200,000 0.062 4.625 0.288 Darwin $20,000,000 $1,800,000 $10,000,000 16% min req 0.18 $200,000
Home Nursing Meals on Wheels House-keeping $260,000 $400,000 $240,000 120,000 210,000 160,000 140,000 190,000 80,000 8,000 40,000 20,000 20,000 7,000 15,000 40,000 38,000 37,000 52,000 80,000 48,000 120,000 165,000 120,000 $20,000 $25,000 -$40,000 12,000 Unit per Year make 12000 $144,000 12 144000 120,000 10 120000 36,000 3 36000 96,000 2 24000 192,000 0 0 $588,000 27 324000 Product B C $90 $80 14 40
32 16 8 4 54 60 $36 $20 40% 25% $36 $20 32 16 8 8 4 2 $9 $10 Sales Value sales value at the split off $96,000 60000 0.25 $180,000 108000 0.45 $90,000 72000 0.3 240000 Y Z $180,000 90000 $108,000 72000 $72,000 $18,000 48000 14400 $24,000 $3,600 Factor 11% present value 1-30000 5.146 25730-4270
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 780,000 150,000 640,000 1,570,000 180,000 100,000 1,650,000 Accts recev
oh 6000 18000 126000 %-age conversion 75% 20% 790000 10000 800000
25000 25000 2400 1800 27400 26800 $ 427,500.00 $ 22800 13680 463,980.00 Total cost of production %-age conversion cost per equivalent units Conversion $ 48,000 $ 2,367,000 $ 2,415,000 $ 805000 3.00 $ 4.10 unit cost
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 $ 280 30 $ 9,600 $ 90 1 $ 200 $ 40 1 $ 800 $ 160 1 $ 1,200 $ 120 1 $ 800 $ 800 $ 19,600 $ 1,490 $ 21,090 Custom Design Standard Model Custom Design 3 3 424 636 3 0 729 28 588 672 $13,200 $21,200 $39,600 $9,240 $15,900 $27,720
400000 339499 60501
margin of safety $ 300 increase es and $5000 in ad exp no it decreases the income statement by 1400
variable costing
December Total $700,000 $1,900,000 $175,000.00 $560,000.0 $20,000.00 755000 1585000 oct 50000 $ Total Year 3 First 810,000 160,000 510000 2940000 486000 2454000 4,908,000 480000 3 Total $ 82,720 Total
$ 85,140 total 20,400 175700 $ 8.61 predetermined OH rate Total $ 355,250
market by $60,000.
80,000 15,000 37,000 52,000 28,000 lost to the company buy from outside 384000 384000 60000 more expensive to buy
processing cost 30000 54000 36000 120000
old 260,000 1,650,000 1,910,000 210,000 1,700,000 raw materials 75000 73000
13-1 Year cash flows 11% factor now -30000 1 1-8 5000 5.146 Net present value 13-2 1) the total annual cash inflow is $9000 2) the internal rate is 5% 3) initial cost 45000 life of project 6 annual cost savings 9000 salvage value 13000 item years amount of cash flow 2% factor annual cost savings 1-6 9000 5.001 initial investment now 45000 1 salvage value 6 13000 5 13-3 item years cash flow 15% factor annual savings 1-10 100000 5.019 investment now 750000 1 present value 1) the intangible values must be greater than $248100 13-4 Investment Proposal A B C Investment required -$85,000 -$200,000 -$90,000 Present value of cash inflows 119,000 250,000 135,000 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
3 $6,000 4 $8,000 5 $9,000 6 $8,000 7 $6,000 8 $5,000 9 $4,000 10 $4,000 S o 13-6 initial investment 80000 old machine cost 33000 simple rate= new machine cost 10000 old machine residual 5000 depreciation on new mach 8000 13-7 13-9 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 15000 1 annual cash inflow 1-10 4000 4.833 present value Project B item year cash flow 16% factor investment now 15000 1 annual cash inflow 1-10 0 Single cash inflow at the end o 10 60000 0.227 present value the company should invest on project A initial investment 97900 increase cash flow 17000 yearly depreciation 10877.8 1) internal rate= 5.76 15% 2) item year cash flow 10% factor investment now 97900 1
annual cash inflow 1-9 17000 5.759 present value 3) initial investment 97900 increase cash flow 15000 internal rate= 6.53 8% 13-10 initial investment 247760 increase cash flow 40000 internal rate 6.194 the machine needs to be used for 12 year
Presesnt value -30000 25730-4270 present value of cash flows 45009 45000 65000 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 -$170,000 221,000 $51,000 2) payback $1.30 Payback period = Investment Net annual ca calculation using the payback formula g is not right with the formula
