ACCT-2020 Lecture Notes - Lecture 4: Earnings Before Interest And Taxes, Contribution Margin, Fixed Cost

76 views12 pages

maroonmanatee425

5 Feb 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Contribution margin = sales-variable costs (both period & product costs) Each add 1 unit sold covers fixed costs by contribution margin/unit. Sp , vc , volume , fc . Sp , vc , volume 15, fc . Increased by for +5 volume of footballs. Fixed expenses are ,000 per month and the company is selling 2,000 units per month. The marketing manager argues that a ,000 increase in the monthly advertising budget would increase monthly sales by ,000. Calculate the increase or decrease in net operating income. Management is considering using higher-quality components that would increase the variable expense by per unit. The marketing manager believes that the higher-quality product would increase sales by 10% per month. One of the company"s products, a small camp stove, sells for per unit. Variable expenses are per stove, and fixed expenses associated with the stove total ,000 per month.

Related Questions

Folgers manufactures coffee:

Item	Total Cost
Salaries for Administrative Staff	$264,000
Salary for Factory Manager	14,800
Rent on Factory and Equipment	184,600
Utilities for Factory	40,200
Advertising (fixed)	20,400
Rubber and plastic	448,200
Wages for Assembly Staff	358,000
Total	$1,330,200

a. Identify all costs above as either a product cost(specifically DM, DL or OH) or a period cost (PC).

b. If Folgers had produced 12,000 units, but only sold Â¾ of itsinventory what amount would it report for inventory?

c. Identify all of their costs as either a variable cost (VC) ora fixed cost (FC) then calculate the variable cost per unit(rounded to the nearest penny) assuming 12,000 units were producedand the total fixed costs. Prepare a CM model assuming all unitswere sold at $125each.

Use the contribution margin model toanswer each situation below, which is independent of the others andunless specified otherwise, uses the VC and FC data above.

d. Management expects a 20% increase in unit sales. If so, whatis the Folgersâ projected net income under this scenario?

e. Folgers is considering using recycled rubber and plastic fortheir product. If so, its most recent costs for materials wouldincrease by $10 per unit; as a result, Folgers would increase theprice by $5 per unit to help offset that cost increase. Inaddition, management would increase advertising by 50 percent. Ifthose changes are made,Folgers anticipates that unit sales wouldincrease by 15 percent. What is the projected net income under thisscenario?

f.Folgers is considering whether it should make upgrades to thefactory and equipment; if so, the rent on factory and equipmentwould increase by 15 percent. Management projects that itsproduction (and sales) volume would increase by 20 percent if theprice were lowered by $5 per unit for all units. What is theprojected net income under this scenario?

byzantiumotter741

ACCT-2020 Lecture Notes - Lecture 4: Earnings Before Interest And Taxes, Contribution Margin, Fixed Cost

Document Summary

Get access

Related Documents

ACCT208 Study Guide - Midterm Guide: Earnings Before Interest And Taxes, Total Absorption Costing, Contribution Margin

ACCT30210 Lecture Notes - Lecture 4: Operating Leverage, Contribution Margin, Earnings Before Interest And Taxes

ADMS 2510 Lecture Notes - Lecture 2: Scatter Plot, Gross Profit, Income Statement

Related Questions