Incase of variable cost when activity changes then total cost will be changed but per unit cost will be always fixed or constant
Incase of Fixed cost when activity changes then total cost will be fixed but per unit cost will be changed
Relevant Range
Unit produced and sold 60000 80000 100000 Total cost:
Variable cost 150000 80000*2.5 250000 =200000
Fixed cost 360000 360000 360000
Total cost 510000 ? ? Cost per unit:
Variable cost 2.5 2.5 2.5 Fixed cost 6 4.5 3.6 Total cost per unit ? ? ?
Variable cost per unit 150000/60000=2.5 tk Fixed cost per unit 360000/60000=6 Tk
I/S (Contribution Format)
Sales 90000*7.5=675000 -Variable Exp 90000*2.5=225000 Contribution Margin 450000 _Fixed Expense 360000 Net income 90000
High low method
Equation for total cost y=a+bx
Here a=Total fixed cost
b= Variable cost per unit x= No of units
y= Total cost 1.
Variable cost per unit= Change in cost/Change in activity
= Highest cost – Lowest cost/Highest activity-lowest activity = 15200-12800/1900-1100
= 3 Tk
Total fixed cost= Total admitting cost –total variable cost = 15200- (1900*3)
= 9500 2. y=9500+3x
3. y= 9500+3*1300 =13400 Tk
Exercise 5-12
Activity cost
Highest activity=2000*70%=1400*30=42000 42000*21=882000 Lowest “ =2000*45%=900*30= 27000 792000
1.Variable cost per unit=882000-792000/42000-27000 =6 Tk per room per day
2.Total fixed cost= 792000-27000*6=630000 Tk 3. Y= 630000+6 {2000*60%=1200*30=36000}
=630000+216000 =846000 Tk
Contribution format I/S Sales 2000*400=800000 -V.Exp
Cost of goods sold 2000*150 V. selling exp 2000*50 V.Adm exp 160000*25%
CM 360000 -F.Exp
F.selling exp 150000(250000-100000) F.adm exp 160000*75%
NI 98000
Traditional Approach Sales
_cost of goods sold Gross profit
-Operating Exp NI
5-21
1.For 70000 machine hour level
Total overhead cost 241600 Utility 52000/40000=1.3*70000= 91000 Supervisory Salary 60000
Maintenance 90600(241600-91000-60000)
2.For maintenance cost
Variable Cost per MH= 90600-58200/70000-40000 =1.08 Tk
Total fixed cost =90600-( 70000*1.08) =15000 Tk
y=a+bx
y= 15000+1.08x 3.y=a+bx
Here y =total cost
A means total fixed cost B=variable cost per unit
X = No of hours worked Cost formula for total overhead cost Y= (15000+60000)+(1.08+1.3)x = 75000+2.38 x
4. y=a+bx
=75000+(2.38*45000) =182100
5-16:
1.Cost of goods sold Variable Shipping exp Variable/Mixed * Advertising Fixed
Salary & commission Mixed*
Insurance Fixed Depreciation Fixed 2. Shipping cost
Variable Shipping cost per unit= 56000-44000/4500-3000 =8 Tk
Total fixed cost= 56000-(8*4500) = 20000 tk
3. Sales - Variable exp CM
-Fixed Exp Net income
Sales 630000 _ VE
Cost of goods sold 252000 Shipping 36000 Salary &commission CM
_ FE
Shipping 20000 Advertising 70000 Insurance 9000
Depreciation 42000 Salary & commission Net income
5-16 Req 1:
1
�
Cost of goods sold Variable 2�
Shipping exp Variable/Mixed 3�
Advertising Exp Fixed4
�
Salary and Commission: Mixed 5�
Insurance exp Fixed6
�
Depreciation Exp Fixed Req 2:Shipping exp;
Variable cost per unit= 56000-44000/4500-3000=Tk 8 per unit Fixed Expense=56000-4500*8=20000 Tk
Y=20000+8x
Salary and Commission:
Variable cost per unit: 143000-107000/4500-3000=24 tk per unit Fixed exp= 107000-3000*24=35000 Tk
= 143000-4500*24=35000 Tk Y= 35000+24x
Req :3
Income/Statement using contribution format Sales 630000 -Variable Expense:
Cost of goods sold 252000
Shipping exp (4500*8) 36000
Salary and commission 108000 396000
(4500*24) Contribution Margin 234000
_Fixed Expense: Shipping 20000
Salary and commission 35000
Advertising 70000
Insurance 9000
Depreciation 42000 176000
Net Income 58000 5-15:
Income Statement Traditional Method
Sales
_ Cost of goods sold Gross profit
- Operating Expense Selling:
Advertising Delivery of organ
Sales salaries and commission Utilities
Depreciation of sales facilities Total selling exp
Administrative Exp:
Executive Salaries Depreciation of office equipment
Clerical Insurance
Total administrative exp
950 3600
10800(4800+150000*4%
) 650 5000 21000
13500 900
4900 {2500+(60*40)}
700 20000
150000 90000 60000
Total operating exp Net income
41000 19000
Contribution format
Sales
_Variable exp:
Cost of goods sold Delivery of organ Clerical
Sales salaries and commission CM
_ Fixed Exp:
Advertising
Sales salaries and commission Utilities
Depreciation of sales facilities Executive Salaries
Depreciation of office equipment
Clerical Insurance
Net income
90000 3600 2400 6000
950 4800 650 5000 13500 900
2500 700
150000
102000 48000
29000
19000
