chapter 18 solutions manual

8/11/2019 chapter 18 solutions manual

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Chapter 18

Cost Behavior and Cost-Volume-ProfitAnalysis

QUEST!"S

1# Cost-volume-profit analysis is espe$ially useful in the plannin% phase for a &usiness#This phase involves predi$tin% the volume of sales a$tivity' the $osts to &e in$urred'

revenues to &e re$eived' and profits to &e earned# t is also useful in (hat-if)sensitivity* analysis#

+# A varia&le $ost is one that varies proportionately (ith the volume of a$tivity# ,oreample' dire$t materials and dire$t la&or )(hen the (or.ers are paid for $ompletedunits* are treated as varia&le $osts (ith respe$t to the num&er of units produ$ed#

/# Varia&le $osts per unit stay the same )remain $onstant* (hen output volume$han%es# This is &e$ause ea$h unit $onsumes the same amount of varia&le $osts(ithin the relevant ran%e of a$tivity#

0# ,ied $osts per unitde$rease (hen output volume in$reases# This is &e$ause thetotal amount of fied $osts remains the same (hile it is &ein% divided amon% moreunits (ithin the relevant ran%e of a$tivity#

# A step-(ise $ost remains $onstant over a limited ran%e of output a$tivity' outside of(hi$h it $han%es &y a lump-sum amount' then remains $onstant over another limitedran%e of output a$tivity' and so on# A $urvilinear $ost %radually $han%es in anonlinear manner in response to $han%es in sales volume#

2# Definition:Unit $ontri&ution mar%in 3 Sales pri$e per unit - Varia&le $osts per unit#Unit $ontri&ution mar%in is the per unit dollars availa&le to $over fied $osts' (iththe remainder &ein% profit#

4# Definition5 Contri&ution mar%in ratio 3 Contri&ution mar%in 6 Sales pri$e per unit#The $ontri&ution mar%in ratio tells (hat per$ent of ea$h sales dollar is availa&le to$over fied $osts' (ith the remainder &ein% profit#

8# Contri&ution mar%in ratio means that for ea$h sales dollar a spe$ified per$ent isavaila&le to $over fied $osts and $ontri&ute to profits# To illustrate' if a $ompanyhas a 47 $ontri&ution mar%in ratio' then 47 )or 4* of ea$h sales dollar isavaila&le to $over fied $osts and $ontri&ute to profits#

# A CVP analysis for a manufa$turin% $ompany is simplified &y assumin% that theprodu$tion and sales volumes are e9ual# This is the same as assumin% no $han%esin &e%innin% and endin% inventory levels for the period#

1:# The first is that althou%h individual $osts $lassified as fied or varia&le mi%ht not&ehave pre$isely in those patterns' some variations of individual $omponents in the

McGraw-Hill Companies, 2007

Solutions Manual, Chapter 1 1!1


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%roup of fied or varia&le $osts may tend to offset ea$h other# The se$ond is thatmana%ement mi%ht reasona&ly assume that $osts are either fied or varia&le (ithinthe relevant ran%e of operations )or at least the period under analysis*#

11# By assumin% a relevant ran%e for operatin% a$tivity' mana%ement $an more;ustifia&ly assume either fied or varia&le relations &et(een $osts and volume' and&et(een revenue and volume# The assumption also helps limit the $onsideration of

alternative strate%ies to those that $all for volume levels that fall (ithin the relevantran%e#

1+# Three $ommon methods for measurin% $ost &ehavior are5 the s$atter dia%ram' thehi%h-lo( method' and least-s9uares re%ression#

1/# A s$atter dia%ram is used to display the relation &et(een past $osts and salesvolumes# s $urrent $apa$ity )relevant ran%e*# )"ote5The total $ost line $onsists of mied $osts#*

12# ,ied $osts are depi$ted as a hori=ontal line on a CVP $hart &e$ause they remainthe same )$onstant* at all volume levels (ithin the relevant ran%e#

