EX:6-1 (PART 1)

TOTAL
SALES (10100 UNITS) $353500
VARIABLE EXPENSES 202000
CONTIBUTION MARGIN 151500
FIXED EXPENSES 135000
NET OPERATING INCOME $16500

PART 2:
SALES (9900 UNITS) $346500
VARIABLE EXPENSES 198000
CONTRIBUTION MARGIN 148500
FIXED EXPENSES 135000
NET OPERATING INCOME $13500

PART 3:
SALES (9000) UNITS $315000
VARIABLE EXPENSES 180000
CONTRIBUTION MARGIN 135000
FIXED EXPENSES 135000
NET OPERATING INCOME $ 0
THIS IS THE COMPANY'S BREAKEVEN POINT

EX:6-11 PART 1
TOTAL
SALES (20000)UNITS *1.15=23000 UNITS $345000
VARIABLE EXPENSES 207000
CONTRIBUTION MARGIN 138000
FIXED EXPENSES 70000
NET OPERATING INCOME $68000

PART 2:
SALES (20000) UNITS *1.25=25000 UNITS $337500
VARIABLE EXPENSES 225000
CONTRIBUTION MARGIN 112500
FIXED EXPENSES 70000
NET OPERATING INCOME $42500

PART 3:
SALES (20000)UNITS *0.95=19000 UNITS $313500
VARIABLE EXPENSES 171000
CONTRIBUTION MARGIN 142500
FIXED EXPENSES 90000
NET OPERATING INCOME $52500

PART 4:
SALES (20000)UNITS *0.90=18000 UNITS $302400
VARIABLE EXPENSES 172800
CONTRIBUTION MARGIN 129600
FIXED EXPENSES 70000
NET OPERATING INCOME $59600

EX:6-12 PART 1
PROFIT=UNIT CM *Q-FIXED EXPENSES
$0=($30-$12)*Q-$216000
$0=($18)*Q-$216000
$18Q=$216000
Q=$216000/$18
Q=12000 UNITS OR AT $30 PER UNIT $360000

PART :2
THE CONTRIBUTION MARGIN IS $216000 BECAUSE THE CONTRIBUTION MARGIN IS EQUAL TO THE FIXED EXPENSES AT THE BR

PART :3
UNITS SOLD TO ATTAIN =TARGET PROFIT + FIXED EXPENSES/UNIT CONTRIBUTION MARGIN
17000

SALES (170000) UNITS*$30 PER UNIT $51000

VARIABLE EXPENSES (17000)UNITS*$12 PER UNIT 204000
CONTRIBUTION MARGIN 3060
FIXED EXPENSES 21
NET OPERATING INCOME $90

PART :4
MARGIN OF SAFETY IN DOLLAR TERMS:
MARGIN OF SAFETY IN DOLLARS=TOTAL SALES-BREAKEVEN SALES
90000
MARGIN OF SAFETY IN PERCENTAGE:
MARGIN OF SAFETY PERCENTAGE=90000/450000
0.2

PART:5
THE C.M RATIO IS 60%
EXPECTED TOTAL C.M:($500000*60%)……………………………………………………………….$300000
PRESENT TOTAL C.M:($450000*60%)…………………………………………………………………$270000
INCREASED C.M:…………………………………………………………………………………………………$30000

EX:6-5 PART:1
CURRENT SALES
SALES $180000
V.E 126000
C.M 54000
F.E 30000
NET OPERATING INCOME: $24000
ASSUMING NO OTHER IMPORTANT FACTORS NEED TO BE CONSIDERED,THE INCREASE IN THE ADVERTISING BUDGET SHOULD

PART:2
THE $2 INCREASE IN VARIABLE COST WILL CAUSE THE UNIT CONTRIBUTION MARGIN TO DECREASE FROM $27 TO $25 WITH T
EXPECTED TOTAL CONTRIBUTION MARGIN WITH THE HIGHER QUALITY COMPONENTS:
2200 UNITS*$25 PER UNIT…………………………………….$55000
PRESENT TOTAL C.M:
2000 UNITS*$27 PER UNIT…………………………………….$54000
CHANGE IN TOTAL C.M:………………………………………….$1000

ASSUMING NO CHANGE IN FIXED COSTS AND ALL OTHER FACTORS REMAIN THE SAME,THE HIGHER QUALITY COMPONENTS S

EX:6-10 PART:1
THE OVERALL C.M RATIO CAN BE COMPUTED AS FOLLOWS:
OVERALL C.M RATIO=TOTAL C.M /TOTAL SALES
0.3

PART :2
THE OVERALL BREAKEVEN POINT IN SALES DOLLARS CAN BE COMPUTED AS FOLLOWS:
OVERALL BREAKEVEN POINT=TOTAL F.E/OVERALL C.M RATIO
80000

