CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–16 (FIN MAN); Ex. 5–16 (MAN)
a. Filmed
Entertainment Networks Publishing
Revenues……………………………
…
$11,784.0 $13,562.0 $6,328.0
b. The Filmed Entertainment and Networks segments sell an information or media
product that has a very small variable cost per unit. For example, the Networks
segment earns revenue monthly from each customer. However, the variable
cost of each customer is rather small. The cost of providing the service is
c. The higher contribution margin ratios of the Filmed Entertainment and Networks
20-21
CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–17 (FIN MAN); Ex. 5–17 (MAN)
a.
Effect of change in sales:
b. The sales will increase by $31,875. If the variable cost per unit were $10, and
Ex. 20–18 (FIN MAN); Ex. 5–18 (MAN)
Effect of change in sales:
Sales quantity factor (38,000 – 41,000) × $200 $(600,000)
BUY BEST INC.
ROMERO PRODUCTS INC.
Contribution Margin Analysis—Sales
For the Year Ended December 31, 2014
Contribution Margin Analysis—Sales
For the Year Ended December 31, 2015
20-22
CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–19 (FIN MAN); Ex. 5–19 (MAN)
Effect of changes in variable costs of goods sold:
Variable cost quantity factor (41,000 – 38,000) × $80 $ 240,000
ROMERO PRODUCTS INC.
Contribution Margin Analysis—Variable Costs
For the Year Ended December 31, 2014
20-23
CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–20 (FIN MAN); Ex. 5–20 (MAN)
a.
Atlanta/ Baltimore/ Pittsburgh/
Baltimore Pittsburgh Atlanta Total
Revenues $255,000 $594,000 $542,080 $1,391,080
Variable costs:
Labor costs for loading
Revenues: Revenue per railcar × Number of railcars
b. The Atlanta/Baltimore route performs significantly worse than do the other two routes.
A close examination of the operating statistics indicates that this route runs very few
EAST COAST RAILROAD
For the Month Ended April 30, 2014
Contribution Margin by Route
20-24
CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–21 (FIN MAN); Ex. 5–21 (MAN)
a.
Revenues ($500 × 700 railcars) $350,000
Labor costs for loading and unloading railcars
b.
Planned contribution margin $(29,291)
Effect of change in sales:
Contribution Margin Analysis—Atlanta/Baltimore Route
For the Month Ended May 31, 2014
EAST COAST RAILROAD
Contribution Margin for Atlanta/Baltimore Route
For the Month Ended May 31, 2014
EAST COAST RAILROAD
20-25
CHAPTER 20 Variable Costing for Management Analysis
Ex. 20–22 (FIN MAN); Ex. 5–22 (MAN)
a.
Revenue $7,254,000
Variable costs:
b.
Planned contribution margin* $ 2,105,625
Effect of change in revenue:
records, and marketing costs
Effect of changes in instructional costs:
Contribution Margin Analysis
For the Fall Term 2014
UNDERWATER UNIVERSITY
Variable Costing Income Statement
For the Fall Term 2014
UNDERWATER UNIVERSITY
20-26
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–1A (FIN MAN); Prob. 5–1A (MAN)
1.
Sales $4,095,000
Cost of goods sold:
2.
Sales $4,095,000
Variable cost of goods sold:
3. The income from operations reported under absorption costing exceeds the
income from operations reported under variable costing by $16,800 ($376,740 –
ICE COLD FRIDGE COMPANY
Variable Costing Income Statement
For the Month Ended May 31, 2014
PROBLEMS
ICE COLD FRIDGE COMPANY
Absorption Costing Income Statement
For the Month Ended May 31, 2014
20-27
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–2A (FIN MAN); Prob. 5–2A (MAN)
1.
Sales (2,925 units) $315,900
Cost of goods sold:
Direct materials $117,000
2.
Sales (2,925 units) $315,900
Variable cost of goods sold:
Direct materials $117,000
3. $106,500. The loss from operations from temporarily closing the portion of the plant
4. Production of solvent should be continued. Temporary suspension of production
would result in an operating loss of $106,500 [from (3) above], compared with a loss
HEYWARD INDUSTRIES INC.
