Introduction to management accounting 16th edition pdf download

Sales Variable costs: Variable costs of goods sold Variable other operating expenses Contribution margin. The variable costs include part of the costs of goods sold and also part of the other operating costs. Note that contribution margin can be either larger than or smaller than the gross margin.

If most of the cost of goods sold and a good portion of the other operating costs are variable, then variable costs may exceed the cost of goods sold, and the contribution margin will be smaller than the gross margin. However, if a large portion of both the cost of goods sold and the other expenses are fixed, cost of goods sold may exceed the variable cost, resulting in the contribution margin exceeding gross margin.

Assumptions include: Expenses can be classified into variable and fixed categories that completely describe their behavior within the relevant range. Costs and revenues are linear within the relevant range. Predicted sales volume is within the relevant range.

Efficiency and productivity are unchanged. Sales mix is unchanged. Changes in inventory levels are insignificant. As volume increases, the more expensive models would generate more profits. Anticipated Annual Sales Between 0 - 42, 42, - , , and above. No, management cannot use theater capacity or average boxes sold because the number of seats per theater does not indicate the number of patrons attending nor the popcorn-buying habits in different geographic locations.

The decision rule does not take into account variations in demand that could affect model choice. Its profits increase faster as sales increase, but its profits decrease faster or losses increase faster as sales decrease. Post provides more inventive to its sales force to increase sales. A possible negative of the increased inventive for the Post sales force to increase sales is a motivation to increase those short-term sales at any cost.

Many companies have found that too much emphasis on sales volumes can cause managers to take unethical actions to increase their sales levels. The break-even point is , units of beef enchiladas plus , units of chicken tacos, a grand total of , units.

The major lesson of this problem is that changes in sales mix affect break-even points and net incomes. The nursing costs would have been variable instead of fixed. Some instructors might want to point out that hospitals have been under severe pressures to reduce costs. More than ever, nursing costs are controlled as variable rather than fixed costs. For example, more part-time help is used, and nurses may be used for full shifts but only as volume requires. Changes in volume affect profits in the new environment a high fixed cost, low variable cost environment more than they affect profits in the old environment.

Therefore, profits in the old environment are more stable and less risky. The higher risk new environment promises greater rewards when conditions are favorable, but also leads to greater losses when conditions are unfavorable, a more risky situation. This case is based on real data that has been simplified so that the numbers are easier to handle.

To determine the actual volume, let Y be a combination of 1 dinner and 2 lunches. This is 1 dinner and 2 lunches above the break-even volume. Therefore, the advertising expenditure would be warranted.

Variable costs are. However, there are many subjective factors to be considered. Volume may not fall in the short run, but the decline in quality may eventually affect repeat business and cause a long-run decline.

Much may depend on the skill of the chef. The following table shows the comparison between percentage changes in total revenue and income before taxes for the six major regions of Nike. The term operating leverage means that a substantial portion of the resources used to generate income were fixed-cost resources and did not increase in response to increased revenue-generating activities. As a result, income changes more than proportional to the change in revenue.

There are many possible explanations. One possibility is that while revenues increased, variable costs may have increased so that the overall contribution margin fell, resulting in a decrease in income. Another possibility is that even if variable costs did not increase, fixed costs may have increased by an amount that more than offset the increased contribution from increased sales. However, Nike also has many fixed costs.

The costs of the distribution center, equipment, and salaries of regular employees and management all contribute to a substantial fixed-cost component of total cost. Another significant component of fixed costs is the Nike World Campus in Beaverton, Oregon with 16 buildings and almost 6, management staff. For the solution to this Excel Application Exercise, follow the stepby-step instructions provided in the textbook chapter.

The break-even points are much smaller because the contribution margin is larger while the fixed costs are unchanged. Then students must assess the market to determine a price so that they can compute a break-even point. Completing this problem can be done quickly or it can take much time. It might even be done in class, with students suggesting the various costs and predicting their levels.

A complete analysis might involve finding the actual prices of the resources needed to make the product or service. This could lead to time-consuming research. Whatever approach is taken, students are led to see the real-world application of what they are learning. Be sure to examine the current web site before assigning this problem, as the information there may have changed. Different fares are offered because of the different costs incurred by SWA to serve customers who have different flying needs.

