Devry Econ 312

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John Doe DeVry College DXXXXXXX Week 3 EXERCISE 5-16 (a) CHAMBERLIN MANUFACTURING Cost of Goods Manufactured Schedule For the Month Ended June 30, 2008 Work in process inventory, June 1 $5,000 Direct Materials Raw materials inventory, June 1 $9,000 Raw materials purchases 54,000 Total raw materials available for use 63,000 Less: Raw materials inventory, June 30 13,100 Direct materials used 49,900 Direct labor 57,000 Manufacturing overhead Indirect labor $5,500 Factory insurance 4,000 Machinery depreciation 4,000 Factory utilities 3,100 Machinery repairs 1,800 Miscellaneous…show more content…
Total fixed costs = $408,000. (1) $.50X = $.33X + $408,000 $.17X = $408,000 X = 2,400,000 units (2) 2,400,000 X $.50 = $1,200,000 (c) Contribution margin ratio = ($.50 – $.33) ÷ $.50 = 34% (or 1 – .66) Margin of safety ratio = ($1,800,000 – $1,200,000) ÷ $1,800,000 = 33% (rounded) PROBLEM 6-2A (Continued) (d) Required sales X = | $408,000 + $238,000 | = $1,900,000 | | .34 | | BYP 6-3 (a) Sweeteners and packaging are a variable cost to Coca-Cola because their 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. This will lead to a decline in net income unless the company can increase its selling price, increase the number of units it sells, or reduce other costs. (b) This description makes the marketing expenditures sound like they are a variable cost, since it suggests that they vary with the amount of units sold. However, unlike variable costs, the relationship of marketing costs is not directly proportional to sales, since other factors also influence units sold. Thus, it is not a pure variable cost. However, it is also not a fixed cost, in that there usually is a relationship between marketing expenditures and sales. For CVP purposes, it might best be handled as a mixed cost, having both a fixed and variable

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