Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 10E
Differential Costs and Sunk Costs
Refer to the data given in Exercise 1-7. Answer all questions independently.
Required:
1.What is the incremental
2. What is the incremental cost incurred if the company increases production and sales from 20,000 to 20,001 units?
3. Assume that Kubin Company produced 20,000 units and expects to sell 19,800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer?
4. Assume that Kubin Company produced 20,000 units and expects to sell 19,800 of them. If a new customer unexpectedly emerges and expresses interest in bu4ng the 200 extra units that have been produced by the company and that would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?
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a) Using the equation method, calculate the normal capacity of the business.
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iii) The total variable cost per unit
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c) Calculate Greek’s break-even point in units and in sales dollars.
d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income.
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A CVP graph such as the one shown below is a useful technique for showing relationships among
an organization's costs, volume, and profits.
8.
Required:
Identify the numbered components in the CVP graph.
Answer
Number 1
Number 2
Number 3
Number 4
Number 5
Number 6
Number 7
Number 8
Number 9
State the effect of each of the following actions on the break-even point.
Answer
|The unit selling price is increased from $ 18 to $20.
|Unit variable expenses are decreased from $12 to $10.
|Fixed expenses are increased by $3,000 per period
Two thousand more units are sold during the period than were
budgeted
Due to paying salespersons a commission rather than a flat
salary, fixed expenses are reduced by $8,000 per period and
unit variable expenses are increased by $3
Due to an increase in the cost of materials, both unit variable
expenses and the selling price are increased by $2.
Advertising costs are increased by $10,000 per period,
resulting in a 10% increase in the number of units sold.
Due…
1.What is a cost whose total amount changes in direct proportion to a change in volume? mixed cost fixed cost irrelevant cost variable cost
2. Which of the following costs is an example of a fixed cost? delivery costs salary of plant manager direct materials sales commissions
3. If production increases by 15%, how will total variable costs likely react? remain the same decrease by 15% increase by 7.5% increase by 15%
4. Which of the following statements is TRUE with respect to fixed costs per unit? They will increase as production decreases They will decrease as production decreases They will remain the same as production levels change They will increase as production increases
5. Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. What are breakeven sales? $11,000 $4,714 $3,300 $7,700
6. Fixed Company produces a single product selling for $30 per unit. Variable costs…
Chapter 1 Solutions
Introduction To Managerial Accounting
Ch. 1 - What are the three major types of product costs in...Ch. 1 - Define the following: (a) Direct materials, (b)...Ch. 1 - Explain the difference between a product cost and...Ch. 1 - Distinguish between (a) a variable cost, (b) a...Ch. 1 - What effect does an increase in the activity level...Ch. 1 - Define the following terms: (a) Costbehavior and...Ch. 1 - What is meant by an activity base when dealing...Ch. 1 - Managers often assume a strictly linear...Ch. 1 - Distinguish between discretionary fixed costs and...Ch. 1 - Does the concept of the relevant range apply to...
Ch. 1 - What is the difference between a traditional...Ch. 1 - Prob. 12QCh. 1 - Define the following terms: differential cost,...Ch. 1 - Only variable costs can be differential costs. Do...Ch. 1 - Prob. 1AECh. 1 - This Excel worksheet form is to be used to...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 4F15Ch. 1 - Prob. 5F15Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 8F15Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 15F15Ch. 1 - Identifying Direct and Indirect Costs Northwest...Ch. 1 - Prob. 2ECh. 1 - Classifying Costs as Product or Period Costs...Ch. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Traditional and Contribution Format Income...Ch. 1 - Direct and Indirect CostsKubin Company’s relevant...Ch. 1 - Product Costs and Period Costs; Variable and Fixed...Ch. 1 - Fixed, Variable, and Mixed Costs Refer to the data...Ch. 1 - Differential Costs and Sunk Costs Refer to the...Ch. 1 - Cost Behavior; Contribution Format Income...Ch. 1 - Product and Period Cost Flows The Devon Motor...Ch. 1 - Prob. 13ECh. 1 - Cost Classification Wollogong Group Ltd. of New...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Cost Classifications for Decision Making Warner...Ch. 1 - Classifying Variable and Fixed Costs and Product...Ch. 1 - PROBLEM 1—18 Direct and Indirect Costs; Variable...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Variable and Fixed Costs; Subtleties of Direct and...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Cost Terminology; Contribution Format Income...Ch. 1 - Cost Classification Listed below are costs found...Ch. 1 - Different Cost Classifications for Different...Ch. 1 - Traditional and Contribution Format Income...
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