管理会计ima13sol_ch02.doc

CHAPTER 2COVERAGE OF LEARNING OBJECTIVESLEARNING OBJECTIVEFUNDA-MENTALASSIGN-MENTMATERIALCRITICAL THINKINGEXERCISES AND EXERCISESPROBLEMSCASES, EXCEL,COLLAB., & INTERNET EXERCISESLO1: Explain how cost drivers affect cost behavior.24,25, 2739, 4162LO2: Show how changes in cost-driver activity levels affect variable and fixed costs.A1, A2, B1, B224,25, 28, 2939, 42, 43, 45, 49, 50, 51, 52, 53, 5762, 63, 64, 67LO3: Calculate break-even sales volume in total dollars and total units.A1, A2, B1, B232,33,3540, 42, 43, 44, 45, 47, 49, 50, 51, 53, 54, 5662, 64, 67LO4: Create a cost-volume-profit graph and understand the assumptions behind it.30, 3139LO5: Calculate sales volume in total dollars and total units to reach a target profit.A1, A2, B1, B230, 31, 34, 3540, 42, 43, 44, 45, 47, 49, 50, 51, 5363, 64LO6: Differentiate between contribution margin and gross margin.45, 54LO7: Explain the effects of sales mix on profits (Appendix 2A).3658, 5965LO8: Compute cost-volume-profit relationships on an after-tax basis (Appendix 2B).A1, B137, 3860, 6166CHAPTER 2Introduction to Cost Behavior and Cost-Volume Relationships2-A1(20-25 min.)1.Let N= number of unitsSales= Fixed expenses + Variable expenses + Net income$1.00 N= $6,000 + $.80 N + 0$.20 N= $6,000N= 30,000 unitsLet S= sales in dollarsS= $6,000 + .80 S + 0.20 S= $6,000S= $30,000Alternatively, the 30,000 units may be multiplied by the $1.00 to obtain $30,000.In formula form:In units = = 30,000In dollars = = $30,0002.The quick way: (40,000 - 30,000) x $.20 = $2,000Compare income statements:Break-even Point IncrementTotalVolume in units 30,000 10,000 40,000Sales$30,000$10,000$40,000Deduct expenses:Variable24,0008,00032,000Fixed 6,000 - 6,000Total expenses$30,000$8,000$38,000Effect on net income$ 0$ 2,000$ 2,0003.Total fixed expenses would be $6,000 + $1,552 = $7,552 = 37,760 units; = $37,760 salesor 37,760 x $1.00= $37,760 sales4.New contribution margin is $.18 per unit; $6,000 $.18 = 33,333 units33,333 units x $1.00 = $33,333 in sales5.The quick way: (40,000 - 30,000) x $.16 = $1,600. On a graph, the slope of the total cost line would have a kink upward, beginning at the break-even point.2-A2(20-30 min.)The following format is only one of many ways to present a solution. This situation is really a demonstration of sensitivity analysis, whereby a basic solution is tested to see how much it is affected by changes in critical factors. Much discussion can ensue, particularly about the final three changes.The basic contribution margin per revenue mile is $1.50 - $1.30 = $.20(1)(2)(3)(4)(5)(1)x(2)(3)-(4)RevenueContributionTotalMilesMargin PerContributionFixedNetSoldRevenue MileMarginExpensesIncome1.800,000$.20$160,000$120,000$ 40,0002.(a) 800,000.35280,000120,000160,000(b)880,000.20176,000120,00056,000(c)800,000.0756,000120,000(64,000)(d)800,000.20160,000132,00028,000(e)840,000.17142,800120,00022,800(f)720,000.25180,000120,00060,000(g)840,000.20168,000132,00036,0002-B1(15-20 min.)1. = = 1,250 units2.Contribution margin ratio: = 25%$8,000 25% = $32,0003. = = 2,500 units4.($50,000 - $20,000)(110%)= $33,000 contribution margin;$33,000 - $20,000= $13,0005.New contribution margin:$40 - ($30 - 20% of $30)=$40 - ($30 - $6) = $16;New fixed expenses: $80,000 x 110% = $88,000; = = 6,750 units2-B2(15-25 min.)1.176 x ($30 - $10) - $2,300 = $3,520 - $2,300 = $1,2202.a.198 x ($30 - $10) - $2,300 = $3,960 - $2,300 = $1,660or (22 x $20) + $1,220 = $440 + $1,220 = $1,660b.176 x ($30 - $12) - $2,300 = $3,168 - $2,300 = $868or $1,220 - ($2 x 176) = $868c.$1,220 - $220 = $1,000d.(9.5 x 22) x ($30 - $10) - ($2,300 + $300) = $4,180 - $2,600 = $1,580e.