Acc/531 Week 4 Managerial Accounting

Chapter Problems
Kia Kelly
BA510 Accounting
November 24, 2015
Curtis Crocker

Chapter Problems

Problem 5-17
Fixed cost =$480,000
Contribution margin= $8.00 Break even unit sales= Fixed expenses/ Unite Contribution Margin
$480,000÷$8.00=$60,000 units
2(a)
Year 1 Year 2 Year 3
Direct Material 25 25 25
Direct Labor 16 16 16
Variable Manufacturing overhead 5 5 5
Variable costing unit product cost 46 46 46

2 (b) Year 1 Year 2 Year 3
Sales $3,360,000 $2,800,000 $3,640,000
Variable Expenses
Variable cost of goods sold ($46 per unit) 2,760,000 2,300,000 2,990,000
Variable selling and Administrative ($2 per unit) 120,000 100,000 130,000
Total Variable expenses 2,880,000 2,400,000 3,120,000
Contribution Margin 480,000 400,000 520,000

Sales (40,000 x 5) 200,000.00
Cost of goods sold (40,000 x 3.50) 140,000.00
Gross Margin 60,000.00
Selling and Administrative expenses 50,000.00
(40,000 x 0.75 + 20,000)
Net Operating Income 10,000.00

1(c)
The net operating loss is determined by using the variable cost of 5,000 and then the net income is calculated with the absorption cost at 10,000. The variation happens because the absorption cost and the fixed overhead is capitalized within the inventories instead of being expensed on the income statement.

If I take the variable costing and absorption costing the net operating incomes can be reconciled by figuring out how much of the fixed manufacturing overhead that was deferred within the inventories within the month.
Fixed manufacturing overhead start of the inventories

Activing Cost Pool A(Activity Rate) B (Activity) A x B (Abc cost)
Animation concept $6,000 per proposal 20 proposal $120,000
Animation production $7,700 per minute of animation 12 minutes $92,400
Contract Administration $6,600 per contract 8 contracts $52,800 $265,200

2.
The margin can be determined by subtracting cost from sales: -$25,200 Money is being lost in the market and it would be in the best interest to let go of this area, but there are some situations that are unavoidable when it comes to cost if more than 25,200 of the total cost then technically the organization is not losing money.

Problem 6-18
1.
Predetermined overhead rate =(Estimated total manufacturing overhead cost)/(Estimated total direct labor dollars)=508,625/162,500=$3.13

EX300 TX500 Total
Sales $1,200,000 $500,000 $1,700,000
Direct Materials 366,325 162,500 $528,875
Direct labor 120,000 42,500 $162,500 manufacturing overhead $375,600 133,025 508,625
Total manufacturing cost 861,925 338,075 1,200,000 product margin $338,075 $161,925 $500,000

2. The first step is to get the activity rates
Activity Cost Pools A (Total Cost) B (Total Activity) A/B (Activity Rate)
Machining $198,250 $152,500 $1
Setups $150,000 375