Simple rate of return = Incremental - Incremental expenses, revenues including depreciation Initial investment * ('23000-8000)/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
$ $ 97,903 3 rs
ows red required cash inflow
9-2 9-3 July August September Total October Sales units 30000 45000 60000 135000 50000 Add desired ending inv 4500 6000 5000 15500 Total needs 34500 51000 65000 150500 less: beginig inv 3000 4500 6000 13500 Required production 31500 46500 59000 137000 Budgeted production, in calculators Year 2 Year 3 First Second Third Fourth First 120,000 190,000 300,000 200,000 160,000 3 3 3 3 3 Total Total cheps 360,000 570,000 900,000 600,000 2,430,000 Add: ending inventory 114000 180000 120000 96000 510000 total available cheps 474,000 750,000 1,020,000 696,000 2,940,000 Less: beginning inv 72,000 114,000 180,000 120,000 486,000 Total Purchase 402,000 636,000 840,000 576,000 2,454,000 Total price $ 804,000 $ 1,272,000 $ 1,680,000 $ 1,152,000 4908000 9-4 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 0.4 0.4 0.4 0.4 0.4 Labour hour required 2000 1760 1800 1960 7520 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 0.4 0.4 0.4 0.4 0.4 Labour hour required 2000 1760 1800 1960 7520 Guaranteed labour hour 1800 1800 1800 1800 1800 labour hours paid 2000 1800 1800 1960 Hourly wage rate $ 23,100 $ 19,800 $ 19,800 $ 22,440 $ 85,140 10-4 5700 5700 5250
1.25 1.3 1.3 7125 7410 6825-285 f 585 u 300 U 10-6 Bugeted Actual Standard 44000 44000 45000-1000 indirect LB 0.9 39600 42000 40500 1500 supplies 0.15 6600 6900 6750 150 electricity 0.05 2200 1800 2250-450 Actual cost incured Total cost 48400 50700 49500-6700 -4500 11-1 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 300000 360000 660000 VE 120000 189000 309000 CM 180000 171000 351000 traceable ex 138000 45000 183000 Segment margin 42000 126000 168000 common fixed cost 105000 Operating income 63000 11-2
480,000 11 normal 16.5 overtime
U F F U 37,500 CD packs and 18,000 DVD packs.
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 490,000 120,000 210,000 160,000 Contribution margin 410,000 140,000 190,000 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 405,000 120,000 165,000 120,000 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 12000 un
Direct materials $12 $144,000 12 $144,000 Direct labour 10 120,000 10 120,000 Variable manufacturing 3 36,000 overhead 3 36,000 Fixed manufacturing 8* 96,000 overhead, traceable 2 24,000 Fixed manufacturing 16 192,000 overhead, common, but allocated 0 0 Total cost $49 $588,000 27 $ 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) =78000-60000=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 78000 12-4 Direct materials $143.00 Direct labour 86.00 Manufacturing overhead 35.00 Unit product cost $264.00 12-5 unit total 10 10 bangles 3499.5 V OH 70 DM 1430 DL 860 Filigree 60 total variable cost 2420 CM 1079.5 Fixed cost 465 operating icome $ 614.50 Yes the order should be accepted because it increases t Product A B C Selling price $60 $90 $80 Variable costs: Direct materials 27 14 40 Direct labour 12 32 16
Variable manufacturing overhead 3 8 4 Total variable cost 42 54 60 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 42000 48000 14400 profit/loss from further processing -$6,000 $24,000 $3,600 12-7 Product Y and Z should be processed further while product X should be sold at the split point Insurance $1,750 1750 Licences $250 250 Taxes (vehicle) $150 150 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
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 60,000 320,000 Contribution margin 620,000 140,000 480,000 Fixed expenses 540,000 180,000 360,000 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
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
$ 384,000 $ 384,000 $ 60,000 om outside 0 will increase the company's operating income by $18000 the operating income by 614.50 Product A B C Contribution $18 $36 $20 margin 1 1 1 CM per minute 18 36 20
