Advance Budgeting & Profit Planning Techniques

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QUESTION AND ANSWER FOR ASSIGNMENT AEU

1. Active Company accumulated the following data for a delivery truck.

Miles DrivenTotal CostMiles drivenTotal Cost

January 10,000$ 15,000March9,000$ 12,500

February8,000$14,500April7,500$13,000

Required:

a) Determine the equation to predict total costs for delivery truck. b) What should total costs be if 12,187 miles were driven?

Cost =15000 _ 13000= 2000
Activity10,00070002500

← In cost = 2000= 0.8= VC Per unit
2500

( In Activity = 15000_ 10000 × 0.8 = 8000=7000
13000 7500 × 0.8 = 6000=7000

b) 12187 × 0.8 = 9749.6
= 7000
16749.6

2. The Law Mower Shop is a retailer that sells lawn mowers. The income statement for the month of June showed a gross margin of $ 60,000 and operating income of $ 20,000. Selling and administrative expenses were 50% fixed. Two hundred mowers were sold at an average price of $ 750 per unit. All mowers are purchased from Toro and John Deere.

Required:

a) Prepare an income statement for the month using the contribution approach. b) What is the contribution margin per unit?

Gross margin – 60,000
Oprt income _ 20,000
S/ADM exp = 50%
Selling price= $ 750 per unit.

a) Unit sold per unit total
200

Sales 750 × 200 = 150,000

Variable expenses

Cost of goods sold 90000
Selling expenses/ together admin 20,000

Fixed cost

Cost S/admin 20000

Total cost = 40,000 admin cost with variable expenses.

b) Y= a + b (×)

Contribution margin = selling price- expenses per unit = 750-650
= 750-650
= 100per unit 90000
20000...
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