14# Company A has a $ontri&ution mar%in of :7 ?)@+:'::: @1:':::* 6 )@+:':::* andCompany B has a $ontri&ution mar%in of 8:7 ?)@+:'::: @0':::* 6 )@+:':::*# Thismeans Company B (ill ma.e more profit on ea$h additional dollar of sales $omparedto Company A# This is also seen &y loo.in% at operatin% levera%e )fied $osts6total$osts*# Company B>s operatin% levera%e is hi%her#

18# s primary varia&le $osts in ma.in% iPods are5 $osts of the $omponent parts)$hips' $asin%s' ele$troni$ parts*' and dire$t la&or# The $ost of operatin% the plantand e9uipment are fied &e$ause re%ardless of produ$tion levels these produ$t$osts are in$urred# dentifi$ation of many other varia&le and fied $osts is possi&le#

+:# Best Buy offers a full line of ele$troni$s' $omputer soft(are' applian$es' and otherprodu$ts# To ade9uately understand its operations' Best Buy should $ompute&rea.-even points for all types of produ$ts sold#

+1# A 27 in$rease in the sale of a popular model of


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QUCD STUES

Qui$. Study 18-1 )1: minutes*

1# Varia&le 0# Varia&le 4# ,ied

+# Pro&a&ly


4/46


Varia&le $osts 3 3 @+: per maintenan$e hour

Usin% the lo( point' @/'2:: 3 )@+:6maint# hr# 2 maint# hrs#* F fied $ostTherefore' fied $ost 3 @+'1::

Qui$. Study 18- )1: minutes*

Contri&ution mar%in @'::: @/'::: 3 @+':::

Contri&ution mar%in ratio )@'::: - @/':::* 6 @'::: 3 :#0: )or 0:7*

nterpretation5 This result indi$ates 0: $ents of ea$h sales dollar is availa&le

to $over fied $osts and $ontri&ute to profit#


1# Contri&ution mar%in per unit 3 @: - @/2 3 @0

+# Brea.-even point in units 3 3 /'::: units

Qui$. Study 18-4 )1: minutes*1# Contri&ution mar%in ratio 3 3 2:7

+# Brea.-even point in dollars 3 3 @+4:':::


#inancial an$ Mana%erial &ccountin%, 2n$ '$ition1!!

@12+':::@0

@: - @/2@:

@12+':::2:7

@8'1:: - @/'2::+0 - 2


5/46


Preta in$ome 3 @10:'::: 6 )1 - :#/:* 3 @+::':::

n$ome taes 3 @+::'::: :#/: 3 @2:':::

Units to &e sold 3 3 2'4:0 units )rounded*

Qui$. Study 18- ) minutes*

Corre$t )true* ans(er is 2#

Qui$. Study 18-1: )1 minutes*

Company B is li.ely to have a hi%her de%ree of operatin% levera%e )!G*#

Eplanation5 Company B has a relatively lo( proportion of varia&le $osts tototal $osts# This means that the $ontri&ution mar%in )sales - varia&le $osts*for Company B is relatively hi%h# Also' %iven that the fied $osts forCompany B ma.e up a hi%h proportion of its $osts' the in$ome)$ontri&ution mar%in - fied $osts* for this $ompany (ill &e relatively lo((hen sales volume is lo(' &ut hi%h (hen sales volume is hi%h# The de%reeof operatin% levera%e is $omputed as a ratio of the $ontri&ution mar%in to

preta in$ome# n the $ase of Company B' &e$ause the numerator)$ontri&ution mar%in* is a relatively hi%h num&er' the !G is also li.ely to &erelatively hi%h# The reverse is true for Company A#


Brea.-even point in $omposite units 3 3 28: $omposite units

"um&er of &eepers at &rea.-even 3 8 28: 3 '00: individual &eepers

Hreen5 28: 3 /'0:: &eepersHold5 28: / 3 +':0: &eepers


Solutions Manual, Chapter 1 1!)

