# Xueqin Chen

Chapter 5
33. A.Variable cost per unit=
(\$1,721-\$1,399)÷ ( 105,000-
98,000)
=0.0!
"i#e\$ costs=1,721-(105,000%0.0!)= \$--3,109
&ost e'uation (= -3109)0.0!#
*. +tilit( cost o, pro\$ucin- 120,000 units =-3,109)0.0!%120,000=\$211

&. .e-ression anal(sis (=513.!20)0.010258/
+tilit( cost o, pro\$ucin- 120,000 units=513.!2)0.010258%120,000=\$17.58

.e-ression is a statistical tool t0rou-0 all 1 1ont0s \$ata points , t0e 0i-02lo3
1et0o\$ \$eri4es a strai-0t line bet3een 5ust t3o o, t0e \$ata points .+sin- t0e 0i-0est
an\$ lo3est le4el o, acti4it(,3e \$i\$ not use t0e re1ainin- \$ata point. 6, one o, points
selecte\$ is unusual.1a( not be a -oo\$ 1easure o, t0e ,i#e\$ an\$ 4ariable co1ponents
o, t0e 1i#e\$ cost. 7o use t0e 0i-02lo3 esti1ate 3oul\$ a,,ect our pre\$iction o, total
o4er0ea\$ costs ne#t 1ont0. 80e re-ression 1et0o\$ 1uc0 accurate t0an t0e 0i-02lo3
esti1ate pre\$iction o, total o4er0ea\$ costs in t0e ,uture.
1.
A.&ost per unit 2 Absorption &ostin-
9irect 1aterial \$25
9irect labor 35
Variable o4er0ea\$ 15
"i#e\$ o4er0ea\$
Total per unit \$79
B. Variable &ostin-

9irect 1aterial \$25
9irect labor 35
Variable o4er0ea\$ 15
Total per unit \$75

C. ( 100,000 +nits pro\$uce\$ an\$ 105,000 units 7ol\$) i, per units sales price is /
Absorption Costing
7ales 105,000%/
:ess ; &ost o, -oo\$s sol\$ 8,295,000
<ross pro,it 105,000/ -8,295,000
=et operatin- inco1e 105,000/ -8,295,000

Variable Costing
7ales 105,000%/
:ess ; Variable costs 7,875,000
&ontribution 1ar-in 105,000%/ - 7,875,000
:ess ; "i#e\$ costs 00,000
=et operatin- inco1e 105,000/-8,275,000
9i,,erence =(\$105,000/ -\$ 8,295,000 ) - (\$105,000/-\$8,275,000)= -\$20,000
Variable &ostin- net operatin- inco1e is 0i-0er t0an Absorption &ostin- .
D.
( 100,000 +nits pro\$uce\$ an\$ 70,000 units 7ol\$) i, per units sales price is /
Absorption Costing
7ales \$70,000%/
:ess ; &ost o, -oo\$s sol\$ 5,530,000
<ross pro,it 70,000/ -5,530,000
=et operatin- inco1e \$70,000/ -5,530,000

Variable Costing
7ales \$70,000%/
:ess ; Variable costs 5,250,000
&ontribution 1ar-in 70,000/-5,250,000
:ess ; "i#e\$ costs 00,000
=et operatin- inco1e \$70,000/-5,!50,000
9i,,erence =(\$70,000/ -\$ 5,530,000 ) - (\$70,000/-\$5,!50,000)= \$ 120,000
Absorption &ostin- net operatin- inco1e is 0i-0er t0an Variable &ostin- .
E.
( 100,000 +nits pro\$uce\$ an\$ 100,000 units 7ol\$) i, per units sales price is /
Absorption Costing
7ales \$100,000%/
:ess ; &ost o, -oo\$s sol\$ 7,900,000
<ross pro,it 100,000/ -7,900,000
=et operatin- inco1e \$100,000/ -7,900,000

Variable Costing
7ales \$100,000%/
:ess ; Variable costs 7,500,000
&ontribution 1ar-in 100,000/-7,500,000
:ess ; "i#e\$ costs 00,000
=et operatin- inco1e \$100,000/-7,900,000
9i,,erence =(\$100,000/ -\$ 7,900,000) - (\$100,000/-\$7,900,000)= \$ 0
=o \$i,,erence in net operatin- inco1e bet3een t3o 1et0o\$s.
F. Absorption costin- is re'uire\$ b( <AA> an\$ 1ust be use\$ 30ene4er a co1pan(
pro4i\$es ,inancial state1ents to t0e outsi\$e t0e co1pan(.
Chapter 6
19.
A.
6, # is t0e sales price o, per s(ste1
7ales \$10,000%/
:ess ; Variable costs ;
?anu,acturin- costs 50,000
&ontribution 1ar-in \$10,000/--50,000
:ess ; "i#e\$ &osts;
7@A costs \$20,000
At0er ,i#e\$ costs 10,000
8otal ,i#e\$ costs 30,000
=et operatin- inco1e \$10,000/-\$50,000-\$30,000=\$30,000
/=11
7ale price is \$11 per s(ste1
*.
7ales \$110,000
:ess ; Variable costs ;
?anu,acturin- costs 50,000
&ontribution 1ar-in \$ !0,000
:ess ; "i#e\$ &osts;
7@A costs \$20,000
At0er ,i#e\$ costs 10,000
8otal ,i#e\$ costs 30,000
=et operatin- inco1e \$30,000
&ontribution 1ar-in (per unit)= !0,000210,000=\$!
&ontribution 1ar-in ratio= !0,0002110,000=55B
*reaC-e4en(units)=\$35,000÷\$!= 5833 units
*reaC-e4en(\$)= \$30,000÷55B= \$5,55
&.
.e\$uce Variable &osts
6, # is t0e Variable &osts
110,000-/-30,000=35,000
/=\$5,000
7o Variable &osts \$e\$uce \$5,000, 10B, 30ic0 is \$5,000, s0e can increase 0er return
on in4est1ent to 35B
7ales \$110,000
:ess ; Variable costs ;
?anu,acturin- costs 5,000
&ontribution 1ar-in \$ !5,000
:ess ; "i#e\$ &osts;
7@A costs \$20,000
At0er ,i#e\$ costs 10,000
8otal ,i#e\$ costs 30,000
=et operatin- inco1e \$35,000
21.
A.
7ales \$3,000,000
:ess ; Variable costs ;
9irect 1aterials \$800,000
9irect labor 700,000
"actor( o4er0ea\$ 300,000
7ellin- e#pense 120,000
A\$1inistrati4e e#pense 30,000
8otal Variable &osts 1,950,000
&ontribution 1ar-in \$1,050,000
:ess ; "i# cost
"actor( o4er0ea\$ 50,000
7ellin- e#pense 180,000
A\$1inistrati4e e#pense 70,000
8otal "i# costs 700,000
=et operation inco1e \$350,000

&ontribution 1ar-in ratio= 1,050,000
3,000,000 = 35B
*reaC e4en (\$)= 700,000
35B = \$ 2,000,000
B.
7ales -Variable &osts - "i#e\$ &osts = 8ar-et >ro,it ( be,ore ta# )
7ales = \$700,000 )\$1,950,000)\$ 700,000 = \$ 3,350,000
\$ 3,350,000 re4enue 1ust D6A -enerate to ac0ie4e &0risEs -oal.