Points Contribution = sales – variable cost Therefore‚ contribution margin for each DRG is calculated as follows: Figures (/unit) DRGM DRGJ DRGP Sales (in $) 1700 2600 900 Less Variable cost ($) (1000) (1200) (600) Contribution ($) 700 1400 300 Required time in hours 2 5 1 Hence contribution per hour = $700/2= $350 $1400/5= $280 $300/1= $300 Weighted average contribution margin: Contribution
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Case 4-33 Cost Structure; Target profit and Break-Even Analysis Contribution Income Statement for all three scenarios: 15% commission 20% commission Own sales force Sales $16‚000‚000 $16‚000‚000 $16‚000‚000 Variable manuf. cost $7‚200‚000 $7‚200‚000 $7‚200‚000 Commissions $2‚400‚000 $3‚200‚000 $1‚200‚000 -Tot. variable cost ($9‚600‚000) ($10‚400‚000) ($8‚400‚000) Contribution margin $6‚400‚000 $5‚600‚000 $7‚600‚000 Fixed overhead $2
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unit × 410‚000 units) $27‚880‚000 Variable costs ($60 per unit × 410‚000 units) 24‚600‚000 Contribution margin $ 3‚280‚000 1b. Contribution margin (from above) $3‚280‚000 Fixed costs 1‚640‚000 Operating income $1‚640‚000 2a. Sales (from above) $27‚880‚000 Variable costs ($54 per unit × 410‚000 units) 22‚140‚000 Contribution margin $ 5‚740‚000 2b. Contribution margin $5‚740‚000 Fixed costs 5‚330‚000 Operating income $ 410‚000 3 Operating income is expected
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and Weil 10e CHAPTER 6 FINANCIAL MODELING FOR SHORT-TERM DECISION MAKING Questions‚ Exercises‚ Problems‚ and Cases: Answers and Solutions 6.1 See text or glossary at the end of the book. 6.2 Operating profit = Sales revenue – Variable cost – Fixed cost 6.3 The unit contribution margin is the excess of the unit price over the unit variable costs. The total contribution margin is the excess of total revenue over total variable costs. 6.4 Assumptions: 1. Revenues
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Executive Summary Our team performed a contribution analysis and determined that Energy Devices‚ Inc. is currently operating at a loss because the breakeven point is much higher than the number of units sold. Due to the low number of products sold‚ it is unlikely the company will be able to succeed. A total contribution analysis and cost-volume-profit analysis will aide in better budgeting‚ which is one factor that will improve profitability. Another factor you should consider is your current
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CHAPTER 14 Sample Exam Questions 1. Which of the following is not a primary purpose given in the text for allocating costs? A. To provide information for economic decisions B. To motivate managers and other employees C. To measure income and assets for reporting to external parties D. To foster cost awareness among managers to improve decisions 2. Which of the following is considered more of an objective than a criterion? A. Cause-and-effect B. Benefits received C. Fairness or equity D. Ability to bear
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CHapter 16 THE BEHAVIOR OF COSTS Changes from the Twelfth Edition All changes to Chapter 16 were minor. Approach We have retained our approach of putting all C-V-P topics in a single chapter because many schools’ marketing and management accounting core courses start simultaneously‚ and marketing likes to have break-even analysis covered early in the management accounting course. Also‚ if there are students in the course with work experience or‚ in the case of MBA courses‚ with some
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worries that the discount will hurt brand image as premium products. Furthermore‚ marketing’s consultants also think that discount has a negative impact on company’s profit. The argument between two departments focuses on the contribution margin. As a result‚ contribution margin is the key to solving the problem in this case. Approach: The consultant and sales manger use two ways to calculate the variable cost (VC). The consultant (Exhibit 1) added all the expense together‚ including direct labor
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CVP Analysis of 2012 A critical aspect that managers must be aware of in order to make sound decisions and precise projections is the understanding of the relationships among costs‚ volume and the company’s profit; otherwise known as CVP analysis. CVP analysis stands for Cost-volume-profit analysis which a form of cost accounting in managerial economics. The five essential concepts underlying CVP analysis include: 1. The behavior of both costs and revenues as being linear throughout the relevant
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includes the: Debt-to-equity ratio 10. Current assets divided by current liabilities is the: Current Ration 11. Ch.18 Managerial accounting is different from financial accounting in that: (users and decision makers‚ purpose of info‚ flexibility of practice‚ timeliness of information‚ time decision‚ focus of information‚ nature of information) 12. Which of the following items are management concepts that were created to improve companies’ performances? All of the above- just in time manufacturing
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