(7 x 22) x ($33 - $10) - $2,300 = $3,542 - $2,300 = $1,2422-1This is a good characterization of cost behavior. Identifying cost drivers will identify activities that affect costs, and the relationship between a cost driver and costs specifies how the cost driver influences costs.2-2 Two rules of thumb to use are:a. Total fixed costs remain unchanged regardless of changes in cost-driver activity level.b. The per-unit variable cost remains unchanged regardless of changes in cost-driver activity level.2-3 Samples of variable costs are the costs of merchandise, materials, parts, supplies, sales commissions, and many types of labor. Examples of fixed costs are real estate taxes, real estate insurance, many executive salaries, and space rentals.2-4Fixed costs, by definition, do not vary in total as volume changes. However, if fixed costs are allocated or spread over volume on a per-unit-of-volume basis, they decline per unit as volume increases.2-5Yes. Fixed costs per unit change as the volume of activity changes. Therefore, for fixed cost per unit to be meaningful, you must identify an appropriate volume level. In contrast, total fixed costs are independent of volume level.2-6No. Cost behavior is much more complex than a simple dichotomy into fixed or variable. For example, some costs are not linear, and some have more than one cost driver. Division of costs into fixed and variable categories is a useful simplification, but it is not a complete description of cost behavior in most situations.2-7No. The relevant range pertains to both variable and fixed costs. Outside a relevant range, some variable costs, such as fuel consumed, may behave differently per unit of activity volume.2-8The major simplifying assumption is that we can classify costs as either variable or fixed with respect to a single measure of the volume of output activity.2-9The same cost may be regarded as variable in one decision situation and fixed in a second decision situation. For example, fuel costs are fixed with respect to the addition of one more passenger on a bus because the added passenger has almost no effect on total fuel costs. In contrast, total fuel costs are variable in relation to the decision of whether to add one more mile to a city bus route.2-10No. Contribution margin is the excess of sales over all variable costs, not fixed costs. It may be expressed as a total, as a ratio, as a percentage, or per unit.2-11A break-even analysis does not describe the real value of a CVP analysis, which shows profit at any volume of activity within the relevant range. The break-even point is often only incidental in studies of cost-volume relationships.2-12No. break-even points can vary greatly within an industry. For example, Rolls Royce has a much lower break-even volume than does Honda (or Ford, Toyota, and other high-volume auto producers).2-13No. The CVP technique you choose is a matter of personal preference or convenience. The equation technique is the most general, but it may not be the easiest to apply. All three techniques yield the same results.2-14Three ways of lowering a break-even point, holding other factors constant, are: decrease total fixed costs, increase selling prices, and decrease unit variable costs.2-15No. In addition to being quicker, incremental analysis is simpler. This is important because it keeps the analysis from being cluttered by irrelevant and potentially confusing data.2-16Yes. Computer spreadsheets readily display various combinations of changes in selling prices, unit variable costs, fixed costs, and target profits.2-17Operating leverage is a firms ratio of fixed to variable costs. A highly leveraged company has relatively high fixed costs and low variable costs. Such a firm is risky because small changes in volume lead to large changes in net income.2-18No. In retailing, the contribution margin is likely to be smaller than the gross margin. For instance, sales commissions are deducted in computing the contribution margin but not the gross margin.2-19No. CVP relationships pertain to both profit-seeking and nonprofit organizations. In particular, managers of nonprofit organizations must deal with tradeoffs between variable and fixed costs. To many government department managers, lump-sum budget appropriations are regarded as the available revenues.2-20Contribution margin could be lower because the proportion of sales of the product bearing the higher unit contribution margin