BUS 202 Lecture 3: January 27th
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Department
BUS - Business Administration
Course
BUS 202
Professor
Nick Ross
Semester
Spring

Description
January 27th Friday, January 27, 20179:12 AM • Review Problem ○ Parker: § Number of units produced and sold $60k $80k $90k Total variable cost $150k $2.5 * $80=$200.00 $2.5*90=$225.00 Tot fixed cost $360k $360 $360 § Per unit variable co$150/$60 = $2.5 $200/$80=$2.5 $225/$90=$2.5 Per unit fixed cost $360/$60 = $6.00 $360/$80=$4.5 $360/$90=$4.00 § Assume that we sell 90,000 hats at $7.50 each § Contribution income statement: □ Sales: 90,000 * $7.50 = $675,000.00 □ Variable expense: $225,000 ® Contribution margin: $675,000.00 -$225,000 = $450,000.00 □ Fixed expenses: $360,000 ® Net income: $450,000 -$360,000 = $90,000.00 • Job Costing: ○ Example: Levis jeans: Skinny Jeans Bellbottoms jeans § 1 yard of materia2 yards or material § Each yard costs $10 Each day 10 batches of jeans are made and each batch is 1000 pairs of jeans § § 5 batches of skinny, 5 of bell bottom § Machine uses $5,000 worth of cleaner each day and $25,000 in lubricant § Cost object: Pair of Jeans: Direct/Indirect Period/product Yard Direct Product Direct materials □ Cleaner Indirect Product MOH Lubricant Indirect Product MOH □ What is the cost of a pair of Jeans?: ® Total MOH/ # 0f jeans = ((25,000 + 5,000)/10,000) = $3 ◊ Cost of a pair of skinny jeans are: $10 + $3 = $13.00 January 27th Friday, January 27, 20179:12 AM • Review Problem ○ Parker: § Number of units produced and sold $60k $80k $90k Total variable cost $150k $2.5 * $80=$200.00 $2.5*90=$225.00 Tot fixed cost $360k $360 $360 § Per unit variable co$150/$60 = $2.5 $200/$80=$2.5 $225/$90=$2.5 Per unit fixed cost $360/$60 = $6.00 $360/$80=$4.5 $360/$90=$4.00 § Assume that we sell 90,000 hats at $7.50 each § Contribution income statement: □ Sales: 90,000 * $7.50 = $675,000.00 □ Variable expense: $225,000 ® Contribution margin: $675,000.00 -$225,000 = $450,000.00 □ Fixed expenses: $360,000 ® Net income: $450,000 -$360,000 = $90,000.00 • Job Costing: ○ Example: Levis jeans: Skinny Jeans Bellbottoms jeans § 1 yard of materia2 yards or material § Each yard costs $10 Each day 10 batches of jeans are made and each batch is 1000 pairs of jeans § § 5 batches of skinny, 5 of bell bottom § Machine uses $5,000 worth of cleaner each day and $25,000 in lubricant § Cost object: Pair of Jeans: Direct/Indirect Period/product Yard Direct Product Direct materials □ Cleaner Indirect Product MOH Lubricant Indirect Product MOH □ What is the cost of a pair of Jeans?: ® Total MOH/ # 0f jeans = ((25,000 + 5,000)/10,000) = $3 ◊ Cost of a pair of skinny jeans are: $10 + $3 = $13.00 □ Cleaner Indirect Product MOH Lubricant Indirect Product MOH □ What is the cost of a pair of Jeans?: ® Total MOH/ # 0f jeans = ((25,000 + 5,000)/10,000) = $3 ◊ Cost of a pair of skinny jeans are: $10 + $3 = $13.00 ◊ Cost of a pair of bell bottoms are: $20 + $3 = $23.00 $13.3 for 1 pair of skinny ® Cleaner and lubricant is a function of the total number of yards of
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