BUSI 101 1st Edition Lecture 13Outline of Last Lecture I. Page 84 in Managerial Accounting Textbooka. Problems 2-4A and 2-5AII. Page 174 in Coursepacka. Problems 9,10,13,14,15III. Chapter 4 Notesa. Page 78 in Coursepacki. Traditional versus ABC CostingOutline of Current Lecture I. Traditional Costing vs. ABC costing vs. Value Added ActivityII. Example 4.6III. Page 96 in the CoursepackIV. Chapter 5a. Page 89 in the CoursepackV. Page 91 in the CoursepackVI. Page 92 in the Coursepack – relationshipsVII. Page 93 in the CoursepackCurrent Lecture*Chapters 1,2, 4 due this week in recitationThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.*Take home will go up on canvas this week- 5 HW type questions, you answer 4- Due week of April 6thABC – activity based costingTraditional Cost System – one cost driverABC – allocates overhead to multiple cost pools and then assigns the activity cost pools to projects by means of cost driversValue Added Activity – increases the worth of a product of serviceEx. 4.6A) Traditional $ 260,0002500 DL Hours= $104 per DLhourMobile800x$104=$83,200$83,200/200 (safes) = $416 per safeWalk in1700x$104=$176,800$176,800/50 safes=$3536 per safeMH $160,000/500 moves = $320 per movePUR $100,000/800P.O=$125 per P.O.Mobile Walk InMH 300x$320=$96,000 200x$320=$64,000PUR 450x$125=$56,250 350x$125=$43,750$152,250/200=$761.25 per safe $107,750/50=$2155 per safeChapter 5 – page 89 in CoursepackVariable Costs: change, in total, with changes in activity levelFixed Costs: do not change, in total, with changes in activity level within a relevant rangeY=a+bcTC=FC+(VC/units)($ of units)Page 90) High Low MethodCosts RoomsHigh May $1,160,000 12,000Low June $680,000 6,000480,000 6,000VC=480,000/6000=$80 per room (slope)Y=a+bx1,160,000=a+(80)(12,000)a=200,000 (TFC)y=200,000+(80)(10,500)y=1,040,000Costs RoomsHigh May $860,000 12,000Low Jan $680,000 6,000180,000 6,000VC=180,000/6000=$30 per roomY=a+bx680,000=a+(30)(6000)a=500,000y=500,000+(30)(10,500)y=815,000Page 91 in CoursepackEcon graph versus Accounting Graph (look in book)Direct/Variable/Contribution Margin I/S:Sales SP(x)-Variable Costs -VC (x)=Contribution Margin =CM (x)-Fixed Costs -TFC-Profit =ProfitSP(x)-VC(x) –TFC=πCM(x)=TFC x=TFC/CM per unit (break even points)CMR = CM/SP SP(x)=($TFC+π)/CMR x=($TFC+π)/CM per unitVCR=VC/SPCMR+VCR=1Ex page 91)1. $3-5-22. 3/5=60%=0.63. 3000/$3 per unit=1000 units4. $3000/0.6=50005. (3000+900)/$3 per unit = 1300 units6. (3000+900)/0.6 = 6500Page 92 in Coursepack – relationshipsX=TFC/CM per unitSP/unit-VC/unitYour parents buy you a $60,000 car on graduation day t=40%How much must they ear before taxes to have $60,000 for your new ride?πBT $100,000 1.00-Taxes -$40,000 -0.40=πAT 60,000 .6060,000/1-0.4 = 60,000/.6=100,000x=(TFC+π/1-t)/CM per unitSP(x)=(TFC+π/1-t)/CMREx. Page 93)NOW Would Like to EarnSales 2,000,000 1,200,000-VC 750,000 450,000=CM 1,250,000 750,000-TFC 500,000 500,000=πBT750,000 250,000-taxes (40%) -300,000 100,000-πAT450,000 150,0008A: 1B: 2C: CM/PKG = $66per pkgx$6 $4 x$7$48 $4