Decent Essays

PRESENTATION

ON
MANAGERIAL ACCOUNT

BY
ID-1406065
ID- 1406067
ID- 1406071
ID- 1406073
ID- 1406079

Dobojit Chakama
Md Saiful Islam
Md Mustafizur Rahman
A B M Khaled Haider
1

Assignment
• Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company’s contribution format: • Income statement for the most recent month is given below:
 Sales (13,500 units at \$20 per unit) . . . .... \$270,000
 Variable expenses . . . . . . . . . . . . . . . . . . . . 189,000
 Contribution margin . . . . . . . . . . . . . . . . . . . 81,000
 Fixed expenses . . . . . . . . . . . . . . . . . . . . . … 90,000

What will the new contribution format income statement look like if these changes are adopted?
Solution
3. Sales (27,000 units × \$18 per unit*)………………
Less variable expenses

\$486,000 378,000

(27,000 units × \$14 per unit)………………………
*\$20 – (\$20 × 0.10) = \$18
Contribution margin………………………………..

Less fixed expenses (\$90,000 + \$35,000)………
Net operating loss………………………………….

125,000
\$(17,000)

108,000

9

Requirement- 4: Refer to the original data. The company’s advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by \$0.60 per unit.
Assuming no other changes, how many units would have to be sold each month to earn a profit of \$4,500?
Solution

Sales
\$ 20Q
\$5.40Q
Q
Q

=
=
=
=
=

Variable expenses + Fixed expenses + Profits
\$14.60Q* + \$90,000 + \$4,500
\$94,500
\$94,500 ÷ \$5.40 per unit
17,500 units

*\$14.00 + \$0.60 = \$14.60.

10

Alternative Solution :
Unit sales to attain
Fixed expenses + Target profit
=
target profit
CM per unit
=

\$90,000 + \$4,500

\$5.40 per unit**

= 17,500 units
** \$6.00 - \$0.60 = \$5.40.

11

Requirement- 5: Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by \$118,000 per month.
a. Compute the new CM ratio and the new break-even both units and dollars.

point in

Solution:
The new CM ratio would be:

12

The new break-even point would be :
Break-even point