declines.2-21 = 2-22 = x x (1 - tax rate)2-23No. The individual is confused. Definitions of variable and fixed cost behavior are based on total cost behavior, not unit cost behavior.2-24The key to determining cost behavior is to ask, “If there is a change in the level of the cost driver, will the total cost of the resource change immediately?” If the answer is yes, the resource cost is variable. If the answer is no, the resource cost is fixed. Using this question as a guide, the cost of advertisements is normally variable as a function of the number of advertisements. Note that because the number of advertisements may not vary with the level of sales, advertising cost may be fixed with respect to the cost driver “level of sales.” Salaries of marketing personnel are a fixed cost. Travel costs and entertainment costs can be either variable or fixed depending on the policy of management. The key question is whether it is necessary to incur additional travel and entertainment costs to generate added sales.2-25The key to determining cost behavior is to ask, “If there is a change in the level of the cost driver, will the total cost of the resource change immediately?” If the answer is yes, the resource cost is variable. If the answer is no, the resource cost is fixed. Using this question as a guide, the cost of labor can be fixed or variable as a function of the number of hours worked. Regular wages may be fixed if there is a commitment to the laborers that they will be paid for normal hours regardless of the workload. However, overtime and temporary labor wages are variable. The depreciation on plant and machinery is not a function of the number of machine hours used and so this cost is fixed. 2-26Suggested value chain functions are listed below. New ProductsNew TechnologyNew Positioning StrategiesNew Pricingq Marketingq R & Dq Designq R & Dq Designq Marketingq Supportq Marketing2-27 (5 10 min.)Situation Best Cost DriverJustification1.Number of SetupsBecause each setup takes the same amount of time, the best cost driver is number of setups. Data is both plausible, reliable, and easy to maintain.2.Setup TimeLonger setup times result in more consumption of mechanics time. Simply using number of setups as in situation 1 will not capture the diversity associated with this activity.3.Cubic FeetAssuming that all products are stored in the warehouse for about the same time (that is inventory turnover is about the same for all products), and that products are stacked, the volume occupied by products is the best cost driver. 4.Cubic Feet WeeksIf some types of product are stored for more time than others, the volume occupied must be multiplied by a time dimension. For example, if product A occupies 100 cubic feet for an average of 2 weeks and product B occupies only 40 cubic feet but for an average of 10 weeks, product B should receive twice as much allocation of warehouse occupancy costs.2-28(5-10 min.)1.Contribution margin = $900,000 - $500,000= $400,000Net income= $400,000 - $330,000= $ 70,0002.Variable expenses = $800,000 - $350,000= $450,000Fixed expenses = $350,000 - $ 80,000= $270,0003.Sales = $600,000 + $360,000= $960,000Net income = $360,000 - $250,000= $110,000 2-29(10-20 min.)1.d= c(a - b)$720,000= 120,000($25 - b)b= $19f= d - e= $720,000 - $650,000 = $70,0002.d= c(a - b)= 100,000($10 - $6) = $400,000f= d - e= $400,000 - $320,000 = $80,0003.c= d (a - b)= $100,000 $5 = 20,000 unitse= d - f= $100,000 - $15,000 = $85,0004.d= c(a - b)= 60,000($30 - $20)= $600,000e= d - f= $600,000 - $12,000 = $588,0005.d= c(a - b)$160,000= 80,000(a - $9)a= $11f= d - e= $160,000 - $110,000 = $50,0002-30 (10 min.)Using the graph above, the estimated breakeven point in total units sold is about 80,000. The estimated net income for 100,000 units sold is $80,000 ($1,000,000 - $920,000).2-31 (10 min.)Using the graph above, the estimated breakeven point in total units sold is about 60,000 (actual breakeven volume is 58,800). The estimated net loss for 50,000 units sold is $88,000 ($1,500,000 - $1,588,000).2-32(10 