# Managerial Accounting

Topics: Point, Bundles Pages: 2 (552 words) Published: January 17, 2013
1-5
a. Historical costs are not useless in rapidly changing environment. Even though it does not tell us the fair market value of a certain item, it gives us an idea of how the price has changed as time passes. It allows us to record the depreciation and forecast the future costs. b.

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2-4
A lotion bundle consists of 2 cases of 4oz, 4 cases of 8oz and 1 case of 12oz bottles. For each lotion bundle:
Revenue=2*\$36+4*\$66+1*72=\$408,
Variable cost=2*\$13+4*\$24.5+1*27=\$151
Contribution margin=2*\$23+4*\$41.5+1*45=\$257.
Therefore, the number of bundles required to break even is \$771,000/\$257=3,000 bundles 3,000 bundles require a production of 6,000 cases of 4oz, 12,000 cases of 8oz and 3,000 cases of 12oz bottles.

2-12
a. Line K
Break-even point in units=\$40,000/0.6=66,667 units
Break-even points in sales dollars=\$40,000/0.5=\$80,000
Line L
Break-even point in units=\$20,000/0.2=100,000 units
Break-even points in sales dollars=\$20,000/0.25=\$80,000

b. The fixed costs for the two products combined are expected to be less than the sum of the fixed costs of each product line operating as a separate business because there will be some costs saving when the two lines operate as one business. For example, rent or maintenance fee of a second plant is not necessary, and costs to purchase equipment for L will be significantly reduced.

c. Assuming that for each unit of K sold, one unit of L is sold. K&L combined revenue=\$2, variable cost=\$1.2, and contribution margin=\$0.8 Break-even point in units of K&L=\$50,000/0.8=62,500 units Therefore,

Line K Break-even point in units=62,500 units
Break-even points in sales dollars=\$75,000

Line L Break-even point in units=62,500 units
Break-even points in sales dollars=\$50,000

2-22
a. Option A
Fixed cost=\$10,000+\$5000=\$15,000, Variable cost=\$0.01+\$0.02=\$0.03, Revenue=\$0.08. Contribution margin=\$0.05. Break-even point in units=\$15,000/\$0.05=300,000...