INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
8th Edition
ISBN: 9781260118742
Author: BREWER
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 5AE
5.
a)
To determine
Concept Introduction:
Contribution and Fixed and Variable Costs in Manufacturing
- Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.
- Examples are costs of direct material and direct labor.
- Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.
- Examples are costs of factory rent, depreciation on plant and equipment
Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.
- Examples are Direct materials and Manufacturing Overhead
- Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.
- Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.
- In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.
- Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.
- Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.
To Compute:
Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.
5.
b)
To determine
Concept Introduction:
Contribution and Fixed and Variable Costs in Manufacturing
- Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.
- Examples are costs of direct material and direct labor.
- Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.
- Examples are costs of factory rent, depreciation on plant and equipment
- Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.
- Examples are Direct materials and Manufacturing Overhead
- Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.
- Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.
- In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.
- Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.
- Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.
To Compute:
Changes in Operating leverage due to reduction in selling price
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
When a company has post-acquisition expenditures related to Property, Plant, and Equipment it must determine whether the amount
should be expensed as an ordinary repair or capitalized as a major repair, addition, or betterment. This requires considering the nature
of the expenditure and the use of judgment.
Many companies use a threshold amount. Any expenditure below the threshold is expensed. Items over the threshold are examined
and a decision is made about whether to expense or capitalize the item. This approach is justified by both materiality and considering
costs and benefits. For example, a company with $94 million in net property, plant, and equipment and $250 million of operating
expenses would not consider a $100 repair as material. Plus, if the company had to spend thousands of dollars examining every repair
expenditure, the costs of doing the analysis could easily outweigh the benefits.
SouthEast Equipment has a large number of machines and equipment that are available for…
The Excel worksheet form that appears below is to be used to recreate the Review Problem pertaining to the Magnetic Imaging Division of Medical Diagnostics, Inc. Download the workbook containing this form from Connect, where you will also receive instructions about how to use this worksheet form.
You should proceed to the requirements below only after completing your worksheet.
Required:
1. Check your worksheet by changing the average operating assets in cell B6 to $8,000,000. The ROI should now be 38% arid the residual income should now be $1,000,000. If you do not get these answers, find the errors in your worksheet and correct them.
Explain why the ROI and the residual income both increase when the average operating assets decrease.
2. Revise the data in your worksheet as follows:
a. What is the ROI?
b. What is the residual income?
c. Explain the relationship between the ROI and the residual income?
A product's life cycle is the period of time from initial expenditure on research and development (R&D) to the time at which support to customers is withdrawn (Drury, 2018). Choose a product that you are familiar with and critically analyse the product's life cycle. Leamers are required to refer to at least THREE latest published journal articles to support the argument. Use APA format for in-text citations and references.
Chapter 6 Solutions
INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
Ch. 6.A - The Cheyenne Hotel in Big Sky, Montana, has...Ch. 6.A - Least-Squares Regression LOS11 Bargain Rental Car...Ch. 6.A - Prob. 3ECh. 6.A - Archer Company is a wholesaler of custom-built...Ch. 6.A - George Caloz&Freres, located in Grenchen,...Ch. 6.A - Least-Square. Regression; Scattergraph; Comparison...Ch. 6.A - Cost Behaviour; High4æw Method; Contribution...Ch. 6.A - Nova Company’s total overhead cost at various...Ch. 6.A - High-Low Method; Contribution Format Income...Ch. 6.A - Least-Squares Regression Method; Scattergraph;...
