Accunting Project 3 Assignment - ABC, Inc.
Question # 00117998
Posted By:
Updated on: 10/14/2015 12:50 PM Due on: 10/14/2015
Worth 10 pts.
Project 3 is due by Wednesday, October 14th 6:15 pm CT. Send via the assignment area and make sure you save your file with first initial of first name and last name.
Covers material in chapters 7 and 8.
You will be graded on the accuracy of your answer and usage of cell referencing in the DATA area.
Make sure you are reviewing the demonstrations I have in chapter 7 and 8 course document folders.
DATA
ABC, Inc. is a newly organized manufacturing business this year.
The following company's costs and expenses are:
Sales price per unit
Manufacturing costs:
Direct materials
Direct labor
Variable Manufacturing overhead
Fixed Manufacturing overhead
Period expenses:
$40
Fixed Costs
$25,000
Variable Selling and administrative expenses
Fixed Selling and Administrative expenses
Totals
Units produced
Units sold
Variable Costs
$10
6
3
4
31,000
$56,000
$23
5,000 units
4,800 units
Grading Rubric:
Requirement Points
1
2
3
4
5
6
7
8
9
10
11
12
13
0.5
1
1
1
1
1
0.5
0.5
0.5
0.5
0.5
1
1
Total pts.
Possible
10
Project 3 Objectives:
1. Analyze production costs.
2. Prepare income statement.
3. Develop a recommendation to management based on your analysis.
4. Compute breakeven analysis.
5. Provide the impact of changes is sales volume in relationship to DOL.
6. Analyze how changes in cost impact breakeven.
Required:
Use the information in the DATA field above using cell referencing to answer the following requirements.
1. Calculate the unit cost for variable costing. Review Exhibit 8-2 on page 320.
2. Calculate the unit cost for absorption costing. Review Exhibit 8-2 on page 320.
3. Prepare an absorption-costing income statement. Review Exhibit 8-3 on page 321.
4. Prepare a variable-costing income statement. Review Exhibit 8-3 on page 321.
5. Reconcile the differences in income that you calculated in #3 and #4 using exhibit 8-4 on page 322 as your guide or use the shortcut reconciliation on pages 322-323.
6. Calculate the breakeven point in units. Reference page 271.
7. Calculate the breakeven point in sales dollars.
8. Calculate the safety margin in Dollars. Reference page 277.
9. What does the margin of safety mean? Explain what the margin of safety means in your own words using this project? Be very explicit in your answer, so I know you understand this concept and the importance of it to managers.
10. Calculate the operating leverage factor. Reference page 288.
11. What if sales volume increases by 2% how much will income increase in percentage terms? Make sure you have read over the DOL discussion and
understand the multiplier impact of changes in sales volume that occurs based on DOL.
12. What if the direct labor cost per unit increases from $6 a unit to $7, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct material in the data area and actually all your answers should be updated. Please put the direct material cost back to the original number once you have answered the question?
13. What if the fixed manufacturing overhead cost decreases from $25,000 to $23,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question?
Solution:
1.
2.
Variable costing
Absorption Costing
Total per unit cost
3.
ABC Company Inc.
Absorption Costing Income statement
Sales revenue
Less: Cost of goods sold
Gross Margin
Less: Selling and administrative expenses
Variable
Fixed
Net income
4.
ABC Company Inc.
Variable Costing Income statement
Sales Revenue
Less: Variable Expenses:
Variable manufacturing costs
Variable Selling and administrative costs
Contribution margin
Less: Fixed Expenses:
Fixed manufacturing overhead
Fixed selling and Administrative expenses
Net income
5.
I am using a modification of the short cut method on page 323 as my model.
Change in inventory:
Units produced
Guidance:
Units sold
This difference should
Increase in inventory
equal the difference in
Fixed overhead rate
net income below.
Difference in fixed overhead expensed
Net income:
Absorption costing
Variable costing
Difference
6.
Break even in units
Units
7.
Break even in sales $
8.
Safety Margin in Dollars
On page 277 I realize the author uses budgeted sales revenue in the margin of safety calculation, but if you are
given the actual sales revenue you can replace budgeted sales with actual sales, which you should do for #8.
9. What does the margin of safety mean? Be very explicit in your answer, so I know you understand this concept and the importance of it to managers.
10. Calculate the operating leverage . Reference page 288
11. What if sales volume increases by 2% how much will income increase in percentage terms? Make sure you have read over the Operating leverage discussion and
understand the multiplier impact of changes in sales volume that occurs based on operating leverage.
12. What if the direct labor cost per unit increases from $6 a unit to $7, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct material in the data area and actually all your answers should be updated. Please put the direct material cost back to the original number once you have answered the question?