PART:3
CLAIMJUMPER
ORIGINAL DOLLAR SALES $30000
PERCENT OF TOTAL 30%
SALES AT BREAKEVEN 24000
SALES 24000
V.E 16000
C.M 8000
F.E
NET OPERATING INCOME
CLAIMJUMPER VARIABLE EXPENSES:(240000/30000)*20000=$16000
MAKEOVER V.E:(560000/70000)*50000=40000
EX:11-2 PART :1
NUMBER OF HELMETS 35000
STANDARD KG OF PLASTIC PER HELMET *0.6
TOTAL STANDARD KG ALLOWED 21000
STANDARD COST PER KG *RM8
TOTAL STANDARD COST RM168000
ACTUAL COST INCURRED RM171000
TOTAL STANDARD COST RM168000
TOTAL MATERIAL VARIANCE UNFAVORABLE RM 3000

PART :2
(AQ*AP) (AQ*SP) (SQ*SP)
RM171000 22500KG*RM8 PER KG=18000 21000KG*RM8 PER KG=RM168000
PRICE VARIANCE RM9000 F QUANTITY VARIANCE RM120000 U
TOTAL VARIANCE RM3000 U
35000 HELMETS *0.6 KG PER HELMET=21000KG
MATERIALS PRICE VARIANCE =AQ(AP-SP)
22500KG (RM7.60 PER KG-RM8.00 PER KG)=RM9000 F
RM171000+ 22500KG=RM7.60 PER KG
MATERIALS QUANTITY VARIANCE=SP(AQ-SQ)
RM PER KG (22500KG-21000 KG=RM12000 U

EX:11-3 PART:1
NUMBER OF MEALS PREPARED 4000
STANDARD DIRECT LABOR HOURS PER MEAL *0.25
TOTAL D.L HOURS ALLOWED 1000
STANDARD D.L COST PER HOUR *9.75
TOTAL STANDARD D.L COST 9750
ACTUAL COST INCURRED 9600
TOTAL STANDARD D.L COST 9750
TOTAL D.L VARIANCE 150 FAVORABLE

PART:2
(AH*AR) (AH*SR) (SH*SR)
960 HRS *10.00 PER HR=9600 960*9.75=9360 1000*9.75=9750
RATE VARIANCE 240 U EFFICIENCY VARIANCE 390 F
TOTAL VARIANCE $150 F
LABOR RATE VARIANCE=AH(AR-SR)
960(10.00-9.75)=240 U
LABOR VARIANCE =SR(AH-SH)
9.75(960-1000)
390
EX:11-7 PART :1 A
(AQ*AP)
25000 MICRONS*$0.48 PER MICRON=$12000
(AQ*SP)
25000 MICONS*$0.50 PER MICRON=$12500
(SQ*SP)
18000 MICRONS*$0.50 PER MICRON=$9000

PRICE VARIANCE$500 F
20000 MICRONS*$0.50 PER MICRON=$10000
QUANTITY VARIANCE $1000 U
3000 TOYS*6 MICRONS PER TOY =18000 MICRONS
MPV=AQ(AP-SP)
25000(0.48-$0.50)=500 F
MQV=SP(AQ-SQ)
0.50(20000-18000)=1000 U

PART:B
DIRECT LABOR VARIANCE:
AH*AR
36000
AH*SR
4000 HRS*$8.00 PER HR=$32000
SH*SR
3900 HRS*$8.00 PER HR=$31200
RATE VARIANCE 4000 U
EFFICIENCY VARIANCE $800 U
TOTAL VARIANCE $4800 U
3000 TOYS *1.3 HRS PER TOY=3900 HRS
LRV=AH(AR-SR)
4000 HRS($9.00 PER HR -$8.00 PER HR )=$4000 U
$36000/4000 HRS =$9.00 PER HR
LEV=SR(AH-SH)
$8.00 PER HR (4000 HRS-3900 HRS=$800 U

PART :2
A VARIANCE USUALLY HAS MANY POSSIBLE EXPLANATIONS.IN PARTICULAR WE SHOULD ALWAYS KEEP IN MIND THAT THE STA
SOME OF THE OTHER POSSIBLE EXPLANATIONS FOR THE VARIANCES OBSERVED AT DAWSON TOYS APPEAR BELOW:

MATERIAL PRICE VARIANCE:SINCE THIS VARIANCE IS FAVORABLE THE ACTUAL PRICE PAID PER UNIT FOR THE MATERIAL WAS
INCLUDING THE PURCHASE OF A LOWER GRADE MATERIAL AT A DISCOUNT,BUYING IN AN UNUSUALLY LARGE QUANTITY TO T
OF THE MATERIAL OR PARTICULARLY SHARP BARGAINING BY THE PURCHASING EPARTMENT.