Ch. 6.A - Mixed Cost Analysis and the Relevant Range LOS-10...Ch. 6.A - Prob. 12PCh. 6 - What is the meaning of contribution margin ratio?...Ch. 6 - Prob. 2QCh. 6 - In all respects, Company A and Company B are...Ch. 6 - What is the meaning of operating leverage?Ch. 6 - What is the meaning of break-even point?Ch. 6 - In response to a request from your immediate...Ch. 6 - What is the meaning of margin of safety?Ch. 6 - Prob. 8QCh. 6 - Explain how a shift in the sales mix could result...Ch. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - The Excel work sheet from that appears below is to...Ch. 6 - Prob. 3AECh. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - Prob. 5AECh. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Prob. 11F15Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - The Effect of Cha noes ¡n Activity on Net...Ch. 6 - Prob. 2ECh. 6 - Prepare a Profit Graph L062 Jaffre Enterprises...Ch. 6 - Computing and Using the CM Ratio L063 Last month...Ch. 6 - Changes in Venable Costs, Fixed Costs, Selling...Ch. 6 - Prob. 6ECh. 6 - Lin Corporation has a single product 1ose selling...Ch. 6 - Compute the Margin of Safety LO6-7 Molander...Ch. 6 - Compute and Use the Degree 01 Operating Leverage...Ch. 6 - Prob. 10ECh. 6 - Missing Data; Basic CVP Concepts L061, L069 Fill...Ch. 6 - Prob. 12ECh. 6 - Change in selling price, Sales Volume, Variable...Ch. 6 - Prob. 14ECh. 6 - Operating Leverage 1061. 1068 Magic Realm, Inc.,...Ch. 6 - Prob. 16ECh. 6 - Break-Even and Target Profit Analysis 1064, 1066,...Ch. 6 - Break-Even and Target Profit Analysis; Margin of...Ch. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - CVP Applications; Contribution Margin Ratio:...Ch. 6 - Break-Even and Target Profit Analysis LO6-6, L066...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Sales Mix; Commission Structure; Multiproduct...Ch. 6 - Changes in Cost Structure; Break-Even Analysis;...Ch. 6 - Graphing; Incremental Analysis; Operating Leverage...Ch. 6 - Interpretive Questions on the CVP Graph L062, L065...
Knowledge Booster
Similar questions
- Evaluate these three technologies used to obtain energy and atmosphere credits towards LEED certification by calculating total NPV and gross NPV at R=7% and complete the table for gross and net NPV values. If you could only recommend one to your client, which would you recommend and why? Suggestion: Set this up in an Excel spreadsheet to make your calculations a little easier to keep track of. If you do that, please include that spreadsheet with your assignment. Building Technology Install high efficiency packaged rooftop units (RTUS) Comprehensive lighting and plug load efficiency Incremental Cost $50,000 $50,000 strategy Enhanced insulation $50,000 and glazing package for building envelope Annual Total SPP Savings (Yrs) Life (Yrs) $10,000 5 12 $5,000 10 $10,000 5 Investment 10 15 Gross NPV Net NPVarrow_forwardHow difficult is it to expand the original RedBrandmodel? Answer this by adding a new plant, two newwarehouses, and three new customers, and modify thespreadsheet model appropriately. You can make up therequired input data.arrow_forwardYou are the accountant for the Best Outdoor Living company which manufactures various outdoor furniture. The furniture is sold by specialty stores and through internet outlets. You are responsible for reviewing costs and creating standards costs based on the information you have reviewed. One of your former colleagues has recently started a company to collect and sell data on industry benchmarks. You are offered the chance to receive benchmarks from other outdoor furniture companies for free if you will provide the standard and actual costs for the last three years of your company. As creation of the standards is a tedious process, you feel this data would be helpful in your job. Review the IMA’s ethical guidelines, under Reading Preparation and identify the conflict with the guidelines. What are the relevant factors in this situation and how you should handle this, and what you would recommend to the Controllerarrow_forward
- Using spreadsheet (e.g, Excel), design a decision aid to help you complete the following task. You are looking for a new apartment and decided to go through a realtor instead of shopping for the apartment through advertisments. Avbel Realty provided you with the following list of seven available apartments in the area specified. The apartments have been evaluated by Avbel Realty using 12 different criteria (listed as 2-13) on the speedsheet in figure 5.17) Here are some suggestions on how to set up your decisions aid: (1) Decide which of the 12 factor you want to inclide in your decision model. (2) For each factor selcted in step (1), decide how much decision weight you want to assign it relative to the other factors. Suggestion: You may want to distribute the decision weight so that they add up to 100 (i.e, 100 percent). Be prepared to discuss and justify your decisions about factors and weights, especially in comparison to the factors and weights used by other students. References ;…arrow_forwardJim is beginning the prospecting process for a company that is ready to sell low-cost computers to consumers. Which of the following techniques should he consider? Select answer from the options below Purchasing information from commercial sources that will give him leads to pursue. Using an app that uses satellite maps to identify high-density areas of homes and businesses so he can begin cold canvassing. Asking existing clients and customers for the names of other interested potential customers. All of these are correct.arrow_forwardPlant Design is a major requirement for you to be able to graduate BS ChE in Batangas State University. Supposeyou are a panelist, and you must evaluate if the design is feasible or not. You look at the breakdown of expenses,possible revenues, etc. Here are some important chapters and discussions taken from a certain plant design. This plant design, entitled “IIVSDROP: The First Ear Dropper Solution Manufacturing Plant in the Philippines”considers a 30-year period of study, starting 2021, after finishing its construction by 2020. All projections,and interest rates set by the company shall be evaluated within this 30-year period. The inflation rate shallnot be included in the computation and a minimum attractive rate of return is set at 20%. Our company produces ear dropper solution which can be sold for PHP. 125.00 per bottle. Annually, thecompany can produce 1000 pallets of the product. Each pallet is stacked with 14 layers and each layerconsists of 8 boxes. A box contains 12 bottles…arrow_forward
