Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 6, Problem 6PA
1.
To determine
Variable Costing
Variable costing is the method that is used by the management (managers) for decision making purposes. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead is treated as period (fixed) expense.
Contribution Margin Analysis
Contribution margin analysis emphasized on explaining the differences between planned and actual contribution margins. Managers are regularly used this analysis for planning and supervisory purposes.
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
To calculate: The contribution margin analysis report for the year ended December 31.
2.
To determine
To interpret: The contribution margin analysis report.
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Farr Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of Farr Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report.
The following data have been gathered from the accounting records for the year ended December 31:
Instructions
Prepare a contribution margin analysis report (using the spreadsheet) for the year ended December 31.
At a meeting of the board of directors on January 30, the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of $30 had the effect of increasing sales. However, this was a trade-off since sales volume decreased. Also, variable cost of goods sold per unit increased by $15 more than planned. The variable selling and administrative expenses appear out of control. They increased by $7 per…
Farr Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of Farr Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report.
1) Prepare a contribution margin analysis report for the year ended December 31.
2) At a meeting of the board of directors on January 30, the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of $30 had the effect of increasing sales. However, this was a trade-off since sales volume decreased. Also, variable cost of goods sold per unit increased by $15 more than planned. The variable selling and administrative expenses appear out of control. They increased by $7 per unit more than was planned, which is an increase of over 47% more than was planned. Let’s look into these expenses and get them…
ALABAMA CORPORATION Goals and Objectives Review of basic terminology Review basic accounting and journal entries to reflect the flow of costs Review preparation of income statement and supporting schedules for manufacturer given end-of-year information The company manufactures a single product, cleverly named Product X. The following information is available for the calendar year 2018 just completed, during which they produced and sold 200,000 units. Sales for the year was $2,400,000. During the year, the company paid a sales commission of 5 percent of sales. The corporate income tax rate was 20%. Direct materials purchases $300,000 Direct labor 140,000 Depreciation - factory equipment 45,000 Depreciation - factory building 30,000 Depreciation - headquarters building 50,000 Factory insurance 15,000 Property taxes: Factory 20,000 Headquarters 18,000 Utilities - factory 34,000 Utilities – sales 1,800 Administrative salaries 150,000 Indirect labor salaries 156,000 Sales office…
Chapter 6 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 6 - What types of costs are customarily included in...Ch. 6 - Which type of manufacturing cost (direct...Ch. 6 - Which of the following costs would be included in...Ch. 6 - In the variable costing income statement, how are...Ch. 6 - Prob. 5DQCh. 6 - Discuss how financial data prepared on the basis...Ch. 6 - Prob. 7DQCh. 6 - Explain why rewarding sales personnel on the basis...Ch. 6 - Prob. 9DQCh. 6 - Prob. 10DQ
Ch. 6 - Explain why service companies use different...Ch. 6 - Prob. 1BECh. 6 - Prob. 2BECh. 6 - Prob. 3BECh. 6 - Prob. 4BECh. 6 - Contribution margin by segment The following...Ch. 6 - Prob. 6BECh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Variable costing income statement On November 30,...Ch. 6 - Absorption costing income statement On March 31....Ch. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Variable costing income statement for a service...Ch. 6 - Prob. 21ECh. 6 - Variable costing income statement for a service...Ch. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Salespersons report and analysis Walthman...Ch. 6 - Prob. 5PACh. 6 - Prob. 6PACh. 6 - Absorption and variable costing income statements...Ch. 6 - Income statements under absorption costing and...Ch. 6 - Absorption and variable costing income statements...Ch. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Prob. 6PBCh. 6 - Prob. 1ADMCh. 6 - Prob. 2ADMCh. 6 - Prob. 3ADMCh. 6 - Prob. 4ADMCh. 6 - Prob. 1TIFCh. 6 - Inventory effects under absorption costing BendOR,...Ch. 6 - Prob. 3TIF