Estimated Income Statement—Absorption Costing—Solvent
For the Month Ending May 31, 2015
For the Month Ending May 31, 2015
Estimated Income Statement—Variable Costing—Solvent
HEYWARD INDUSTRIES INC.
20-28
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–3A (FIN MAN); Prob. 5–3A (MAN)
1. a.
Sales $771,750
Cost of goods sold:
b.
Sales $771,750
Cost of goods sold:
2. a.
Sales $771,750
Variable cost of goods sold:
Variable cost of goods manufactured $660,450
For the Month Ended January 31, 2015
HIP AND CONSCIOUS CLOTHING COMPANY
Absorption Costing Income Statement
For the Month Ended February 28, 2015
Variable Costing Income Statement
HIP AND CONSCIOUS CLOTHING COMPANY
Absorption Costing Income Statement
For the Month Ended January 31, 2015
HIP AND CONSCIOUS CLOTHING COMPANY
20-29
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–3A (FIN MAN); Prob. 5–3A (MAN) (Concluded)
2. b.
Sales $771,750
Variable cost of goods sold:
Inventory, February 1 (4,050 units × $11.90) $ 48,195
3. a. For January, the income from operations reported under absorption costing
exceeds the income from operations reported under variable costing by
b. For February, the income from operations reported under absorption costing
is less than the income from operations reported under variable costing by
4. The Hip and Conscious Clothing Company was equally profitable in January and
February under the variable costing concept. Sales and the variable cost per unit
were the same for both January and February. The difference in income reported
HIP AND CONSCIOUS CLOTHING COMPANY
Variable Costing Income Statement
For the Month Ended February 28, 2015
20-30
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–4A (FIN MAN); Prob. 5–4A (MAN)
1.
Variable
Variable Cost Selling
of Goods Sold Expenses Contribution
Contribution as a Percent as a Percent Margin
Salesperson Margin of Sales of Sales Ratio
Case $147,560 50.0% 19.0% 31.0%
Dix 139,200 50.0% 21.0% 29.0%
2. Sussman has the highest contribution margin and contribution margin ratio for the
year. This is because of two factors. First, Sussman has the smallest variable cost
3. Other factors that should be considered in evaluating the performance of salespersons
VICTORN INSTRUMENTS COMPANY
Salespersons’ Analysis
For the Year Ended December 31, 2014
20-31
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–5A (FIN MAN); Prob. 5–5A (MAN)
1.
S M L Total
Sales $668,000 $737,300 $956,160 $2,361,460
2. Annual income from operations would be reduced below its present level by $146,360
if Size M were to be discontinued (Proposal 2), as indicated below:
Contribution margin for Size M $224,680
Less reduction in fixed production costs and fixed operating
VALDESPIN COMPANY
For the Year Ended June 30, 2014
Contribution Margin by Size Segment
Size
20-32
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–5A (FIN MAN); Prob. 5–5A (MAN) (Concluded)
3.
S L Total
Sales $1,536,400 $956,160 $2,492,560
4. $46,936. A comparison of the amount of income from operations under present
conditions, as indicated in (1), and under Proposal 3, as indicated in (3), suggests an
increase of $46,936 if Proposal 3 is accepted, as illustrated below.
Income from operations, Proposal 3 $132,726
Alternatively, the $46,936 increase can be determined as follows:
Contribution margin, Size S, Proposal 3 $541,696
Contribution margin, Size S, present operations 235,520
Size
VALDESPIN COMPANY
Contribution Margin—Proposal 3
20-33
CHAPTER 20 Variable Costing for Management Analysis
Prob. 20–6A (FIN MAN); Prob. 5–6A (MAN)
1.
Planned contribution margin $1,386,000
Effect of change in sales:
2. The president’s first statement appears correct taken at face value. The president is
incorrect regarding variable cost of goods sold. The majority of the decrease in the
$4.00, which more than offset the favorable variable cost quantity factor, resulting
in an overall decrease in the contribution margin. The increase in the variable selling
DOZIER INDUSTRIES INC.
Contribution Margin Analysis
For the Year Ended December 31, 2014
20-34