min.)1.Let TR= total revenueTR - .30(TR) -$42,000,000= 0.70(TR)= $42,000,000TR= $60,000,0002.Daily revenue per patient = $60,000,000 50,000 = $1,200. This may appear high, but it includes the room charge plus additional charges for drugs, x-rays, and so forth.2-33(15 min.)1.100% Full50% FullRoom revenue $50$7,300,000 a$3,650,000 bVariable costs $10 1,460,000 730,000Contribution margin5,840,0002,920,000Fixed costs 3,400,000 3,400,000Net income (loss)$2,440,000$ (480,000)a)400 x 365 = 146,000 rooms per year 146,000 x $50 = $7,300,000b)50% of $7,300,000 = $3,650,0002.Let N= number of rooms$50N -$10N - $3,400,000 = 0N= $3,400,000 $40 = 85,000 roomsPercentage occupancy= 85,000 146,000 = 58.2%2-34(15 min.)1.$23. To compute this, let X be the variable cost that generates $1 million in profits:($48 - X ) x 800,000 - $19,000,000 = $1,000,000($48 - X)= ($1,000,000 + $19,000,000) 800,000$48 - X= $200 8 = $25X= $48 - $25 = $232.Loss of $600,000:($48 - $25) x 800,000 - $19,000,000= ($23 x 800,000) - $19,000,000= $18,400,000 - $19,000,000= ($600,000)2-35(15-20 min.)1.Let N= number of occupied rooms per month$62N - $12N - $400,000= $0N= $400,000 $50N= 8,000 per month or 267 per day2. $62N - $12N - $400,000= $100,000N= $500,000 $50N= 10,000 per month3.Let P = room rate per dayOther contribution margin = $60,000 + $30,000 + $30,000 + $20,000 = $140,000 .80(400)x30xP + $140,000 - .80(400)x30x$12 - $400,000 = $100,0009,600P + $140,000 - $115,200 - $400,000= $100,0009,600P= $475,200P= $49.50The latter answer indicates how hotels frequently may be inclined to reduce room rates if they can generate contribution margins from other hotel activities. The most prominent example is gambling conducted by hotels in Las Vegas and Atlantic City.2-36 (15-20 min.)1.Let R = pints of raspberries and 2R = pints of strawberriessales - variable expenses - fixed expenses = zero net income$1.10(2R) + $1.45(R) - $.75(2R) - $.95(R) - $15,600= 0$2.20R + $1.45R - $1.50R - $.95R -$15,600= 0$1.2R - $15,600= 0R= 13,000 pints of raspberries2R = 26,000 pints of strawberries2.Let S = pints of strawberries($1.10 - $.75) x S - $15,600 = 0.35S - $15,600 = 0S = 44,571 pints of strawberries3.Let R = pints of raspberries($1.45 - $.95) x R - $15,600 = 0$.50R - $15,600 = 0R = 31,200 pints of raspberries2-37(10 min.)1.$.50N - $.40N - $6,000 = $.10N = $6,000 + $.10N = $6,000 + $360N = $6,360 $.10 = 63,600 units2.$.50N - $.40N - $6,000 = $.10N = $6,000 + $.10N = $6,000 + $600N = $6,600 $.10 = 66,000 units2-38(15 min.)Several variations of the following general approach are possible:Sales - Variable expenses - Fixed expenses = S - .7S - $470,000 = .3S = $470,000 + $70,000S = $540,000 .3 = $1,800,000Check:Sales$1,800,000Variable expenses (70%) 1,260,000Contribution margin540,000Fixed expenses 470,000Income before taxes$ 70,000Income taxes 40% 28,000Net income$ 42,0002-39(10-15 min.)The answer is $1,100,000.Refined analysis:$1,200,0001,100,0001,000,000$2,000,000$2,400,000billingsPractical analysis:$1,200,0001,100,0001,000,000$2,000,000$2,400,000billingsRelevant Range2-40 (15-20 min.) 1. Microsoft: ($28,365 - $5,191) $28,365 = .82 or 82% Procter & Gamble: ($40,238 - $20,989) $40,238) = .48 or 48%There is very little variable cost for each unit of software sold by Microsoft, while the variable cost of the soap, cosmetics, foods, and other products of Procter & Gamble is substantial.2. Microsoft: $10,000,000 x .82 = $8,200,000 Procter & Gamble: $10,000,000 x .48 = $4,800,0003. By assuming that changes in sales volume do not move the volume outside the relevant range, we know that the total contribution margin generated by any added sales will be added to the operating income. Thus, we can simply multiply the contribution margin percentage by the changes in sales to get the change in operating income.The main assumptions we make when we assume that the sales volume remains in the relevant range are that total fixed costs do not change and unit variable cost remain unchanged. This generally means that such predictions will apply only to small cha