- Penny is compiling a list of costs incurred so far on a project. She must categorize these costs so that she can present the amount of direct cost incurred. Which of the following should Penny include in this list?This type of question contains radio buttons and checkboxes for selection of options. Use Tab for navigation and Enter or space to select the option. option A Expense incurred in meeting the regulatory standards for the company option B Benefits for employees in the organization option C Travel expenses to the customer’s office option D Costs incurred for maintaining coffee stations around the office.arrow_forward! Required information [The following information applies to the questions displayed below.] Bid Kinnear Plastics manufactures various components for the aircraft and marine industry. Kinnear buys plastic from two vendors: Tappan Corporation and Hill Enterprises. Kinnear chooses the vendor based on price. Once the plastic is received, it is inspected to ensure that it is suitable for production. Plastic that is deemed unsuitable is disposed of. The controller at Kinnear collected the following information on purchases for the past year: Total purchases (tons) Plastic discarded Tappan 5,000 200 Hill 7,500 375 The purchasing manager has just received bids on an order for 330 tons of plastic from both Tappan and Hill. Tappan bid $2,112 and Hill bid $2,109 per ton. Required: a. Assume all else remains the same. What bid by Tappan would make Kinnear indifferent between buying from Tappan or Hill? (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardWalton Bike Company makes the frames used to build its bicycles. During year 2, Walton made 21,000 frames; the costs incurred follow. Unit-level materials costs (21,000 units x $49) Unit-level labor costs (21,000 units × $56) Unit-level overhead costs (21,000 x $11) Depreciation on manufacturing equipment Bike frame production supervisor's salary Inventory holding costs Allocated portion of facility-level costs $1,029,000 1,176,000 231,000 90,000 93,400 280,000 590,000 Total costs $3,489,400 Walton has an opportunity to purchase frames for $120 each. Additional Information 1. The manufacturing equipment, which originally cost $550,000, has a book value of $410,000, a remaining useful life of 4 years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $76,000 per year. 2. Walton has the opportunity to purchase for $990,000 new manufacturing equipment that will have an expected useful life of 4 years and a salvage value of $47,600. This…arrow_forward
- After reading through the information I'm a little confused on a few of the equations and why and where they pull info from each of the answers. After reading through the problem the three things needed are: A. Operating Income (annual) for the new WSM service? B1. What annual operating income can WSM expect from adopting Internet ticket sales? (More info is in the picture attached in the b-1. section) C. Ignoring the information in requirement (b), how many discounted tickets would WSM have to sell annually to earn an operating income of $4,800,000? Assume that the annual number of flights remains at 1,400 and that the discounted tickets would be evenly divided across the 1,400 flights.arrow_forward1– Please complete all work in excel. Use excel to make the calculations (cells can be clicked on to view any formulas used) and be sure to identify your answer, including units. You must have an excel file with formulas within the cell. A. XCountry Train Inc. specializes in trans-American moves for businesses and individuals through the delivery of containers. For every container the company loads on its trans-American rail, the business must pay the rail owners $8,000. In addition, containers are weighed and for each pound of weight, the company must pay $0.10. Harry plans to charge $0.50 per pound to his customers. How many pounds would a container have to hold in order for the company to Break Even?arrow_forwardBelow are four cases that you will have to solve using Excel spreadsheets. 3rd Case The company MEGAMAX SA is analyzing two possibilities to expand the market , one of them is to choose to expand the plant to be able to produce a greater number of products, the other option is to diversify production with different new products to take advantage of the facilities that currently owns; The information and projections you have to be able to carry out the analysis to make a decision are the following: PROJECT Initial investment INCOME EXPENSES INCOME Extension $810,000 EXPENSES Diversification $900,000 It is requested: Concept Year 1 cash flows 5. Determine the internal rate of return. 6. Determine the present value. 7. Determine the recovery period. 8. Define which is the most viable project. Year 2 cash flows $1,000,000 $400,000 The discount rate for the project will be 12%, and investors propose a MARR of 28%. $550,000 $600,000 $1,100,000 $900,000 $400,000 $500,000 Year 3 cash flows…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education