13. What if the fixed manufacturing overhead cost decreases from $25,000 to $23,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question?
Project 3 is due by Wednesday, October 14th 6:15 pm CT. Send via the assignment area and make sure you save your file with first initial of first name and last name.
Covers material in chapters 7 and 8.
You will be graded on the accuracy of your answer and usage of cell referencing in the DATA area.
Make sure you are reviewing the demonstrations I have in chapter 7 and 8 course document folders.
DATA
ABC, Inc. is a newly organized manufacturing business this year.
The following company's costs and expenses are:
Sales price per unit
Manufacturing costs:
Direct materials
Direct labor
Variable Manufacturing overhead
Fixed Manufacturing overhead
Period expenses:
$40
Fixed Costs
$25,000
Variable Selling and administrative expenses
Fixed Selling and Administrative expenses
Totals
Units produced
Units sold
Variable Costs
$10
6
3
4
31,000
$56,000
$23
5,000 units
4,800 units
Grading Rubric:
Requirement Points
1
2
3
4
5
6
7
8
9
10
11
12
13
0.5
1
1
1
1
1
0.5
0.5
0.5
0.5
0.5
1
1
Total pts.
Possible
10
Project 3 Objectives:
1. Analyze production costs.
2. Prepare income statement.
3. Develop a recommendation to management based on your analysis.
4. Compute breakeven analysis.
5. Provide the impact of changes is sales volume in relationship to DOL.
6. Analyze how changes in cost impact breakeven.
Required:
Use the information in the DATA field above using cell referencing to answer the following requirements.
1. Calculate the unit cost for variable costing. Review Exhibit 8-2 on page 320.
2. Calculate the unit cost for absorption costing. Review Exhibit 8-2 on page 320.
3. Prepare an absorption-costing income statement. Review Exhibit 8-3 on page 321.
4. Prepare a variable-costing income statement. Review Exhibit 8-3 on page 321.
5. Reconcile the differences in income that you calculated in #3 and #4 using exhibit 8-4 on page 322 as your guide or use the shortcut reconciliation on pages 322-323.
6. Calculate the breakeven point in units. Reference page 271.
7. Calculate the breakeven point in sales dollars.
8. Calculate the safety margin in Dollars. Reference page 277.
9. What does the margin of safety mean? Explain what the margin of safety means in your own words using this project? Be very explicit in your answer, so I know you understand this concept and the importance of it to managers.
10. Calculate the operating leverage factor. Reference page 288.
11. What if sales volume increases by 2% how much will income increase in percentage terms? Make sure you have read over the DOL discussion and
understand the multiplier impact of changes in sales volume that occurs based on DOL.
12. What if the direct labor cost per unit increases from $6 a unit to $7, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct material in the data area and actually all your answers should be updated. Please put the direct material cost back to the original number once you have answered the question?
13. What if the fixed manufacturing overhead cost decreases from $25,000 to $23,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question?
Solution:
1.
2.
Variable costing
Absorption Costing
Total per unit cost
3.
ABC Company Inc.
Absorption Costing Income statement
Sales revenue
Less: Cost of goods sold
Gross Margin
Less: Selling and administrative expenses
Variable
Fixed
Net income
4.
ABC Company Inc.
Variable Costing Income statement
Sales Revenue
Less: Variable Expenses:
Variable manufacturing costs
Variable Selling and administrative costs
Contribution margin
Less: Fixed Expenses:
Fixed manufacturing overhead
Fixed selling and Administrative expenses
Net income
5.
I am using a modification of the short cut method on page 323 as my model.
Change in inventory:
Units produced
Guidance:
Units sold
This difference should
Increase in inventory
equal the difference in
Fixed overhead rate
net income below.
Difference in fixed overhead expensed
Net income:
Absorption costing
Variable costing
Difference
6.
Break even in units
Units
7.
Break even in sales $
8.
Safety Margin in Dollars
On page 277 I realize the author uses budgeted sales revenue in the margin of safety calculation, but if you are
given the actual sales revenue you can replace budgeted sales with actual sales, which you should do for #8.
9. What does the margin of safety mean? Be very explicit in your answer, so I know you understand this concept and the importance of it to managers.
10. Calculate the operating leverage . Reference page 288
11. What if sales volume increases by 2% how much will income increase in percentage terms? Make sure you have read over the Operating leverage discussion and
understand the multiplier impact of changes in sales volume that occurs based on operating leverage.
12. What if the direct labor cost per unit increases from $6 a unit to $7, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct material in the data area and actually all your answers should be updated. Please put the direct material cost back to the original number once you have answered the question?
13. What if the fixed manufacturing overhead cost decreases from $25,000 to $23,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question?
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Rating:
/5
Solution: Accounting Project 3 Assignment - ABC, Inc. Solution