Allocation of 3000 for the 3 product 900 1200 750 LBH rate 8 8 8 Total cost 7200 9600 6000
Droping desgin dep. Copying $760,000 320000 $440,000 434000 $6,000 total operating income will be $6000
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). 8+ 20000 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
1) Queensland margin 0.09 turn 2 ROI= 0.18 18% new south wales margin 0.06 turn 3.5 ROI 0.21 21% 2) residual income= $60,000 residual income= $120,000.00 11-1 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 660000 300000 Variable expense 309000 120000 CM 351000 180000 traceable fixed expenses 183000 138000 Segment Margin 168000 42000 Commong fixed expenses 105000 Operating income 63000 11-2 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
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 120000 Central CM ratio 0.7 incremental CM 84000 less: add expense 25000 increased Segment Margin 59000 Yes it would increase the segment CM by $59000 11-3 11-4
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 70000 60000 CM ratio 0.35 0.5 incremental CM 24500 30000 Less: costs 8000 8000 increased segment margin 16500 22000 1) Advertising should be done on landscaping 2) the $90000 is devided between the two segment 72000 and 18000 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 10000 @ $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 100,000 100,000 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
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 20000 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 11-9 30% 0.5 15% operating income $ 600,000 sales $ 2,400,000 average operating assets $ 4,400,000 min rate of return 0.09 Residual income=600000-(4400000*.09)= $ 204,000 11-10 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= 0.0875 Turnover= 2.666666667 ROI= 0.233333333 Western margin= 0.062162162
Turnover= 4.625 ROI= 0.2875 2) 11-11 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= 0.18 2) Perth Residual income= $150,000.00 Darwin Residual income= $200,000.00
Family Law Commercial Law Total Family Law $400,000 $600,000 Revenues from clients $1,000,000 $400,000 100,000 120,000 Variable expenses 220,000 100,000 300,000 480,000 Contribution 780,000 300,000 margin 280,000 390,000 Traceable fixed 670,000 280,000 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 10000 @ $14 margin=operating income/sales turnover=sales/avg operating asset
0.18 old 37,500 CD packs and 18,000 DVD packs. DVD 360000 189000 171000 45000 126000 North Total $600,000 $2,000,000 40% $300,000
North Total $600,000 $2,000,000 $240,000 $792,000 $360,000 $1,208,000 $300,000 $1,150,000 $60,000 $58,000 155000 -$97,000 ncreased by 15% if monthly advertising was increased by $25,000. Would you recommend the incr Total Toronto Vancouver 825000 150000 600000 675000 405000 45000 360000 420000 105000 240000 168000 78000 90000 252000 27000 150000 120000 132000
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.
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
Commercial Law $600,000 120,000 480,000 390,000 90,000
reased advertising? Show computations
campaign would
10-1 1) 2) 3) 10-3 1150 1150 1200 10 9.5 9.5 11500 10925 11400 575 U -475 F 100 U 1) $11400 should have been incured to prepare the 6000 meals and it differs by $575 unfavourable 2) 10-4 1) 10-5 5700 5700 5250 1.25 1.3 1.3 7125 7410 6825-285 F 585 U 300 U $6825 should have been incured for the 35000 but it actually incured $300 more 51000 51000 48000 7.73 8.33 8.33 394000 424830 400000-30830 F 24830 U -6000 F 1)? Please advise the solution for this problem. Thanks 2)?
10-6 Actual DL hours(1) Budgeted DL hours(2) Standar DL hours(3) Actual cost incured: 44000 44000 45000 indirect LH 42000 indirect LH $ 0.90 $ 39,600.00 $ 40,500.00 supplies 6900 supplies $ 0.15 $ 6,600.00 $ 6,750.00 electricity 1800 electricity $ 0.05 $ 2,200.00 $ 2,250.00 10-7 order 50000 delivered 40000 paid 34000 returns 2000
