This website uses cookies to ensure you have the best experience.

# Management Accounting: Fixed And Variable Costs

524 words - 3 pages

I.Assignment InstructionsCosts can be classified into two categories, fixed and variable costs. These costs behave differently based on the level of sales volumes. Suppose we are running a restaurant and have identified certain costs along with the number of annual units sold of 1000.Item: Raw Materials (cost for hamburgers)Total Annual Cost: 650Item: Building RentTotal Annual Cost: 9000Identify which cost item above is fixed and variable and why? What is the cost per unit of each? Suppose we increased our sales volume to 6000 units and then to 8000 units the following year (and are still within the relevant range), what would be the total annual cost and unit cost of fixed and ...view middle of the document...

It is a constant no matter what the level of activity and does not change. A fixed cost would only change if a company were to rent a different facility that either increased or decreased the amount of the fixed cost. (Horngren/Sundem/Stratton, 2005).2.What is the cost per unit of each?a.The cost per unit of the material is: \$0.651. \$650 / 1000 = \$0.65b.The cost per unit for rent is: \$9.001.\$9000 / 1000 = \$9.003.What would be the total annual cost and unit cost of fixed and variable costs at 6000 units of sales?a.6000 Units1.Variable cost per unit is = \$0.652.Total annual cost of variable cost = \$0.65 * 6000 = \$3,9003.Unit fixed cost = \$1.504.Total annual cost of fixed cost = \$90001.Since we do not know the selling price, the Cost Volume Profit Analysis, Equation Method would be shown as follows:a.(\$X * 6000) - \$3900 - \$9000 = net income4.What would be the total annual cost and unit cost of fixed and at 8000 units of sales?a.8000 Units1.Variable cost per unit is = \$0.652.Total annual cost of variable cost = \$0.65 * 8000 = \$52003.Unit fixed cost = \$1.134.Total annual cost of fixed cost = \$90001.Since we do not know the selling price, the Cost Volume Profit Analysis, Equation Method would be shown as follows:a.(\$X * 8000) - \$5200 - \$9000 = net incomeReferencesHorngren, C./Sundem, G./Stratton, W. (2005). Introduction to Management Accounting.(13th ed.). Upper Saddle River, NJ. Pearson Education Inc.American InterContinental University. (2007). ACG420-0701B-09: ManagerialAccounting and Organizational Controls. Assignment List. Retrieved on March 17,2007 from https://mycampus.aiu-online.com/Login.aspx?logout=yes

## Other Essays Like Management Accounting: Fixed and Variable Costs

### Discuss The Relationship Between Accounting Choices Made By Management And The Values Reported In Financial Statements And The Possible Reasons Why Those Choices Are Made

2485 words - 10 pages the firms' shareholders. Shareholders could possibly assure themselves that management will make optimal decisions, but only if appropriate incentives are given and only if the management is monitored (referred to as agency costs) (Whittred and Zimmer, 1988, p. 26). This may provide an answer to the accounting choices made that gave rise to the initial total group loss of \$54.8 million.Management's wealth may have been tied to the well-being of

### Revised Inome Statement, the Contribution Margin Pproach

1091 words - 5 pages better off is the company financially?  Which income method did you use?  Please explain and show your computations. Product Information: | | | | | | Units Produced | 400,000 | | Units Sold | 355,000 | | Selling Price per Unit | \$19.00 | | Direct Material Cost per Unit | \$3.50 | | Direct Labor Cost per Unit | \$1.40 | | Variable Selling Costs per Unit | \$1.20 | | Fixed Manufacturing Costs | \$1,600,000 | | Fixed

### Cost Volume Profit Analysis

2298 words - 10 pages overheads cover many different expenses within the business – rent, administration, heating and lighting, motoring – the list is endless. As well as dividing the costs into these 3 classifications each cost can be further classified into fixed, variable, stepped and semi-variable. This classification depends upon the behaviour of the cost. A fixed cost is just that – fixed. We pay the same amount of money per period regardless of whether we

### Chapter 16 Managerial Accounting Concepts and Principles

1100 words - 5 pages ) Contribution margin and contribution margin ratio Contribution margin=Sales-Variable costs Contribution margin ratio= Contribution margin/Sales 5) Unit contribution margin Unit contribution margin=Sales price per unit – Variable cost per unit Change in income from operation=Change in sales units*Unit contribution margin 6) Break-even point Break-even sales (units) =Fixed costs/unit contribution margin Break-even sales (dollars