MATERIAL QUANTITY VARIANCE:SINCE THE VARIABLE IS UNFAVORABLE,MORE MATERIALS WERE USED TO PRODUCE THE ACT
SOME OF THE POSSIBILITIES INCLUDE POORLY TRAINED SUPERVISED WORKERS,IMPROPERLY ADJUSTED MACHINES AND DEFE

LABOR RATE VARIANCE:SINCE THE VARIABLE IS UNFAVORABLE ,THE ACTUAL AVERAGE WAGE RATE WAS HIGHER THAN THE ST

LABOR EFFICIENCY VARIANCE:SINCE THIS VARIABLE IS UNFAVORABLE ,THE ACTUAL NUMBER OF LABOR HOURS WAS GREATER
THIS VARIANCE WOULD HAVE BEEN CAUSED BY THE FOLLOWING REASONS LOW QUALITY MATERIAL,POORLY TRAINED WORK
EX : 13-2 PART:1
NO,PRODUCTION AND SALE OF THE RACING BIKES SHOULD NOT BE DISCONTINUED.IF IT WAS DISCONTINUED THEN THE NET
EACH QUARTER.

CURRENT TOTAL TO
SALES $300000
V.E 120000
C.M 180000
F.E :
ADVERTISING TRACEABLE 30000
DEPRECIATION ON SPECIAL EQUIPMENT 23000
SALARIES OF PRODUCT MANAGER 35000
COMMON ALLOCATED COSTS 60000
TOTAL FIXED EXPENSES 148000
NET OPERATING INCOME $32000

PART:2
THE REPORT CAN BE IMPROVED BY ELIMINATING F.E
TOTAL DIRT BIKES
SALES $300000 $90000
VARIABLE MANUFACTURING AND SELLING EXPENSES 120000 27000
C.M 180000 63000
TRACEABLE F.E:
ADVERTISING 30000 10000
DEPRECIATION ON SPECIAL EQUIPMENT 23000 6000
SALARIES OF PRODUCT MANAGER 35000 12000
TOTAL TRACEABLE F.E 88000 28000
PRODUCT LINE SEGMENT MARGIN 92000 35000
COMMON F.E 60000
NET OPERATING INCOME $32000

EX:13-3 PART:1
PER UNIT DIFFERENTIAL COSTS
MAKE BUY
COST OF PURCHASING $35
DIRECT MATERIALS $14
D.L 10
VARIABLE MANUFACTURING OVERHEAD 3
FIXED MANUFACTURING OVERHEAD TRACEABLE 2
COMMON
TOTAL COST $29 $35
DIFFERENCE IN FAVOR OF CONTINUING TO
MAKE THE CARBURETORS $6

ONLY THE SUPERVISOR SALARIES CAN BE AVOIDED IF THE CARBURETORS ARE PURCHASED .THE REMAINING BOOK VALUE OF
$4 PER UNIT DEPRECIATION EXPENSE IS NOT RELEVANT TO DECISION,BASED ON THE DATA THE COMPANY SHOULD REJECT TH

MAKE
COST OF PURCHASING
COST OF MAKING $435000
OPPORTUNITY COST 150000
TOTAL COST $585000
DIFFERENCE IN FAVOR FROM PURCHAING FROM OUTSIDE SUPPLIER $60000

THE COMPANY SHOULD ACCEPT THE OFFER AND PURCHASE CARBURETORS FROM OUTSIE SUPPLIER.

EX:13-4
PER UNIT
INCREMENTAL REVENUE $169.95
INCREMENTAL COSTS:
V.C :
D.M $84.00
D.L 45.00
VARIABLE MANUFACTURING OVERHEAD 4.00
SPECIAL FILIGREE 2.00
TOTAL V.C 4135.00
F.C:
PURCHASE OF SPECIAL TOOL
TOTAL INCREMENTAL COST
INCREMENTAL NET OPERATING INCOME

EX:13-6
A B C
SELLING PRICE AFTER FURTHER PROCESSING $20 $13 $32
SELLING PRICE AT THE SPLIT OFF POINT 16 8 25
INCREMENTAL REVENUE $4 $5 $7
TOTAL QUARTERLY OUTPUT *15000 *20000 *4000
TOTAL INCREMENTAL REVENUE $60000 $100000 $28000
TOTAL INCREMENTAL PROCESSING COST 63000 80000 36000
TOTAL INCREMENTAL PROFIT OR LOSS $(3000) $20000 $(8000)

ONLY PRODUCT B SHOULD BE PROCESSED FURTHER.