Variancce (1-2) Variancce (1-3) Variancce (2-3) 0 U -1000 F -1000 F $ 2,400.00 U $ 1,500.00 U -$ 900.00 F $ 300.00 U $ 150.00 U -$ 150.00 F -$ 400.00 F -$ 450.00 F -$ 50.00 F
9-1 August September October Budgeted sales (all on account) 70000 180000 $400,000 Cash collected 17500 45000 $100,000 49000 126000 3500 Total 17500 94000 $229,500 2) Accts receivable as of September 30 is $126000 9-2 July August September Sales units 30000 45000 60000 Add desired ending inv 4500 6000 5000 Total needs 34500 51000 65000 less: beginig inv 3000 4500 6000 Required production 31500 46500 59000 9-3 Year 2 First Second Third Budgeted production, in calculators 120,000 190,000 300,000 Number of cheps per calculator 3 3 3 Total cheps 360,000 570,000 900,000 Add: ending inventory 114000 180000 120000 total available cheps 474,000 750,000 1,020,000 Less: beginning inv 72,000 114,000 180,000 Total Purchase 402,000 636,000 840,000 Total price $ 804,000 $ 1,272,000 $ 1,680,000 9-4 1st Quarter 2nd Quarter 3rd Quarter Units to be produced 5,000 4,400 4,500 DL hour per unit 0.4 0.4 0.4 Labour hour required 2000 1760 1800 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
DL hour per unit 0.4 0.4 0.4 Labour hour required 2000 1760 1800 Guaranteed labour hour 1800 1800 1800 labour hours paid 2000 1800 1800 Hourly wage rate $ 23,100 $ 19,800 $ 19,800 9-5 1st Quarter 2nd Quarter 3rd Quarter Budgeted direct labour-hours 5,000 4,800 5,200 Variable mfg OH 1.75 1.75 1.75 Total variable mfg OH 8750 8400 9100 Fixed mfg OH 35000 35000 35000 Total OH cost 43750 43400 44100 less: non cash cost 15000 15000 15000 Cash disbursement for mfg OH 28750 28400 29100 2) the company's predetermine rate is $8.61 9-6 1st Quarter 2nd Quarter 3rd Quarter Budgeted unit sales 12,000 14,000 11,000 variable selling and admin 2.75 2.75 2.75 total variable selling and admin 33000 38500 30250 fixed selling and admin 68000 74000 74000 Total selling and admin 101000 112500 104250 Less: depreciation 16000 16000 16000 cash disburesemnet for selling and admin $ 85,000 $ 96,500 $ 88,250 9-7 Quarter 1 2 3 Cash balance, beginning. $6 5 5 Add collections from customers 65 70 96 Total cash available 71 75 101 Less disbursements: Purchases of inventory 35 45 48 Operating expenses 28 30 30 Equipment purchases 8 8 10 Dividends 2 2 2 Total disbursements 73 85 90 Excess (deficiency) of cash available over -2-10 11 disbursements Financing: Borrowings 7 15 0 Repayments (including interest)* 0 0 4
Total financing 7 15 0 Cash balance, ending 5 5 7 *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 10 70000 $80,000 Variable expenses: Cleaning supplies 0.75 5250 6,000 Utilities 0.6 4200 4,800 Maintenance 0.15 1050 1,200 Total variable expenses 1.5 10500 12,000 Contribution margin 8.5 59500 68000 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 $ 25,000 9-9 Flexible data Actual Data for 7800 cars for 7,800 Cars Sales 10 78000 $78,000 Variable expenses: Cleaning supplies 0.75 5850 5,725 Utilities 0.6 4680 4,795 Maintenance 0.15 1170 1,400 Total variable cost 11700 11920 CM 66300 66080 Fixed expenses: Operator wages 10270 10,270 Depreciation 20100 20,100 Rent 8000 8,000 Insurance 1090 1,090 Selling and administrative 3750 3,750 Total Fixed cost 43210 43210 Total OH cost 23090 22870
November December Total $800,000 $700,000 $1,900,000 $280,000 $175,000 $200,000 $560,000 9000 $20,000.00 $489,000 $755,000 1585000 October 135000 50000 5000 140000 50000 5000 5000 135000 45000 Year 3 Fourth First 200,000 160,000 Total for the year 3 3 600,000 2,430,000 96000 96000 696,000 2,526,000 120,000 72000 576,000 2,454,000 $ 1,152,000 $ 4,908,000 4th Quarter Total 4,900 18,800 0.4 0.4 1960 7520 $ 21,560 $ 82,720 4th Quarter 4,900
$ 0.4 $ 11.0 per hour 1960 $ 16.5 over time 1800 1960 22,440 4th Quarter 5,400 20,400 1.75 8.612745098 9450 35000 44450 175700 =175700/20400 15000 8.61 29450 4th Quarter Toal 10,000 47,000 2.75 2.75 27500 129250 74000 290000 101500 419250 16000 64000 $ 85,500 $ 355,250 4 Year 7 $? 92 323 99? 35?? 113? 36 2?????? -17 (?)
