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# Management Accounting Essay

705 words - 3 pages

E5-3
Part (a)

Variable cost = Change in cost / Change in activity
Months | Total
Maintenance Cost | Total
Machine Hours |
January | \$2,400 | 300 |
February | 3,000 | 400 |
March | 3,600 | 600 |
April | 4,500 | 790 |
May | 3,200 | 500 |
June | 4,900 | 800 |
Using the high and low point method we first identify the period with the highest and lowest activity-in the following data Jan and June. We then use the activity and cost data from these two periods to estimate the variable cost component as follows:
Activity Levels | Maintenance Cost | Machine Hour |
High activity level (June) | \$4,900 | 800 |
Low activity level(Jan) | 2,400 | 300 |

4

Break-even Point (Dollars) = Fixed Cost / CMR
= 10,200 / 0.4
= \$ 25,500

P5-5a

Net sales (100,000 units) \$1,600,000
Direct materials \$ 511,000
Direct labor \$ 285,000

Variable Fixed

Selling expenses \$ 240,000 40% 60%
Administrative expenses \$ 280,000 20% 80%
Manufacturing overhead \$ 360,000 70% 30%

a) 1- Contribution margin for current year and project year

TOTAL
Net sales (100,000 units) \$1,600,000 / 100,000 16
less: Variable costs
* Direct materials \$ 511,000 / 100,000 5.11
* Direct labor \$ 285,000 / 100,000 2.85
Contribution margin \$ 804,000 8.04

2- Fixed cost for current year

Variable Fixed
Selling expenses \$ 240,000 (240,000 * 40%) = 96,000 60% = 144,000
Administrative expenses \$ 280,000 (280,000 * 20%) = 56,000 80% = 224,000
Manufacturing expenses \$ 360,000 (360,000 * 70%) = 252,000 30% = 108,000
Fixed cost \$ 880,000 404,000 476,000

Gardner Corporation
CVP Net Income
End of the year

Sales (100,000 units) 1,600,000
...

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