Another factor causing different fares is the need to match products offered by competing airlines. Restrictions such as the requirement to make reservations at least 7 days in advance of travel are necessary to give SWA planning information in advance. Y 50, 26, 76, The production level for each product is 10, units. The production level for each product is 1, units. Assume Woodridge Corporation processes the joint products beyond the split-off point that will maximize net income.

Other relevant data are:. B 18, 8, 23, C 24, 11, 37, B 60, 10, 82, C 66, 14, 79, What is the gain or loss on disposal of the equipment? Which of the following items are irrelevant to the replacement decision? The following data are available:. Useful life in years 17 5. Current age in years 12 0. Disposal value in 5 years 0 0. Adding all five years together, what is the difference in total relevant costs between the old machine and the new machine?

Useful life in years 10 5. Current age in years 5 0. Adding all five years together, what is the difference in total relevant costs between the old and new machines? Useful life in years 12 7. Disposal value in 7 years 0 0. Disposal value old equip. Useful life in years 13 6. Current age in years 7 0. Disposal value in 6 years 0 0. Disposal value of old equip. If 20, units are produced and sold in a year, what is the total cost per unit?

If 40, units are produced and sold in a year, what is the total cost per unit? Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget. How many units should be purchased? All units are paid for in the month following purchase. What is the desired ending inventory value at February 28? What are the expected total purchases for February? What is the beginning inventory on August 1?

What are the expected total purchases for June? What are the total purchases budgeted for July? No uncollectible accounts are expected. What are the estimated cash collections in December? What is the expected balance of Accounts Receivable at October 31? What are the estimated cash collections in November? What is the expected balance in Accounts Receivable at November 30? What are the estimated cash collections in October from October sales?

What is the expected balance in Accounts Receivable at December 31? What are the estimated cash collections in September from September sales? All cash expenses are paid as incurred. What are the total operating expenses budgeted for the month of January? What are the total operating expenses budgeted for the month of April? What are the budgeted total cash disbursements for operating expenses in March?

What are the total cash disbursements budgeted for operating expenses for the month of January? What are the expected total cash disbursements for operating expenses for April? SKU: 96ea64f3a1aa Category: Uncategorized. The company is considering three alternative uses of the idle machine: Alternative 1: Disposal of machine. When considering Alternative 3, what is the opportunity cost of the idle machine? When considering Alternative 2, what is the opportunity cost of the idle machine?

A cost-volume-profit analysis B contribution margin approach C absorption costing approach D incremental analysis Answer: D Diff: 1 LO: AACSB: Reflective thinking skills Learning Outcome: Use incremental analysis to make short-term decisions 11 A proposed project will require the use of ten machines in a company. A quality of purchased part B credit terms offered by supplier of part C timeliness of delivery of purchased part by supplier D all of the above Answer: D Diff: 2 LO: AACSB: Reflective thinking skills Learning Outcome: Distinguish between relevant and irrelevant costs, Use incremental analysis to make short-term decisions 2 What is the most common value-chain function outsourced in most businesses?

A some variable costs of making the part B all variable costs of making the part C fixed costs that can be avoided in the future if the part is purchased D B and C Answer: D Diff: 2 LO: AACSB: Reflective thinking skills Learning Outcome: Distinguish between relevant and irrelevant costs, Use incremental analysis to make short-term decisions 4 In a make-or-buy decision, which of the following is the fundamental question that is asked in making the decision?

A What is the difference in present costs between the two alternatives? B What is the difference in present revenues between the two alternatives? C What is the difference in future revenues between the two alternatives?

D What is the difference in future costs between the two alternatives? A relevant B irrelevant C opportunity costs D incremental costs Answer: B Diff: 2 LO: AACSB: Analytic skills Learning Outcome: Distinguish between relevant and irrelevant costs, Use incremental analysis to make short-term decisions 8 When making a make-or-buy decision for a part used in a product, which of the following item is relevant to the decision?

A variable costs of making the part B contribution margin on new products manufactured in idle area not used for making part C rental income from idle plant when not making the part D all of the above Answer: D Diff: 2 LO: AACSB: Analytic skills Learning Outcome: Distinguish between relevant and irrelevant costs, Use incremental analysis to make short-term decisions 9 Buddy Company manufactures a part for its production cycle.

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