?? $? $? washed) 9,000 90000 6750 5400 1350 13500 76500 10,000 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
8-5 units beginning inv 0 units produced 10000 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 $750,000 8-6 1). absorption costing DL 35 DM 40 variable mfg OH 10 Fixed OH 30 Unit cost $ 115 8-1
1). Unit cost under absorption costing Fixed OH 60 DM 120 DL 140 Variable OH 50 Unit cost 370 8-2 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 $ 480,000 8-3 Year 1 Year 2 Year 3 1). Inventories: Beginning (units) 180 150 160 Ending (units) 150 160 200 Change in in ventorires 30-10 -40 Variable costing operating income $292,400 $269,200 $251,800 Add fixed MFG OH 4500 18000 Deduct fixed MFG OH 13500 Fixed mfg OH per unit $ 278,900 $ 273,700 $ 269,800 2). Year 4 variable costing operating income 240200 fixed costing operating income 267200-27000 -60 Inventories for year 4 increased by 60 units and 27000 fixed manufacturing OH cost was deferre
8-4 Year 1 Year 2 1). variable costing operating income 16847 16847 absorption costing operating income 16847 29378 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 16847-18153 absorption costing operating income 16847 17583 8-7 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 200000 Fixed selling and admin 110000 produced 25000 sold 21000 ending inv 4000 1). 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 1200000 Goods available for sale 1200000
less ending inv 192000 $ 1,008,000 gross margin $ 357,000 variable selling and admin 105000 fixed selling and admin 110000 $ 215,000 operating income/loss: $ 142,000 8-8 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
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 300000 fixed selling and admin 450000 750000 $ 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 450000 450000 Operating income $ 90,000
Unit cost under variable costing DM 120 DL 140 Variable OH 50 Unit cost 310 1). $ 56 13214.29 2). 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.
Year 3 16847 6018 he same under both costing system. operating income is greater that absorption operating income. d Year 3-53153 18318 2). 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 1000000 goods available for sale 1000000
less ending inv 160000 variable COGS (21000*40) 840000 Variable selling & admin 105000 $ 945,000 CM $ 420,000 fixed mfg OH 200000 Fixed selling and admin 110000 Total fixed costs $ 310,000 Operating income $ 110,000
$ 35 40 10 85 Break even point= Fixed expense/cm per unit CM per unit=810000/9000= $ 90 Break even point= 8333.333333 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 450000 $675,000 Operating income $ 90,000
fixed manufacturing OH cost deferred to the next period $ 4,000,000 $ $ 2,960,000 1,040,000 $ $ 560,000 480,000
unit cost 7-3 Sales (40000 units) $ 300,000 7.5 VE $ 240,000 6 CM $ 60,000 1.5 FE $ 45,000 Operating income $ 15,000 1). CM ratio= 0.2 or 20% 2). Sales (40000 units) $ 300,000 7.5 VE $ 240,000 6 CM $ 60,000 1.5 FE $ 45,000 Operating income $ 15,000 the company's operating icome was increased by $300 7-4 Percentage of Per Unit Sales Selling price $90 100% $247,500 Variable expenses 63 70% 173250 Contribution margin $27 30% $74,250 Fixed expense 65000 Operating income $9,250 1). Percentage of Per Unit Sales Selling price $90 100% $247,500 Variable expenses 63 70% 173250 Contribution margin $27 30% $74,250 Fixed expense 65000 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% 173250
Contribution margin $27 30% $74,250 Fixed expense 65000 Operating income $9,250 the $4 increase in VE increased the operating income by $38500 7-5 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+5500+0 2Q=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%
2) margin of safety as % 0.15 7-8 Percentage of Amount Sales Sales $120,000 100% Variable expenses 84,000 70% Contribution margin 36,000 30% Fixed expenses 24,000 Operating income $ 12,000 =36000/12000 1) 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
100% 80% 20% 100% $ 301,500 80% $ 241,200 20% $ 60,300 $ 45000 15,300 $259,500 $0.05 181650 $8,400 $77,850 70000 $7,850 1400 $297,000.0 184250
$112,750.0 65000 $47,750.0 $38,500.0 variable cost is $6 per unit. The company's monthly fixed expense is $5,500 2750 baskets $ 22,000 2750 $ 22,000 =8500/10 break even 850 per unit Margin of safety 150 units =1000-850
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 2500 2500 Variable cost 1575 2100 Total cost 4075 4600 Cost per smoothie served 1.94 1.64 2. 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 $5,196 6-4 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 200,000 600,000 Operating income $200,000
6-5 6-6 Units Produced and Sold 60,000 80,000 Total costs: Variable costs $150,000 200000 Fixed costs 360,000 360000 Total costs $510,000 560000 Cost per unit: Variable cost $2.50 2.5 Fixed cost 6 4.5 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 $3,600 6-8 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 6,000 3 4000 Total cost= 2) 2300 blood test Total cost=