@8':::@1+

@12+'::: F @+::':::@0


6/46

EIEJCSES

Eer$ise 18-1 )+: minutes*

The s$atter dia%ram and its estimated line of $ost &ehavior appear &elo(

The $ost line appears to refle$t a varia&le $ost &e$ause it in$reases at areasona&ly $onstant rate (ith $han%es in sales an$it appears to interse$tthe $ost ais at =ero )the ori%in*#

Eer$ise 18-+ )1 minutes*

1# Hraph K1# Varia&le $ost

Hraph K+# ,ied $ost

Hraph K/#


7/46

Eer$ise 18-/ )1: minutes*

1# A

+# E

/# B

0#

# ,

2# C

Eer$ise 18-0 )1 minutes*

Series A Varia&le $ost

Series B


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The s$atter dia%ram and its estimated line of $ost &ehavior appear &elo(#

$0

$100

$200

$300

$400

$500

$600

$700

$0 $200 $400 $600 $800 $1,000

Sales

Costs

The $ost pattern appears to ehi&it a step-(ise pattern#


#inancial an$ Mana%erial &ccountin%, 2n$ '$ition1!


9/46

Eer$ise 18-4 )/: minutes*

1#

)a* Contri&ution mar%in per unit 3 @18: @1/3 @0 per unit

)&* Contri&ution mar%in ratio 3 @0 6 @18: 3 +7

)$* Brea.-even point in units 3 @2+':: 6 @0 3 1+':: units

)d* Brea.-even point in dollars 3 @2+':: 6 +7 3 @+'+:':::

)Alternatively5 1+':: units @18: 3 @+'+:':::*

+# CVP $hart


Solutions Manual, Chapter 1

$ 0

$500,000

$1,000,000$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

0 5,000 10,000 15,000 20,000 25,000

Units

Sales

Total costsBreak-even point

1!+


10/46


1#

BG!!< C!


11/46

Eer$ise 18- )+ minutes*

Preliminary $omputationsPreta in$ome 3 After-ta in$ome 6 )1 Ta rate*

3 @81:'::: 6 )1 - :#+:*3 @81:'::: 6 :#8:

3 @1':1+'::

n$ome taes 3 Preta in$ome Ta rate3 @1':1+':: :#+: 3 @+:+'::

1# Unit sales at tar%et in$ome 3

3 @2+':: F @1':1+':: @0

3 /'::: units

,ied F Preta+# ollar sales at tar%et in$ome 3 $osts in$ome

Contri&ution mar%in ratio

3 @2+':: F @1':1+':: +7 3 @2'/::':::

)Alternatively5 /'::: units @18: 3 @2'/::':::*


Solutions Manual, Chapter 1 1)1

,ied Preta$osts in$ome

Contri&ution mar%in

+


12/46

Eer$ise 18-1: )+: minutes*

BG!!< C!


13/46

Eer$ise 18-1+ )/: minutes*

1#

)a* Total epe$ted varia&le $osts3 Varia&le $osts per unit units produ$ed and sold3 @2:M +::'::: units

3 @1+':::':::

MThe @2: varia&le $osts per unit is $omputed &y determinin% )i* salespri$e per unit and )ii* su&tra$tin% $ontri&ution mar%in per unit5Sales pri$e per unit )@14':::'::: 6 +::'::: units*################################# @ 8Gess5 Contri&ution mar%in per unit )%iven*########################################### )+*Varia&le $osts per unit############################################################################## @ 2:

)&* To solve' set up a &rief $ontri&ution mar%in in$ome statementSales )%iven*#############################################################################@14':::':::

Varia&le $osts )from part a*#####################################################)1+':::':::*,ied $osts###############################################################################) N *

Preta in$ome )%iven*##############################################################@ 1'+:':::

Thus5 ,ied $osts 3 @ /'4:':::

+# CVP Chart


Solutions Manual, Chapter 1

$ 0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

0 50,000 100,000 150,000 200,000 250,000 300,000

Units

Sales

Total costs

Break-even point

1)(


14/46

Eer$ise 18-1/ )/: minutes*

nstru$tor note5 This eer$ise is solved in / steps1# Prepare a $ontri&ution mar%in in$ome statement for Co# A to $ompute its !GO+# Prepare a $ontri&ution mar%in in$ome statement for Co# B to $ompute its !GO/# Analy=e and interpret (hi$h $ompany &enefits more from a +:7 sales in$rease#

