Week 4 Discussion

docx

School

University of the Cumberlands *

*We aren’t endorsed by this school

Course

633M40

Subject

Accounting

Date

Feb 20, 2024

Type

docx

Pages

4

Report

Uploaded by nidalam27

University of the Cumberlands Adv Managerial Accounting (BACC-731-A01) - First Bi-term Nidal Abi Mosleh 02/03/2024
Activity 1 1) a) Variable Cost per Unit = Total Variable Cost / Number of Units Variable Cost per Unit = $8,190,000 / 450,000 units =18.20 (b) Contribution Margin per Unit = Contribution Margin / Number of Units Contribution Margin per Unit = $3,510,000 / 450,000 units= 7.80 c) Contribution Margin Ratio = (Contribution Margin / Sales) 100 Contribution Margin Ratio = ($3,510,000 / $11,700,000) 100= 0.30 (d) Break-Even Point in Units = Total Fixed Cost / Contribution Margin per Unit Break-Even Point in Units = $2,254,200 / (Contribution Margin per Unit)= 289,000 (e) Break-Even Point in Sales Dollars = Break-Even Point in Units Sales Price per Unit Break- Even Point in Sales Dollars = Break-Even Point in Units (Sales / Number of Units)= 7,514,000 2) How many units must be sold to earn operating income of $296,400? =2.254.200 + 296.400/26 - 18,20 = 27,000 units 3) Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected. = 50000 * 0,40=20,000 4) For the projected level of sales, compute the margin of safety in units, and then in sales dollars. Margin of safety in unit = 450.000 - 289.000 =161,000 Margin of safety in Sales Revenue=26(450.000) - 26(289.000)= 4,186,000 5) Compute the degree of operating leverage. (Note: Round answer to two decimal places.)
degree of operating leverage=Total Contribution margin/Operating income = 2.80 6) Compute the new operating income if sales are 10% higher than expected. Percentage Change in Operating Income=Degree of operating leverage * percent change sales =2.80 * 10% =28% Expected Operating Income=1.255.800 + (28%*1.255.800) = 1,607,424
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
Activity 2 a) Income Statement Sales 20,500 x $83 20.500 x 100 $3,751,500 Cost of Goods Sold 2,722,400 Gross Profit 1,029,100 Less Variable Cost $5 x 20,500 102,500 Contribution Margin 926,600 Less Fixed Cost 330,000 Other FC 667,500 Operating loss (70,900) b) If the decision is made to close down the division, acquiring the product externally would incur a higher cost of $100, as opposed to the current internal cost of $83. It's important to consider the sunk costs tied to the facilities as well. The potential loss would be more substantial if the division is discontinued rather than maintaining its operation. Thus, the recommendation is to refrain from shutting down the division.