Contribution Margins for Lewis Company Lewis Company has been using absorption costing to assess the cost of the modules they manufacture. The use of a variable income statement may allow the firm to make better decision regarding pricing as it will allow for increased transparency and easier calculation of the number of units which will need to be solid to break even. The first stage is to convert the income statement into a contribution statement. Contribution Statements To prepare the
are considering reducing their sales price by 20% per dozen. QUESTION 1: What are EasyFind's total current revenues per month? $19 * 5,470 = $103,930 [+/- $3,118] Total Revenues = Price * Volume QUESTION 2: If EasyFind's variable costs are $10 per dozen, what is their total contribution each month at current prices? ($19 - 10) * 5,470 = $49,230 [+/- $1,477] Total contribution = Unit Contribution * units sold QUESTION 3: What will be EasyFind's new price if they choose to implement the price
MKT 2375 Chapter 2 Problem 1 a. CD Contribution Profit Selling Price to CD Distributor Less: Variable Cost $9.00 $1.25 $0.35 $1.00 $2.60 CD Package and disk Songwriter’s royalties Recording artists’ royalties Total Variable Cost Contribution per CD unit $6.40 Chapter 2 Problem 1 b. Break-Even Analysis – Units and Dollars Total Fixed Cost Advertising and Promotion $275,000 Studio Recording’s Overhead $250,000 Total Fixed Cost $525,000 BEVU = $525,000 / $6.40 = 82,031
Course: MGM 5500 Assignment #6 A. What is the difference between a contribution income statement and a traditional income statement? Contribution income statement is an income statement that classifies cost by behavior (fixed cost and variable cost). Traditional income statement is sometimes called the functional income statement. It is an income statement prepared in the multiple-step or single –step income statement format which conforms to Generally Accepted Accounting Principles (GAAP)
that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? Variable: Wages of hourly personnel, Power Fixed: Rent, custodial services, computer leases, maintenance, depreciation, salaried staff wages, administration, sales, systems development, sales promotion, corporate services 2.) For each expense that is variable with respect to revenue hours, calculate the cost per revenue
point cost is equal to revenue which means there is neither loss nor profit at the intersection of sales line and cost line (Frongello). a) As two graphs are provided in the question; the horizontal line shows the fixed cost where the two semi-vertical (upright) lines show variable cost and sales, respectively. Provider B has greater fixed cost than provider A because B’s fixed cost line is higher than A’s; therefore, provider B has greater fixed costs than provider A. Variable cost is determined
principles 1) Direct costs are identified with and can be traced to a cost object. Indirect costs cannot be identified with or traced to a cost object. 2) Costs by function: A) Product costs consist of manufacturing costs: direct materials, direct labor and factory overhead. B) Period costs consist of selling and administrative expenses. 3) A) Prime costs which consist of direct materials and direct labor costs. B) Conversion costs which consist of direct labor and factory overhead costs. 4) Materials
what will happen to the financial results if a specified level of activity or volume fluctuates. This information is vital to management, as one of the most important variables influencing total sales revenue, total costs and profits is output or volume. Break-Even Analysis is based on the relationship between sales revenue, costs and profit in the short run. The short run being a period in which the output of the firm is restricted to that available from current operating capacity. In the short
understand the cost associated with doing business as well. We can calculate the expected revenue generated by each pricing strategy, but without cost information, it is not possible to determine the preferred price. The cost concepts we introduce are: - Variable cost - Fixed cost - Total cost We combine the cost information with price information to determine unit contribution and total contribution. This Figure is a good enough approximation of actual cost behaviour Total cost The total
heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes. Production is constrained by the capacity of an automated welding machine that is used to make precision welds. A total of 2,000 hours of welding time is available annually on the machine. Because each drum requires 0.4 hours of welding time, annual production is limited to 5,000 drums. At present, the welding machine