Step 1#

Company AContri&ution


15/46

Eer$ise 18-10 )+ minutes*

1# Sellin% pri$e per $omposite unit

8 (indo(s @+:: per unit###############################################################@1'2::

+ doors @:: per unit##################################################################### 1':::

Sellin% pri$e per $omposite unit#######################################################@+'2::

+# Varia&le $osts per $omposite unit

8 (indo(s @1+ per unit###############################################################@1':::

+ doors @/: per unit##################################################################### 4::

Varia&le $osts per $omposite unit####################################################@1'4::

/# Brea.-even point in $omposite units ,ied $osts #3 Contri&ution mar%in per $omposite unit

@::'::: #3 @+'2:: - @1'4::

3 1'::: $omposite units

0# Unit sales of (indo(s and doors at &rea.-even point

indo(s5 8 1'::: units )from /*##################8'::: units

oors5 + 1'::: units )from /*##################+'::: units


Solutions Manual, Chapter 1 1))


16/46

PJ!BGE< SET A

Pro&lem 18-1A )+ minutes*

4arts 1 an$ 2

Tom Thompson CompanyContri&ution


17/46

Pro&lem 18-+A )0: minutes*

4art 1

)a* nstru$tor note5 Use the e9uation in Ehi&it 18#11

Brea.-even in sales units 3 ,ied $osts 6 Contri&ution mar%in per unit

3 @+4:'::: 6 @2:M

3 0':: units )1 unit 3 1:: yards*

MContri&ution mar%in per unit 3 @+:: @10: 3 @2: per 1:: yards

)&* nstru$tor note5 Use the e9uation in Ehi&it 18#1+

Brea.-even in sales dollars 3 ,ied $osts 6 Contri&ution mar%in ratio

3 @+4:'::: 6 /:7M

3 @::':::

)Alternatively5 3 0':: units @+:: 3 @::'::: *

MContri&ution mar%in ratio 3 @2: 6 @+:: 3 /:7


Solutions Manual, Chapter 1 1)7


18/46

Pro&lem 18-+A Continue$

4art 2

CVP Chart for I$ite E9uipment Company

4art (

ICTE EQUP


19/46

Pro&lem 18-/A )0 minutes*

4arts 1 an$ 2


4art 2 5 Calculation of 6aria3le an$ fie$ costsVaria&le $osts 3 3 @:#2: per dollar of sales

Usin% the lo( point5 @20'::: 3 ,ied $osts F )@:#2:6@ of sales @8:':::*Therefore' fied $osts 3 @12':::

4art (

The estimates in Part + $an &e used to predi$t the total $osts that (ill &ein$urred at sales levels of @+::'::: and @/::':::#

Predi$tions

Sales )%iven*###################################################################@+::'::: @/::':::

,ied $osts )from part 2*###############################################@ 12'::: @ 12':::

Varia&le $osts )from part 2*########################################### 1+:':::M 18:':::MM

Total $ost#########################################################################@1/2'::: @12':::

M )@+::'::: sales* )@:#2: per sales dollar*#MM )@/::'::: sales* )@:#2: per sales dollar*#


Solutions Manual, Chapter 1 1)+

@++:'::: - @20':::@/0:'::: - @8:':::


20/46

Pro&lem 18-0A )4 minutes*

4art 1 nstru$tor note5 Use the e9uation in Ehi&it 18#1+

+::8 &rea.-even in sales dollars 3 ,ied $osts 6 Contri&ution mar%in ratio

3 @+:'::: 6 +:7M

3 @1'+:':::

MTo $ompute $ontri&ution mar%in ratioSales pri$e per unit )@1':::'::: 6 +:':::*#################################################################@:Varia&le $osts per unit )@8::'::: 6 +:':::*###############################################################@0:Contri&ution mar%in ratio )@:- @0:* 6 @:*###############################################################+:7

4art 2 nstru$tor note5 Use the e9uation in Ehi&it 18#1+ (ith predi$ted num&ers

+:: &rea.-even in sales dollars 3 ,ied $osts 6 Contri&ution mar%in ratio

3 @0:':::M 6 2:7MM

3 @4:':::

MTo $ompute predi$ted fied $osts+::8 fied $osts plus +:: in$rease )@+:'::: F @+::':::*###################################@0:':::

MMTo $ompute predi$ted $ontri&ution mar%in ratioPredi$ted sales pri$e per unit )no $han%e in sales pri$e*#######################################@:Predi$ted varia&le $osts per unit )@0: :7*#########################################################@+:Predi$ted $ontri&ution mar%in ratio )@:- @+:* 6 @:*##############################################2:7

4art (

ASTJ! C!


