Essay Managerial Accounting Homework

823 Words Nov 8th, 2011 4 Pages
Chapter 4

Exercise 5:
Determine the fixed and variable components of repair expense using the high-low method. Use copies made as the measure of activity.

Slope=estimated variable cost
Intercept=estimated fixed costs

Slope=20,5000-8,5000/900,000-300,000 =12,000/600,000
Variable Cost=$0.02 per copy made

Intercept=300,000 x .02=$6,000 $8,500-$6,000
Fixed cost=$2,500

Exercise 8: a. Use account analysis to determine fixed cost per month and variable cost per new hire.

Fixed Costs:
Manager Salary-$8,000
Depreciation of equipment-$400
Building costs-$2,000 --------------------------------------
Total fixed cost per month=$10,400

Variable Costs:
Office supplies-$300
Staff salaries-$33,000
…show more content…
15% increase in profit:
2,035,000 x .15 = 305,150 + 2,035,000 = 2,340,250

15% increase in variable costs:
1,340,000 x .15 = 201,000 + 1,340,000 = 1,541,000

2,340,250
-1,541,000
-255,000 (fixed costs)
-----------------------------
$544,250 (profit)

544,250/2,340,250 = 23.2561%

The percent is greater in part b than part a, because this approach assumes the 15% increase will occur evenly across all departments. In reality, the increase likely occurred at a varying rate across departments. However, because this was not weighted, departments that have a higher contribution margin ratio but lower sales rate caused an increase in the percentage. In order to correct this, one would need to use the contribution margin ratios for each department to calculate the increase in profit.

Exercise 18: a. Which stand(s) should the company produce?

Contribution Margin per Hour:
Stand A: 60/6 = $10
Stand B: 36/3 = $12

Contribution Margin Given
Stand A = 10 x 350 = $3,500
Stand B = 12 x 350 = $4,200

The company should produce Stand B, because the company will earn more from Stand B considering the company can sell whatever it makes.

b. What would be the incremental benefit of obtaining 15 additional labor hours?

12 x 15 = $180

The incremental benefit is $180 per week increase in sales.

Problem 12: a. Calculate the contribution margin ratios for the audio,

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