BUS 630 Week 1 Assignment
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BUS630 Week 1 Case
Case Info
Case Info
Case Info
Variable overhead includes the cost of hourly labor and the variable cost of equipment operation.
The fixed plant overhead is estimated at $420,000 for the quarter.
practical capacity of 60,000 machine hours.
In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000.
Case Questions
From all original estimates given, prepare estimated contribution margins by product line for the next fiscal quarter. Also, show the contribution margins per unit.
2. Prepare contribution margins as in part (1) with all revisions included.
3. For the original estimates, compute each of the following:
Break-even point for the given sales mix. b. Margin of safety for the estimated sales volume.
4. For the revised estimates, compute each of the following:
Break-even point for the given sales mix. b. Margin of safety for the estimated sales volume.
5. Comment on Herbert's concern about the variable cost of the place mats.
Q1
(1) Estimated contribution margins for the next fiscal quarter (000s omitted):
Computer Place Poster
Paper Napkins Mats Board Total
Number of units 30
Sales $420 (30 * $14/Unit)
Cost of goods sold:
Variable costs 225 (30*7.5)
Contribution margin $195 $228 $270 $320 $1,013
Unit revenue and costs information:
Computer Place Poster
Paper Napkins Mats Board
Selling price $14.00
Materials $ 6.00
Variable factory overhead 1.50 ($9/6)
Unit variable cost $ 7.50
Contribution margin per unit $ 6.50 $ 1.90 $ 6.00 $ 4.00
Q2
(2) Revised contribution margins:
Computer Place Poster
Paper Napkins Mats Board Total
Number of units 35
Sales $490.00 (35*$14)
Cost of goods sold:
Variable costs297.50
Contribution margin $192.50 $228 $252 $320 $ 992.50
Unit revenue and costs information:
Computer Place Poster
Paper Napkins Mats Board
Selling price $14.00
Materials $ 7.00
Variable factory overhead 1.50
Unit variable cost $ 8.50
Contribution margin per unit$ 5.50 $ 1.90 $ 5.60 $ 4.00
"But the cost of our materials for computer stock is now up to $7. Just got a call about that this morning. Also, place mat materials will be up to $4 a unit."
Q3
(3) (a) Breakeven point:
Step 1 Calculate CM per unit. It is = Total dollar amount of contribution margin Total number of units from Q1
Step 2 Calculate CM Ratio. It is = Total dollar amount of contribution margin total dollar amount of sales from Q1
Step 3 calculate BE in units. It is = ($fixed plant overhead + $fixed adm costs) CM per unit from Step 1= 146,037 units
Step 4 calculate BE in dollar amount. It is = ($fixed plant overhead + $fixed adm costs) CM ratio from Step 2= $1,318,627
(b) Margin of safety:
($total sales from Q1 – break-even revenue from Step 4) $sales = 46.83%
Q4 – do the same thing as Q3 with the numbers from Q2
(4) (a) Breakeven point:
Check figures
139,915 units or $1,275,064 revenue
(b) Margin of safety:
Check figure - 50.0%
Note that the fixed plant overhead will change to $378,000 for the revised scenario
Q5
Comment on Herbert's concern about the variable cost of the place mats.
Provide your answer based on the calculations for Q1 to Q4
