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Lecture 2 accounting

# Lecture 2 accounting

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11/08/2009

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Managerial Accounting and control
Dr. Mohamed Youssef
Lecture 2
Example:Per UnitPercentage
Selling Price \$ 5100Variable Cost 4 80Difference \$1 20Total monthly fixed expenses = \$8,000Rent\$2000Labor\$5500Other\$ 500
Contribution Margin TechniquePer Unit
Selling Price \$ 5Variable Cost 4Difference \$1Q= \$ 8000/ \$1 = 8000 units8000 uX \$5= \$40000\$ 8000/20% =\$40000
Equation Technique
BEF= sales – Total cost=0\$5Q-\$4Q-\$8000 =0\$1Q=\$8000Q=80000/\$1Q=8000 unitLet S=sales in dollars needed to break evens-.8s-\$8000=0.2s=\$8000s=8000/.2s=40000
Income statement
Sales revenue8000x \$540000Less V.C8000 x 4(32000)c.m8000Less F.C(8000)Variable income0
Chapter 2 1

Managerial Accounting and control
Dr. Mohamed Youssef
Lecture 2
Example:Example:Example:
sales (100,000 units) \$1,000,000Costs
Fixed Variable
Direct materials 0300,000Direct labor 0200.000Factory costs100,000150,000Marketing and admin cost110,000 50,000Total costs210,000700,000910,000Budgeted operating income 90,000
ComputeA)Breakeven point in units
BEP
in unit
= F.C /UCMUcm =usp-uvc=(1,000,000/100,000)-(7000,000/100,000)= 10-7 = 3BEP
in unit
= F.C /UCM = 210,000/3 =7000BEP
in \$
= 7000 x 10 = \$ 70000
Chapter 2 2
SellingPriceV.C /UnitUCMTotalunit soldTotal c.mTotalF.C.Operatingincome
A\$30\$20
10
70000
700000715000
- 15000B25
205
180000900000800000
100000
C
12
10
2
150000300000220000
12000
D2014
620000
120000
10800
12000
RevenuesV.CF.CTotalcostOperatingincomeContributionmarginpercentage
A
2000
\$500
300
8001200
75%
B2000
1500
300
1800
200
25%
C1000700
300
1000
030%
D1500
900
300
1200300
40%
RevenuesV.CF.CTotalcostOperatingincomeContributionmarginpercentage
A
2000
\$500
300
8001200
75%
B2000
1500
300
1800
200
25%
C1000700
300
1000
030%
D1500
900
300
1200300
40%

Managerial Accounting and control
Dr. Mohamed Youssef
Lecture 2
B)
Number of units that must be sold to achieve a target netincome \$ 90,000, assuming that the income tax rate is 40%
Q = (F.C.+TOI) / UCM= (210,000+[90000/(1-0.4)])/ 3=(210,000+[90000 / 0.6])/ 3=(210,000+150,000)/3=(360,000)/3= 12,000TOI=TNI+TOI x taxes%TOI-taxes% x TOI = TNITOI (1-taxes%) = TNITOI (1-0.4) = TNITOI x 0.6= TNI
C)Breakeven point in units assuming fixed costs increase by \$31,500
BEP
in unit
= F.C /UCM= (210,000+31,500)/3 = 80,500 units
TOI:
Target operating income
TNI:
Target net income after reducing the taxes
Value chain :
The sequence of six business functions in which utility(usefulness) is added to the products or services of anorganization
ResearchAndDevelopmentDesignProductionMarketingDistributionCustomeService
Upstream:
Research and development and design function
Manufacturing or operation:
production function
Downstream:
Marketing, distributon and customer service functionsWe have two types of Leverage
Financial leverage
Operating leverage
Financial leverage:
AssetsDebt 3001000Equity 700
Operating leverage:
The ratio of fixed to variable costs
Chapter 2 3