21/46

Pro&lem 18-0AContinue$

4art ! nstru$tor note5 Use e9uations in Ehi&it 18#18 and 18#+: (ith predi$ted num&ers ),ied $osts F Tar%et preta in$ome*

Je9uired sales in dollars 3 Contri&ution mar%in ratio

3 )@0:':::M F @+::':::MM* 6 2:7MMM3 @2:'::: 6 2:#:73 @1':8/'/// )rounded to (hole dollars*

),ied $osts F Preta in$ome*Je9uired sales in units 3 Contri&ution mar%in per unit

3 )@0:'::: F @+::':::* 6 )@: - @+:*3 @2:'::: 6 @/:3 +1'224 units )rounded to (hole units*

Alternately5

Je9uired sales in units 3 @1':8/'///6 @: per unit3 +1'224 units )rounded to (hole units*

M +::8 fied $osts plus +:: in$rease )@+:'::: F @+::':::*##############################@0:':::MM Tar%et after-ta in$ome )%iven*#############################################################################@10:':::

Preta tar%et in$ome 3 After-ta tar%et in$ome 6 )1 Ta rate*3 @10:'::: 6 )1 :#/:* 3 @+::':::

MMMPredi$ted $ontri&ution mar%in ratio )@:- @/:* 6 @:*from part +############ 2:7 Ta.en from re9uired sales in dollarsR a&ove

4art )

ASTJ! C!


22/46

Pro&lem 18-A )2 minutes*


Brea.-even in dollar sales 3 ,ied $osts 6 Contri&ution mar%in ratio

Produ$t T5

3 @1+'::: 6 +:7M3 @2+':::Produ$t !5

3 @1'04'::: 6 84#7M3 @1'28'410 )rounded to the nearest dollar*

MTo $ompute $ontri&ution mar%in ratioSales pri$e per unit Produ$t T )@+':::'::: 6 :':::*############################################################################### Produ$t ! )@+':::'::: 6 :':::*##############################################################################

T@0:

!

@0:Varia&le $osts per unit Produ$t T )@1'2::'::: 6 :':::*###############################################################################

Produ$t ! )@+:'::: 6 :':::*#################################################################################

@/+

@ Contri&ution mar%in ratio Produ$t T )@0:- @/+* 6 @0:*####################################################################################### Produ$t ! )@0:- @* 6 @0:*########################################################################################

+:#:784#7

4art 2

,ore$asted $ontri&ution mar%in in$ome statements for ea$h produ$t assumin%sales de$lines to /:'::: units (ith no $han%e in unit sales pri$e

VA""A C!#,ore$asted Contri&ution


23/46

Pro&lem 18-A Continue$

4art (

,ore$asted $ontri&ution mar%in in$ome statements for ea$h produ$t assumin%sales in$rease to 2:'::: units (ith no $han%e in unit sales pri$e

VA""A C!#,ore$asted Contri&ution


24/46

Pro&lem 18-2A )0 minutes*



Plan 15

3 )@+::'::: F @/+':::* 6 4:7M3 @4:':::Plan +5

3 )@+::'::: F @/+':::* 6 47M3 @4::':::

MTo $ompute $ontri&ution mar%in ratioSales pri$e per unit Plan 1 )no $han%e*################################################################################################### Plan + ?@+#:: )1 F +:7*######################################################################################

Plan 1@+#::

