and unit cost. After studying Unit 2.2, you should be able to: * Estimate a cost equation from a set of cost data and predict future total cost from that equation. After studying Unit 2.3, you should be able to: * Prepare a contribution format income statement. ------------------------------------------------- PREVIEW OF CHAPTER 2 While GAAP-based income statements are required for external financial reporting, they are not very useful for internal decision making because
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the estimated contribution margin, must subtract the variable cost from the sales ((14 times the 30000 units)-(6 times the 30000 units)). So, the contribution margin for the computer paper would be 240,000. For the napkins they have estimated 120,000 unites in sales with a material cost of 4.50 and a selling price of 7 dollars. The formula would be the same, so for the napkins it would look like ((7 times the 120000 units)-(4.50 times the 120000 units)). So, the contribution margin for the napkins
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cost per unit for completion 150 350 Contribution (loss) on product $(50) REQUIRED 1. Should transfers be made to Division B if there is no unused capacity in Division A? Is the market price the correct transfer price? Show your computations. Outside sales of frames: Selling price of intermediate product $200 Incremental cost per unit in Division A (120) Contribution margin per unit $80 Transfer of frames to Division
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sales is included in the computation of contribution margin on page 33? 3. Perform two separate computations of Benetton's break even point in euros. For the first computation, use data from 2003. For the second computation, use data from 2004. Why do the numbers that you computed differ from one another? 4. What sales volume would have been necessary in 2004 in Benetton to attain a target income from operations of €300 million? 5. Compute Benetton's margin of safety using data from 2003 and 2004
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Case study 1 a. Variable cost per passenger=$70.00 Full fare per passenger=$160.00 Contribution margin = $ 160- $ 70 = $ 90 per passenger Contribution margin ratio = $ 90/$160 = 56.25% Break-even point in passengers = Fixed costs/Contribution Margin = $ 3,150,000/$ 90 per passenger = 35,000 passengers Break-even point in dollars = Fixed Costs/Contribution Margin Ratio= $ 3,150,000/0.5625 = $ 5,600,000. b. Average load factor=70% of 90
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data. In order to make the explanation, I will provide the brief background in the introduction and critical issue sectors. Moreover, the quantitative and qualitative analysis will be delivered. In the quantitative analysis, I will explain the contribution-format income statement and breakeven point in sales dollars based on actual sales data in detail. Finally, I will also list few recommendations that allows the reader to select the best one fit for the Smithen Company. Introduction
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Principles of Managerial Accounting—Fall 2013 Competencies |Competency |Description | |1 |Know difference between managerial and financial accounting. | |(Ch. 1-2) |Managerial accounting – provision of accounting info for a company’s internal users. It is the firms internal | |Q 1-6 |accounting system
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method. 2. solve for the company’s break even point in sales dollars using the equation method and the CM ratio. 3. solve for the company’s break even point in unit sales using the contribution margin method. 4. solve for the company’s break even point in sales dollars using the contribution margin method and the CM ratio. Solution: 1- Sales = Variable expenses + Fixed expenses + Profits 15 Q = 12 Q + 4200 + 0 3 Q = 4200 Q = 4200 / 3 Q = 1400 Unit 2- X =
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Activity 2.5 1. Contribution margin per composite unit = 5 ($10 – 6) + 8 ($15 – 9) = $20 + $48 = $68 Total fixed costs = $500,000 CM per unit 68 = 7353 composite units Leo 7,353 5 = 36,765 units @ $10 = $367,650 Libra 7,353 8 = 58,824 units @ $15 = $882,360 Or alternatively, the average contribution margin could be calculated. Note it is 40% for both products, as follows: Leo $4 5/13 = $1.54 Libra $6 8/13 = $3.69 Average contribution margin $5.23 Total fixed costs = $500
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determine the contribution margin ratio (part a) is: |Contribution Margin Ratio |= |Unit Sales Price – Variable Costs per Unit | | | |Unit Sales Price | a. Contribution margin ratio. b. Sales volume (in dollars) required to break even. c. Sales volume (in dollars) required to earn an annual operating income of $50,000. d. The margin of safety
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