BYP 6-3 (a) When looking at types of cost for coca-cola sweeteners and packaging are a variable cost because the use is directly proportional to the amount of product produced. If the unit cost of a variable cost item increases, the contribution margin will decline. Therefore, if the company is looking to keep the net income higher they need to either increase price, the number sold or cut other costs (b) However, unlike variable costs, the relationship of marketing costs is not directly
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difference between gross margin and contribution margin? Gross Margin is the Gross Profit as a percentage of Net Sales. The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses. Contribution Margin is Net Sales minus the variable product costs and the variable period expenses. The Contribution Margin Ratio is the Contribution Margin as a percentage of Net
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ACC604 Final Exam Practice Questions – Series H 1. The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: A. 50% B. 200% C. 300% D. 20%
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whether to introduce a new product or service line, to determine the appropriate sale price and the consequent market position for the firm’s product. Question 1) “Contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. To compute profit contribution that can be earned by carrying 1 ton of tapioca from Balik Papan to Singapore, dock to dock, and 1 ton of general merchandise goods from Singapore to Balik Papan
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histogram of these errors. As an example, from this plot, 50% of the errors are between 0.49 and 1.04 or 66.6% of the errors are between 0.49 and 1.17 Our second step is to compute the contribution to margin against the liquidation value if not demanded. From the information above we have the margin contribution as $45 - $25 = $20 and the liquidation value as $25 - $15 = $10. This gives us a 20/(20+10) = 0.66 fractile. From the chart above we assume that forecast error for any item at the 0.66
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expenses Contribution Margin Fixed Expenses Net operating income $ 20,000.00 $ 12,000.00 $ 8,000.00 $ 6,000.00 $ 2,000.00 per unit $ 100% $ 20.00 60% $ 12.00 40% $ 8.00 1. Total contribution margin Total units sold Contribution margin per unit $ $ 8,000.00 1,000 units 8.00 per unit 2. Total contribution margin Total sales Contribution margin ratio $ 8,000.00 $ 20,000.00 40% 3 Total variable expenses Total sales Variable expense ratio $ 12,000.00 $ 20,000.00 60.00% 4 Contribution margin
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differences in the contribution margins of the three products, this has lead to a lower total contribution margin than stated in the projected income statement. Nevertheless we’ve reached our sales of $500,000 we didn’t reach our projected operating income of $36,400. Unfortunately we’ve made a operating loss of $8,600. This is due to the fact that our projected income statement was not accurate enough regarding our total contribution margin. Instead of our projected contribution margin of 52% our
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| $24/h | Total variable cost per hour | $28.7/h | $28.7/h | $28.7/h | Income Statement | | Revenue | | Intracompany sales | $82,000 | Commercial sales | 110,400 | Total revenue | $192,400 | Variable costs | (9,844.1) | Contribution margin | $182,555.9 | Fixed costs | (212,939) | Net income(loss) | ($30,383.1) | 3. Intracompany sales=205 h*$400/h=$82,000 Commercial sales=138h*$800/h=$110,400 Variable costs=$28.7/h*(205+138) =$9844.1 Fixed costs=Total expenses-
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(200,000) Material: 14,000 × $2 (28,000) (28,000) 10,000 × $3 (30,000) (30,000) Contribution margin $112,000 $ 70,000 $ 182,000 Fixed costs (100,000) (200,000) (300,000) Profit (loss) $ 12,000 $(130,000) $(118,000) b. Each billable hour of audit services generates $8 of contribution margin ($35 - $25 - $2), tax services generates $7 of contribution margin ($30 - $20 - $3). The advertising should be spent on the audit services. DIF: Moderate OBJ:
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Implications of a 20% “Price Cut” Current Income Statement Income Statement after Price Cut Revenue** 100 80 Variable costs 65 65 Contribution 35 (35%) 15 (18.75%) ** All numbers indexed to 100 for revenue before the price cut. Required volume increase to B/E = X/(CM-X) x 100 In J.C. case, required volume increase = -18.93% 20/(18.75-20) = -18.66%
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