Plan +

@/:#::Total varia&le $osts per unit )&oth Plans 1 and +*


25/46

Pro&lem 18-4A ): minutes*

4art 1 BJEAD-EVE"A"AGLSSASSU


26/46

Pro&lem 18-4AContinue$



27/46

PJ!BGE< SET B

Pro&lem 18-1B )+ minutes*

4arts 1 an$ 2

Hilmore CompanyContri&ution


28/46

Pro&lem 18-+B )0: minutes*

4art 1

)a* nstru$tor note5 Use the e9uation in Ehi&it 18#11

Brea.-even in unit sales 3 ,ied $osts 6 Contri&ution mar%in per unit

3 @0+'::: 6 @10:M

3 /:: units

MContri&ution mar%in 3 @/: @+1: 3 @10:

)&* nstru$tor note5 Use the e9uation in Ehi&it 18#1+


3 @0+'::: 6 0:7

3 @1:'::: )Alternatively5 3 /:: units @/: 3 @1:'::: *

MContri&ution mar%in ratio 3 @10: 6 @/: 3 0:7


#inancial an$ Mana%erial &ccountin%, 2n$ '$ition1*


29/46

Pro&lem 18-+BContinue$

4art 2

4art (

XP-X!P C!#Contri&ution


30/46

Pro&lem 18-/B )0 minutes*

4arts 1 an$ 2


4art 2 Calculation of 6aria3le an$ fie$ costs

Varia&le $osts 3 3 @:#0: per dollar of sales

Usin% the hi%h point5 @11: 3 ,ied $osts F )@:#0:6@ of sales @+1*

Therefore' fied $osts 3 @+0

4art (

The estimates in Part + $an &e used to predi$t the total $osts that (ill &ein$urred at sales levels of @1:: and @14:#

Predi$tions

Sales )%iven*#############################################################################@1:: @14:

,ied $osts )from part 2*#########################################################@ +0 @ +0

Varia&le $osts )from part 2*##################################################### 0:M 28MM

Total $osts#################################################################################@ 20 @ +

M )@1:: sales* )@:#0: per sales dollar*#MM )@14: sales* )@:#0: per sales dollar*#


#inancial an$ Mana%erial &ccountin%, 2n$ '$ition

Dyo Company

0

20

40

60

80

100

$120

0 50 100 150 200 250

Sales

Costs

170

@11: - @8@+1 - @8


31/46

Pro&lem 18-0B )4 minutes*


+::8 &rea.-even in dollar sales 3 ,ied $osts 6 Contri&ution mar%in ratio

3 @+::'::: 6 +:7M

3 @1':::':::

MTo $ompute $ontri&ution mar%in ratioSales pri$e per unit )@4:'::: 6 +:':::*####################################################################@/4#:Varia&le $osts per unit )@2::'::: 6 +:':::*###############################################################@/:#::Contri&ution mar%in ratio )@/4#:- @/:* 6 @/4#:*##################################################### +:7

4art 2 nstru$tor note5 Use the e9uation in Ehi&it 18#1+ (ith predi$ted num&ers

+:: &rea.-even in dollar sales 3 ,ied $osts 6 Contri&ution mar%in ratio

3 @/:':::M 6 2:7MM

3 @8/'//0 )rounded to the net dollar*

MTo $ompute predi$ted fied $osts+::8 fied $osts plus +:: in$rease )@+::'::: F @1:':::*###################################@/:':::

MMTo $ompute predi$ted $ontri&ution mar%in ratioPredi$ted sales pri$e per unit )@4:'::: 6 +:':::*###################################################@/4#:Predi$ted varia&le $osts per unit ?)@2::'::: :7*6 +:':::*#################################@1#::Predi$ted $ontri&ution mar%in ratio )@/4#:- @1* 6 @/4#:*#################################### 2:7

4art (

JVEJA C!


