B2: Strategic Planning: Techniques for Forecasting, Budgeting, and Analysis Flashcards
Which of the following costing methods provide(s) the added benefit of usefulness for external reporting purposes?
Absorption costing methods represent GAAP, which are for the benefit of external users in regards to financial statement presentation
A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the break-even point, what number of units of the first product will have been sold?
Break-even = FC / CM per unit
But… we need to split products
CM's for each product: First product: $10 selling - $6 VC = $4 CM Second product: $25 selling - $13 VC = $12 CM
Now… we determine units.
Break-even in units x CM = FC
(First product CM x 75% of total units) + (Second product CM x 25% of total units) = FC
($4 x 75%z) + ($12 x 25%z) = $312,000
($3z + $3z) = $312,000
$6z = $312,000
z = $312,000 / $6
z = 52,000 total units
52,000 x 75% = 39,000 units allocated towards first product at break-even
A delivery company is implementing a system to compare costs of purchasing and operating different vehicles in its fleet. Truck 415 is driven 125,000 miles per year at a variable cost of $0.13 per mile. Truck 415 has a capacity of 28,000 pounds and delivers 250 full loads per year. What amount is the truck’s delivery cost per pound?
125,000 miles x $0.13 per mile = $16,250 cost
28,000 lbs. x 250 loads = 7,000,000 pounds
$16,250 / 7,000,000 = $0.00232 cost per pound
An increase in production levels within a relevant range most likely would result in:
Increasing the total cost
Absorption Costing: Product vs. Period
Product Costs:
DM, DL, Variable & Fixed Overhead (Use total produced)
Period Costs:
Variable & Fixed SG&A (Use number of units sold)
Variable Costing: Product vs. Period
Product Costs:
DM, DL, Variable Overhead (Use total produced)
Period Costs:
Fixed Overhead, Variable and Fixed SG&A (Use number of units sold)
Snyder Co. manufactures fans with direct material costs of $10 per unit and direct labor of $7 per unit. A local carrier charges Snyder $5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans are sold for $100 each. Indirect factory costs and administrative costs are $6,800 and $37,200 per month, respectively. How many fans must Snyder produce to break even?
$100 selling price - $17 DM & DL - $5 carrier charges - $10 sales commissions \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ $68 CM per unit
($6,800 + $37,200) FC / $68 CM per unit = 648 units
In managerial accounting, the term “relevant range” is often used to describe:
The range over which cost relationships are valid
In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits?
Separable costs after the split-off point. Costs subsequent to split-off, and revenues, are relevant to maximizing profits.
Assume that Whitehall Corporation agreed to sell AM-12 to Flank Corporation after further processing for $5.50 per unit. During the first month of production, Whitehall sold 50,000 units with 10,000 units remaining in inventory at the end of the month. Joint costs attributable to AM-12 were $180,000, and costs of processing AM-12 further were $90,000. With respect to AM-12, what is operating profit last month and what is the value of the remaining inventory?
$180,000 + $90,000 = $270,000
$270,000 / 60,000 units = $4.5 per unit
10,000 remaining units x $4.5 per unit = $45,000 inventory value
$5.50 selling price x 50,000 units sold = $275,000 revenue
$4.5 cost per unit x 50,000 units sold = $225,000 total cost
$275,000 - $225,000 = $50,000 operating profit
The Waller Walleye Plant is operating at capacity and currently generates revenue of $1,600,000 per year by processing stewed walleye for cat food. The plant currently has a 15% contribution margin. The company has been offered the opportunity to prepare stewed sturgeon for upscale cat food using one-quarter of the plant’s capacity. The sturgeon job would take one year and pay $600,000 with a 25% contribution margin. The opportunity cost of not accepting the sturgeon project is:
$600,000 x 25% contribution margin = $150,000
Trijonis Company estimated its material handling costs at two activity levels, as follows:
Kilos Handled: 80,000 Cost: $160,000
Kilos Handled: 60,000 Cost: $132,000
What is Trijonis’ estimated cost for handling 75,000 kilos?
Using high-low method, the variable cost per kilo can be determined by dividing the change in cost.
$160,000 - $132,000 / 80,000 - 60,000 =
$28,000 / 20,000 = $1.40 per kilo
Fixed costs can be determined by using Y = a + bx
$160,000 = a + $1.40 (80,000) = 48,000
Use the same formula to determine costs for 75,000 units.
Y = 48,000 + $1.40 (75,000)
= $153,000
The coefficient of determination, r squared, in a multiple regression equation is the:
Percentage of variation in the dependent variable explained by the variation in the independent variables.
The coefficient of determination (R^2) is the proportion of the total variation in the dependent variable (y) explained by the independent variable (x)
A regression equation:
Estimates the dependent variables.
A regression equation is a statistical model that estimates the dependent variables based on changes in the independent variable.
Which of the following forecasting methods relies mostly on judgement?
The Delphi method of forecasting involves the use of multiple teams in geographically remote locations. Information is shared and gathered in a central point and compiled and then redistributed for comment. The method is highly interpersonal and requires significant judgement.
