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    Managerial Accounting Class Exercise1

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    risvana rahim
    This document discusses variable, fixed, direct, and indirect costs as they relate to managerial accounting. It provides an example of classifying costs for a manufacturing company and calculating variable and fixed costs using the high-low method. It also gives an example of computing the contribution margin for a company using data from April and May, determining the variable cost per unit, contribution margin per unit and in total, and contribution ratio.

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    Managerial Accounting Class Exercise1

    Uploaded by

    risvana rahim
    23 views3 pages
    This document discusses variable, fixed, direct, and indirect costs as they relate to managerial accounting. It provides an example of classifying costs for a manufacturing company and calculating variable and fixed costs using the high-low method. It also gives an example of computing the contribution margin for a company using data from April and May, determining the variable cost per unit, contribution margin per unit and in total, and contribution ratio.

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    Managerial accounting Class Exercise1

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    This document discusses variable, fixed, direct, and indirect costs as they relate to managerial accounting. It provides an example of classifying costs for a manufacturing company and calculating variable and fixed costs using the high-low method. It also gives an example of computing the contribution margin for a company using data from April and May, determining the variable cost per unit, contribution margin per unit and in total, and contribution ratio.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views3 pages

    Managerial Accounting Class Exercise1

    Uploaded by

    risvana rahim
    This document discusses variable, fixed, direct, and indirect costs as they relate to managerial accounting. It provides an example of classifying costs for a manufacturing company and calculating variable and fixed costs using the high-low method. It also gives an example of computing the contribution margin for a company using data from April and May, determining the variable cost per unit, contribution margin per unit and in total, and contribution ratio.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    MBA641

    MANAGERIAL ACCOUNTING
    Class Exercise#1
    Variable Fixe Direct Direct Manufacturing Period Opportunity Sunk
    Cost d Material Labor Overhead Cost Cost Cost Cost
    Cost Cost Cost
    Materials X X
    Production X X
    supervisor
    salary
    Production X X
    line worker
    wages
    Equipment X X
    rental
    Building X X X
    depreciation
    Marketing X X
    cost
    Shipping cost X X
    Return on X
    present
    investment
    Question No.1
    Question No.2

    a)

    As per High Low method

    Variable cost Per unit= Highest Activity Cost-Lowest Activity Cost


    Highest Activity Units-Lowest Activity Units

    Fixed Cost =Highest Activity Cost-(Variable Cost per Units x Highest Activity Units)

    Mixed Expenses are:

    Particulars April May June Remarks


    Sales in units 3,000 3,750 4,500
    1)Shipping Expense Variable Cost=8*3000 Variable Cost=8*3,750 Variable Cost=8*4,500 Refer Note
    =$24,000 (A) =$30,000 (A) =$36,000 (A) No.2
    Fixed Expense=$20,000 (B) Fixed Expense=$20,000 (B) Fixed Expense=$20,000 (B)

    Total(A+B)= $44,000 Total(A+B)= $50,000 Total(A+B)= $56,000


    2) Salaries and Variable Cost=24*3000 Variable Cost=24*3,750 Variable Cost=24*4,500 Refer Note
    Commission =$72,000 (A) =$90,000 (A) =$1,08,000 (A) No.4
    Fixed Expense=$35,000 (B) Fixed Expense=$35,000 (B) Fixed Expense=$35,000 (B)

    Total(A+B)= $1,07,000 Total(A+B)= $1,25,000 Total(A+B)= $1,43,000

    Working Notes:

    Note Particulars April May Computation Remarks


    No. Sales in units 3,000 3,750
    1 Cost of goods sold $1,68,000 $2,10,000 Variable cost per unit Since fixed cost is zero, cost of goods
    =2,10,000-1,68,000 sold is a variable cost.
    3,750-3,000
    =$56 per unit
    ∴Fixed cost
    =2,10,000-(56*3750)
    =0

    2 Shipping expense $44,000 $50,000 Variable cost per unit As it contains both variable and fixed
    =50,000-44,000 elements, it is a mixed expense.
    3,750-3,000
    =$8 per unit
    ∴Fixed cost
    =50,000-(8*3750)
    =$20,000
    3 Advertising expense $70,000 $70,000 As the amount is constant for all
    months, it is a fixed expense.
    4 Salaries and commissions $1,07,000 $1,25,000 Variable cost per unit As it contains both variable and fixed
    =1,25,000-1,07,000 elements, it is a mixed expense.
    3,750-3,000
    =$24 per unit
    ∴Fixed Cost
    =1,25,000-(24*3750)
    =$35,000
    5 Insurance expense $9,000 $9,000 As the amount is constant for all
    months, it is a fixed expense.
    6 Depreciation expense $42,000 $42,000 As the amount is constant for all
    months, it is a fixed expense.

    b) Computation of contribution margin for the month of May

    Contribution margin (In units)= Selling price per unit- Variable cost per unit

    =$140-$88
    =$52 per unit (Refer working note)

    Contribution margin in value= Contribution margin per unit* No. of units sold
    = $52*3750
    =$ 1,95,000

    Contribution ratio = Contribution


    Sales
    = $1,95,000
    $5,25,000
    = 37.14%

    Working note

    1. Selling price per unit= Total sales


    Units sold
    =$5,25,000
    3,750
    = $140 per unit
    2. Total variable cost per unit
    Cost of Goods of sold = $56 per unit
    Selling Expense = $8 per unit
    Salaries and commissions = $24 per unit
    ∴ Total variable cost per unit =$88 per unit

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