32/46

Pro&lem 18-0B Continue$

4art ! nstru$tor note5 Use e9uations in Ehi&it 18#18 and 18#+: (ith predi$ted num&ers

),ied $osts F Preta in$ome*Je9uired sales in dollars 3 Contri&ution mar%in ratio

3 )@/:':::M F @+::':::MM* 6 2:7MMM3 @:'::: 6 2:73 @12'224 )rounded to the net dollar*

),ied $osts F Preta in$ome*Je9uired sales in units 3 Contri&ution mar%in per unit

3 )@/:':::M F @+::':::MM* 6 @++#:3 +0'00 units

Alternatively 3 @12'2246 @/4#: per unitY3 +0'00 units )rounded up to the net unit*

M +::8 fied $osts plus +:: in$rease )@+::'::: F @1:':::*##############################@/:':::MM Tar%et after-ta in$ome )%iven*#############################################################################@10:':::

Preta tar%et in$ome 3 After-ta tar%et in$ome 6 )1 Ta rate*3 @10:'::: 6 )1 :#/:* 3 @+::':::

MMMPredi$ted $ontri&ution mar%in ratio )@/4#:-@1*6@/4#:from part +############## 2:7

Ta.en from re9uired sales in dollarsR a&ove######################################################@12'224YTa.en from part +####################################################################################################@ /4#:

4art )

JVEJA C!


33/46

Pro&lem 18-B )2 minutes*



Produ$t BB5

3 @1::'::: 6 /:7M3 @///'//0 )rounded up to the net dollar*Produ$t TT5

3 @2:'::: 6 84#7M3 @20:':::

MTo $ompute $ontri&ution mar%in ratioSales pri$e per unit Produ$t BB )@8::'::: 6 :':::*############################################################################### Produ$t TT )@8::'::: 6 :':::*################################################################################

BB@12#::

TT

@12#::

Varia&le $osts per unit

Produ$t BB )@2:'::: 6 :':::*############################################################################### Produ$t TT )@1::'::: 6 :':::*################################################################################

@11#+:@+#::

Contri&ution mar%in ratio Produ$t BB )@12#:: - @11#+:* 6 @12#::*#################################################################### Produ$t TT )@12 - @+* 6 @12*#####################################################################################

/:#:784#7

4art 2

,ore$asted $ontri&ution mar%in in$ome statements for ea$h produ$t assumin%sales de$line to //'::: units (ith no $han%e in unit sales pri$e


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Pro&lem 18-BContinue$4art (

,ore$asted $ontri&ution mar%in in$ome statements for ea$h produ$t assumin%sales in$rease to 20'::: units (ith no $han%e in unit sales pri$e

JVEJA C!#,ore$asted Contri&ution


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Produ$t TTs assets that are o(ned or o&tained under a lease a%reement&ased on time' and not on asset usa%e#


Solutions Manual, Chapter 1 17)


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Pro&lem 18-2B )0 minutes*



Eistin% Strate%y5 3 @:'::: 6 7M3 @1'4+4'+4/ )rounded to the net dollar*

"e( Strate%y5 3 @:'::: 6 7M3 @1'4+4'+4/ )rounded to the net dollar*

MTo $ompute $ontri&ution mar%in ratio

Sales pri$e per unit Eistin% strate%y####################################################################################################### "e( strate%y ?@+:#:: )1 +:7*###########################################################################

Eistin%Strate%y

@+:#::

"e(Strate%y

@12#::Total varia&le $osts per unit Unit $osts )@8::'::: 6 1::':::*################################################################################

Unit $osts ?)@8::':::61::':::* )1 +7*############################################################ Pa$.a%in% )@1::'::: 6 1::':::*############################################################################### Pa$.a%in% ?)@1::':::61::':::* )1 F +:7*###########################################################

@ 8#::

1#::@ #::

@ 2#::

1#+:@ 4#+:

Contri&ution mar%in ratio Eistin% strate%y )@+:#:: - @#::* 6 @+:#::*############################################################# "e( strate%y )@12#:: - @4#+:* 6 @12#::*###################################################################

77

4art 2

BEST C!