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- Problems L. Farrah Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of L. Farrah Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report. The following data have been gathered from the accounting records for the year ended December 31: Financial Categories Actual Planned Difference Sales 30,000,000 $ 28,600,000 $ 1,400,000.00 Variable costs: Variable cost of goods sold 21,600,000 $ 21,450,000 $ 150,000 Variable selling and admin expenses 2,640,000 1,950,000 690,000 Total variable costs 24,240,000 23,400,000 840,000 Contribution Margin 5,760,000 5,200,000 560,000 Number of units sold 120,000 130,000 Per unit Sales price 2$ 250 220 Variable cost of goods sold Variable selling and admin expenses 2$ 2$ $ 2$ 180 165 22 15 a. Prepare a contribution margin analysis report for the year ended…arrow_forwardL. Farrah Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of L. Farrah Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report.The following data have been gathered from the accounting records for the year ended December 31:Financial Categories Actual Planned Difference Sales $ 30,000,000 $ 28,600,000 $ 1,400,000.00 Variable costs: Variable cost of goods sold $ 21,600,000 $ 21,450,000 $ 150,000 Variable selling and admin expenses $ 2,640,000 $ 1,950,000 $ 690,000 Total variable costs $ 24,240,000 $ 23,400,000 $ 840,000 Contribution Margin $ 5,760,000 $ 5,200,000 $ 560,000 Number of units sold 120,000 130,000 Per unit Sales price $ 250 $ 220 Variable cost of goods sold $ 180 $ 165 Variable selling and admin expenses $ 22 $ 15 a. Prepare a contribution margin analysis report for the year…arrow_forwardSalespersons report and analysis Pachec Inc. employs seven salespersons to sell and distribute its product throughout the state. Data taken from reports received from the salespersons during the year ended June 30 are as follows: Instructions 1. Prepare a table indicating contribution margin, variable cost of goods sold as a percent of sales, variable selling expenses as a percent of sales, and contribution margin ratio by salesperson. 2. Which salesperson generated the highest contribution margin ratio for the year and why? 3. Briefly list factors other than contribution margin that should be considered in evaluating the performance of salespersons.arrow_forward
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- Harris Company manufactures and sells a single product. A partially completed schedule of the company's total costs and costs per unit over the relevant range of 65,000 to 105,000 units is given below: Required: 1. Complete the schedule of the company's total costs and costs per unit as given in the relevant tab below. 2. Assume that the company produces and sells 95,000 units during the year at a selling price of $9.36 per unit. Prepare a contribution format income statement for the year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the schedule of the company's total costs and costs per unit as given in the relevant tab below. (Round the per unit variable cost and fixed cost to 2 decimal places.) Total cost Variable cost Fixed cost Total cost Cost per unit: Variable cost Fixed cost Total cost per unit $ $ $ 65,000 Units Produced and Sold 85,000 214,500 430,000 644,500 $ 0.00 $ 43,000 43,000 $ 0.00 $ 105,000 43,000 43,000 0.00arrow_forwardRaker Inc., manufactures product A. For the year ended Dec 31, 2019, the ........... contribution margin decreased by $126,000. The president of the firm has expressed concern about this decrease and has required a follow up report. The following data have been gathered from the accounting records for this year Actual Planned Difference S207,000 Sales S2,277,000 S2,070,000 Variable cost of goods sold Variable selling and administrative expenses Total Contribution margin $1,035,000 $828,000 S1,863,000 $414,000 S34,500 S990,000 $540,000 $1,530,000 $540,000 S30,000 $45,000 $288,000 $333,000 (S126,000) number of units sold Per unit : Sales price Variable cost of goods sold Variable selling and administrative expenses $4,500 S66 $69 S30 $33 S24 $18 1. Prepare contribution margin analysis report for this year. 2. Based on this analysis, make your own comment on the 2019 performance. م م م م م م م م م م م م م مه مarrow_forwardd) Construct a contribution margin income statement for the first month (in July) that reflects $2,400,000 in sales revenue for Micol & Co. Ltd. e) Provide two suggestions to Micol & Co. Ltd on how it can increase profit in subsequent months?arrow_forward
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