Week 3 - Practice Text Exercises
ACC 561
July 4, 2011

Question 3-38, Mixed Cost, Choosing Cost Drivers, and High-Low and Visual-Fit Methods, on pp. 121 & 122

2-48 CVP and Financial Statements for a Mega-Brand Company |
| 2006 | 2007 |
Net sales | \$68,222 | \$75,044 |
Costs of products sold | \$33,125 | \$36,438 |
Selling, general, and administrative expense | \$21,848 | \$21,848 |
Operating income | \$13,249 | \$16,759 |
| | |
Percentage Change | 26.5% | |

If sales increase by 10% at Procter \$ Gamble the operating income would be \$16,759, which is a 26.5% increase.   “The phrase incremental effect refers to the change in total results (such as revenue, expenses, or income) under a new condition in comparison with some given or known condition” (Horngren, Sundem, Stratton, & Schatzberg 2008,  p.  61). The sales increase has no bearing on the on the selling, general, and administrative expenses because the selling, general, and administrative expenses are fixed.   A fixed figure will remain the same regardless of sales.

2-61 CVP in a Modern Manufacturing Environment |
|   | Old Production Operation | New Production Operation Unit |
variable cost |   |   |
| Material | \$0.88 | \$0.88 |
| Labor | 1.22 | 0.22 |
Total per unit | \$2.10 | \$1.10 |
Monthly fixed costs |   |   |
| Rent and depreciation | \$450,000 | \$875,000 |
|   Supervisory labor | 80,000 | 175,000 |
|   Other | 50,000 | 90,000 |
Total per month | \$580,000 | \$1,140,000 |

* EXCEL Application Exercise, CVP and Break-Even, on p. 89 (on separate excel attachment)

Question 3-38, Mixed Cost, Choosing Cost Drivers, and High-Low and Visual-Fit Methods, on pp. 121 & 122

1. Find monthly fixed maintenance cost and the variable maintenance cost per driver unit using the visual-fit method based on each potential cost driver. Explain how you treated the April data.   Maintenance costs are \$13,108 plus \$2.17 times unites... [continues]

### Cite This Essay

APA

(2011, 07). Week 3 - Practice Text Exercises. StudyMode.com. Retrieved 07, 2011, from http://www.studymode.com/essays/Week-3-Practice-Text-Exercises-733691.html

MLA

"Week 3 - Practice Text Exercises" StudyMode.com. 07 2011. 07 2011 <http://www.studymode.com/essays/Week-3-Practice-Text-Exercises-733691.html>.

CHICAGO

"Week 3 - Practice Text Exercises." StudyMode.com. 07, 2011. Accessed 07, 2011. http://www.studymode.com/essays/Week-3-Practice-Text-Exercises-733691.html.