37/46

Pro&lem 18-4B ): minutes*



38/46

Pro&lem 18-4BContinue$



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SEJAG PJ!BGE


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Jeportin% in A$tion BT" 18-1

1# Some of the $osts of the Hee. S9uad are5

Varia&le5 Parts used in the servi$in% of a $ustomer>s $omputer' dire$tla&or used to servi$e the $ustomer>s $omputer' indire$t supplies used


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Ethi$s Challen%e BT" 18-/

nstru$tor note5 This 9uestion $an serve to %enerate $lass dis$ussion on $ost analysis andestimation# is$ussion $an fo$us on a$$ountin%' &usiness' and other ethi$al $on$erns#


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Communi$atin% in Pra$ti$e BT" 18-0

nstru$tor note5 Jeports (ill vary' &ut a typi$al report (ould li.ely in$lude assumptionssimilar to the follo(in%#

1# Jevenue )salary* assumptions ,ind ;o& that pays a spe$ified amount#

Deep the ;o& for an entire year#

Employer stays in &usiness#

Epe$tations re%ardin% overtime pay#

+# Cost assumptions

,ind livin% a$$ommodations at a spe$ified amount#

Avoid $ostly entertainment events#

Stay healthy and do not in$ur e$ess medi$al epenses#

Cost estimates for food' $lothin%' and other ne$essities#

Ta.in% t to the "et BT" 18-

The site offers many tools for an entrepreneur in assessin% $osts' sales'and profits# Spe$ifi$ally' an E$el (or.sheet is provided that allo(s anentrepreneur to identify the start-up $osts of the &usiness# A ne( &usinessre9uires many different types of $osts for the different resour$es to &ea$9uired )su$h as people' spa$e' e9uipment*' (hi$h sometimes areoverloo.ed &y less-eperien$ed entrepreneurs# This (or.sheet $an serveas a $he$.-list'R promptin% the entrepreneur to at least thin. a&out thedifferent $osts and their amounts#

Also' many of the tools )su$h as the (or.sheet* are in the form of aspreadsheet# This means an entrepreneur $an modify the spreadsheet and

use it to $ondu$t various types of (hat-ifR analyses &y $onsiderin%different possi&le s$enarios of &usiness#


#inancial an$ Mana%erial &ccountin%, 2n$ '$ition12


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Team(or. in A$tion BT" 18-2

)a* Questions for s$hool administrators )others are possi&le*

"um&er of students that (ould attend the theater#

,re9uen$y of $lass s$heduled sho(in%s#

Ge%al )lia&ility* issues for field trips and asso$iated $osts#

Costs of providin% movies to students at s$hool#

)&* Questions for o(ners )others are possi&le*

Gist of other potential mar.ets for theater sho(in%s durin% s$hooldays#

Ga&or $osts to sho( a movie durin% s$hool days#

Copyri%ht la(s and $osts to sho( a movie#

nsuran$e' if any' on s$hool $hildren attendin% the theater#

Any additional heat and li%htin% $osts#

8usiness9eeA$tivity BT" 18-4

1# n the past' Sun s $ase' the hope is that the free soft(are (ill do three thin%s5

nterest $ustomers in Sun>s servers )as stated a&ove*# Sell other Sun produ$ts

Sell lar%e $ustomer servi$e $ontra$ts

f Sun $an ma.e a lar%e enou%h profit on the three items a&ove' then it$an more than ma.e up for the soft(are %iven a(ay#


Solutions Manual, Chapter 1 1(


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Entrepreneurial e$ision BT" 18-8

1# an% should attempt to o&tain information on $osts and revenues ofany proposed ne( produ$ts# The types of information she should

sear$h for in$lude5a Chan%es in costs, if an;, associate$ with offerin% the new pro$ucts

,or eample' are there $han%es in stora%e' display' or sto$.in% that thene( produ$ts (ill re9uireN ill the ne( produ$ts re9uire refri%erationthat she does not no( haveN ill there &e a need to add additionalshelf spa$eN hat is the shelf life of the produ$tN Xo( often (ill thene( produ$ts need to &e orderedN n (hat 9uantitiesN The use of ana$tivity-&ased $ostin% system $an &e espe$ially useful inunderstandin% ho( $osts mi%ht $han%e (ith the introdu$tion of thene( produ$ts#

3 e6enues associate$ with new pro$ucts The $ompany must offer anattra$tive pri$e to lure $ustomers#


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Hlo&al e$ision BT" 18-1:

1.

chapter 18 solutions manual

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