### Management Accounting

851 words - 4 pages Spreadsheets and Database System. General Observations On Management Accounting 1. Different Numbers for different purposes • Historical costs, standard costs, variable costs, fixed costs, direct costs, overhead costs, marginal costs and other kinds of costs. • Each type of cost / number requires different accouting approach. 2. Accounting Numbers are approximations • Most data used in physical sciences are only

### Burger Kings Statements

1724 words - 7 pages greater than total costs what is happening? a. Fixed costs are not being absorbed b. An operating loss is taking place c. An operating profit is taking place d. Variable costs still need to be absorbed 27.___A spending variance relates to: a. direct materials only b. direct labor only c. manufacturing overhead d. both direct materials and direct labor 28.___ Example, Inc., units of production depreciation on the trucks is a ____. a

1165 words - 5 pages output. 3. The relation between total revenue or cost and output units within relevant range is linear. 4. Unit selling price, unit variable costs, and fixed costs are known. 5. The analysis assumes a single product or a constant revenue mix of products as the level of total units sold changes 6. Time value of money can be ignored. Sources: Master budget and responsibility accounting, Horngren et al., 2003, Cost Accounting: a managerial emphasis

### Almarai Information

669 words - 3 pages interpret data. COURSE CONTENT: 1. Cost Terms and Concepts Direct and indirect costs (direct materials, direct labor, overhead product and period costs, variable and fixed costs. Schedule of cost of finished goods manufactured. 2. Costing Systems Job order and process costing , overhead and applied, allocating indirect costs to production, adjusting over- applied and under-applied overhead

### Financial Performance

650 words - 3 pages * * AAT LEVEL 4 Diploma in accounting Financial performance (FPFM) Assignment 1 * * FPFM Assignment 1 * Task 1 * The total costs of a business, which are semi-variable, at two levels of output are shown below: | 20,000 units£ | 25,000 units£ | Total cost | 135,000 | 177,500 | * The fixed element of the cost steps up by £25,000 at an output level of 23,000 units

### Budged Planing

5580 words - 23 pages CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND MANAGEMENT CONTROL 8-1 Effective planning of variable overhead costs involves: 1. Planning to undertake only those variable overhead activities that add value for customers using the product or service, and 2. Planning to use the drivers of costs in those activities in the most efficient way. 8-2 At the start of an accounting period, a larger percentage of fixed

### Case Summaries Accy 401, Emba; Fall 2000

5169 words - 21 pages managerial accounting: The case introduced fixed and variable costs. For example, depreciation expense and interest expense are fixed costs that only change if there is a major change in production volume. Thus, if the firm doubled its sales its income would more than double. That is, revenue would double, variable costs such as supplies, labor, and shipping would double, but fixed costs would remain unchanged. This case introduced the

## Related Papers

### Fixed And Variable Costs Essay

519 words - 3 pages can instead rent vehicles as needed. The variable cost of renting is \$700 per family served. Will this suggestion help Greg reach the break-even point sooner? If annual fixed costs are \$650,000 and the variable cost per home becomes \$12,700 then Greg will be able to reach the break-even point sooner because \$150,000 is being saved and even if Greg serves just above 108 families a year, \$700 x 200 is \$140,000 which is still \$10,000 less than \$150,000, the breakeven point will be reached sooner.

### Hsm/260 Week 4 / Fixed Costs, Variable Costs And Break Even Point

658 words - 3 pages Assignment: Fixed Costs, Variable Costs, and Break-Even Point Exercise 10.1 During the sixth month of the fiscal year, the program director of the Westchester HomeDelivered Meals (WHDM) program decides to again recompute fixed costs, variable costs, and the BEP using the high–low method. Here are the number of meals served and the total costs of the program for each of the first six months: Month July August September October November December

### Management And Cost Accounting Theory Essay

1026 words - 5 pages analysis and interpretation of data • Facilitates day-to-day management as well as future planning and organizing. Mgt. Accounting Principles – • Compiling data (records, reports, statements etc.) • Management by Exception – top management should be involved only in case of exceptional matters. • Control at Source – costs be controlled at its source • Integration – integration of mgt. information • Efficient

### The Fundamental Accounting Concepts And The Role Of Financial Accounting In Aiding The Decision Making Processes Of Four Different Non Management Stakeholder Groups

2455 words - 10 pages IntroductionReliable, relevant financial statements present the best information about a company's economic history, current financial health, and prospect for the future (Johnson, 2004). The preparation and presentation of financial statements require the use of certain rules to ensure truth, fairness, and consistency.Accounting employs a number of concepts. They underlie all traditional accounting in commercial organizations and are generally