M3 Assignment 2: Required Assignment 1—Cost and Decision-Making Analysis

B6021AssignmentTemplatesWk3.xlsx

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Week 1 Assignment 3

Week 1
	1)
	Budgeted Direct Labor
	Budgeted Manufacturing Overhead
	Total Budgeted	$0.00
		Manufacturing Overhead
	Predetermined overhead rate	Direct Labor
	Budgted Direct Labor
	Total Budgeted
	Pre Determined Overhead	ERROR:#VALUE!
	2)
	Direct Materials Used
	Actul Direct Labor
	Pre Determined Overhead
	Actual Overhead Applied
	Direct Labor * overhead rate
	Work in Progress =		Direct materials used + direct labor + manufacturing overhead

	3)
	Direct Material cost left over
	Direct Labor cost left over
	Finish Goods inventory =		Finished-goods inventory = direct material + direct labor + manufacturing overhead


	4)
	Direct Labor
	Indirect Material Used
	Indirect Labor Used
	Factory Depreciation
	Factory Insurance
	Factory Utilities

	Sum of all indirect Costs


	over/under applied overhead cost = Applied Overhead
	Cost - Actual Overhead Cost

Week 3 Assignment 2

Template for Week 3 Assignment 2
1	The overall break-even sales can be determined using the CM ratio.
		Velcro	Metal	Nylon	Total
	Sales	$165,000	$300,000	$340,000	$805,000
	Variable expenses	?	?	?	?
	Contribution margin	?	?	?	?
	Fixed expenses	-0-	-0-	-0-	?
	Net operating income				?
CM ratio = Contribution margin = $? = ?
Sales $805,000
Dollar sales to break-even = Fixed expenses = $? = $? (rounded)
CM ratio ?
	2	.
		a.	The break-even points for each product can be computed using the contribution margin approach as follows:
		Velcro	Metal	Nylon
	Unit selling price	$?	$?	$?
	Variable cost per unit	?	?	?
	Unit contribution margin (a)	$?	$?	$?
	Product fixed expenses (b)	$?	$?	$?
	Unit sales to break-even (b) ÷ (a)	?	?	?
		b.	If the company were to sell exactly the break-even quantities computed above, the company would lose $?—the amount of the common fixed cost. This can be verified as follows:
		Velcro	Metal	Nylon	Total
	Unit sales	?	?	?
	Sales	$?	$?	$?	$?
	Variable expenses	?	?	?	?
	Contribution margin	$?	$ ?	$?	?
	Fixed expenses	-	-	-	?
	Net operating income	-	-	-	($?)
Allocation of common fixed expenses on the basis of sales revenue:
	Velcro	Metal	Nylon	Total
Sales	$?	$?	$?	$?
Percentage of total sales	?%	?%	?%	100.00%
Allocated common fixed expense*	$?	$ ?	$?	$?
Product fixed expenses	?	?	?	160,000
Allocated common and product fixed expenses (a)	$?	$?	$?	$400,000
Unit contribution margin (b)	$0.?	$0.?	$0.?
“Break-even” point in units sold (a) ÷ (b)	?	?	?
	*Total common fixed expense × percentage of total sales
	Velcro	Metal	Nylon
Normal annual sales volume	?	?	?
“Break-even” annual sales	?	?	?
“Strategic” decision Drop or Retain	?	?	?
If the managers drop the Velcro and Metal products, the company would face a loss of $60,000 computed as follows:
	Velcro	Metal	Nylon	Total
Sales	dropped	dropped	$?	$340,000
Variable expenses			?	100,000
Contribution margin			$?	240,000
Fixed expenses*				300,000
Net operating income				($ 60,000)
	*	By dropping the two products, the company reduces its fixed expenses by only $? (= $? + $?). Therefore, the total fixed expenses are $? rather than $?.
By dropping the two products, the company would go from making a profit of $? to suffering a loss of $?. The reason is that the two dropped products were contributing $? toward covering common fixed expenses and toward profits. This can be verified by looking at a segmented income statement like the one that will be introduced in a later module.
	Velcro	Metal	Nylon	Total
Sales	$?	$?	$?	$?
Variable expenses	?	?	?	?
Contribution margin	40,000	160,000	240,000	440,000
Product fixed expenses	?	?	?	?
Product segment margin	$ 20,000	$ 80,000	$180,000	280,000
Common fixed expenses				?
Net operating income				$ 40,000
	$100,000