亨格瑞管理会计英文第15版练习答案05解析.

CHAPTER 5 COVERAGE OF LEARNING OBJECTIVES

CHAPTER 5

Relevant Information for Decision Making with a Focus on Pricing Decisions

5-A1 (40-50 min.)

1. INDEPENDENCE COMPANY

Contribution Income Statement

For the Year Ended December 31, 2009

(in thousands of dollars)

Sales $2,200 Less variable expenses

Direct material $400

Direct labor 330

Variable manufacturing overhead (Schedule 1) 150 Total variable manufacturing cost of

goods sold $880 Variable selling expenses 80

Variable administrative expenses 25

Total variable expenses 985 Contribution margin $ 1,215 Less fixed expenses:

Fixed manufacturing overhead (Schedule 2) $345

Selling expenses 220

Administrative expenses 119 Total fixed expenses 684 Operating income $ 531

INDEPENDENCE COMPANY

Absorption Income Statement

For the Year Ended December 31, 2009

(in thousands of dollars)

Sales $2,200 Less manufacturing cost of goods sold:

Direct material $400

Direct labor 330

Manufacturing overhead (Schedules 1 and 2) 495 Total manufacturing cost of goods sold 1,225 Gross margin $ 975 Less:

Selling expenses $300

Administrative expenses 144 444 Operating income $ 531

INDEPENDENCE COMPANY

Schedules of Manufacturing Overhead

For the Year Ended December 31, 2009

(in thousands of dollars)

Schedule 1: Variable Costs

Supplies $ 20

Utilities, variable portion 40

Indirect labor, variable portion 90 $150 Schedule 2: Fixed Costs

Utilities, fixed portion $ 15

Indirect labor, fixed portion 50

Depreciation 200

Property taxes 20

Supervisory salaries 60 345 Total manufacturing overhead $495 2. Change in revenue $200,000

Change in total contribution margin:

Contribution margin ratio in part 1

is $1,215 ÷ $2,200 = .552

Ratio times decrease in revenue is .552 × $200,000 $ 110,400 Operating income before change 531,000 New operating income $420,600 This analysis is readily done by using data from the contribution income statement.

In contrast, the data in the absorption income statement must be analyzed and split into variable and fixed categories before the effect on operating income can be

estimated.

5-A2 (25-30 min.)

1. A contribution format, which is similar to Exhibit 5-6, clarifies the analysis.

Without With

Special Effect of Special

Order Special Order Order Units 2,000,000 150,000 2,150,000

Total Per Unit

Sales $11,000,000 $660,000 $4.40 1$11,660,000 Less variable expenses:

Manufacturing $ 3,500,000 $322,500 $2.15 2$ 3,822,500 Selling & administrative 800,000 35,250 .2353 835,250 Total variable expenses $ 4,300,000 $357,750 $2.385 $ 4,647,250 Contribution margin $ 6,700,000 $302,250 $2.015 $ 7,002,250 Less fixed expenses:

Manufacturing $ 3,000,000 0 0.00 $ 3,000,000 Selling & administrative 2,200,000 0 0.00 2,200,000 Total fixed expenses $ 5,200,000 0 0.00 $ 5,200,000 Operating income $ 1,500,000 $302,250 $2.015 $ 1,802,250 1$660,000 ÷ 150,000 = $4.40

2Regular unit cost = $3,500,000 ÷ 2,000,000 = $1.75 Logo .40

Variable manufacturing costs $2.15

3Regular unit cost = $800,000 ÷ 2,000,000 = $ .40 Less sales commissions not paid (3% of $5.50) (.165)

Regular unit cost, excluding sales commission $ .235

2. Operating income from selling 7.5% more units would increase by $302,250 ÷

$1,500,000 = 20.15%. Note also that the average selling price on regular

business was $5.50. The full cost, including selling and administrative expenses, was $4.75. The $4.75, plus the 40¢ per logo, less savings in commissions

of .165¢ came to $4.985. The president apparently wanted $4.985 + .08($4.985)

= $4.985 + .3988 = $5.3838 per pen.

Most students will probably criticize the president for being too stubborn. The

cost to the company was the forgoing of $302,250 of income in order to protect

the company's image and general market position. Whether $302,250 was a wise investment in the future is a judgment that managers are paid for rendering.