BUSI 101 1st Edition Lecture 17Outline of Last 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 CoursepackOutline of Current Lecture I. Accounting GraphsII. Total Cost EquationIII. Page 95 in CoursepackIV. Absorption Costing versus Direct CostingV. TaxingVI. Changing ParametersCurrent LectureTVC (diagonal line graph)UnitVC (horizontal straight line graph)These 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.TFC (horizontal straight line graph)UnitFC (line is concave up, sloping downward getting closer to zero)y=a+bxTotal Costs=FC+VC(x)TC for 10,000 units=$780,000Total Cost for 120,000 units=$960,000Fixed Cost increases by 25% at the 120,000 unit levelWhat is the VC per unit? $3[($780,000=a+b(100,000)](1.25) system of equations-960,000=1.25a+b(120,000)b=$3.00780,000=a+3(100,000)a=$480,000Page 95 in the Coursepack@500,000units Would 1. Sales 100,000-VC (750,000)=CM 250,000-FC (100,000) 150,000=Profit 150,000 225,000@16,000 units @60,000 units2. Sales 400,000 1,500,000-VC (256,000) (1,040,000)=CM 144,000 496,000-FC 250,000 (350,000)=Profit (106,000) 146,000Absorption Costing/Traditional Costing /Pull CostingSales-CGSDMDLVOHD FOHD=GP-S+AV F=πDirect CostingSales-VCDMDLVOHD V S+A=CM-FCFOHD FS+A=π**main difference is fixed costing, everything else stays the sameChapters 1-5- If production=sales: ACπ =DCπ (inventories remain the same)Chapter 6- If production>sales: ACπ>DCπ (inventory increases)- If production<sales: ACπ<DCπ (inventory decreases)In AC, Fixed Overhead is treated as a product costIn DC, Fixed Overhead is treated as a period costDifference in π=△¿inv)(FOHD/unit)Product costs under AC: DM, DL, VOHD, FOHDProduct Costs under DC: DM, DL, VOHDTaxes: x= TFC +π1−tcm / unit(625,000+750,000/.6)/.375=πBTNow Would like to beSales 4,000,000 100% 5,000,000-VC 2,500,000 62.5% 3,125,000=CM 1,500,000 37.5% 1,875,000-FC 625,000 625,000=πBT875,000 100% 1,250,000 (1.0)-taxes 350,000 40% (.4)=πAT525,000 60% 750,000 (.6)Multi-Products6x : 1y : 32x(3)/18+x(5)/5+x(6)/18=41 pkgs.3,075,000/41pkgs.=75,000pkgs. 6x=450,000x’s, 1y=75,000y’s, 3z=225,000z’s=750,000 packagesChanging ParametersSale Price (SP): $1.50 per unitContribution Margin Ratio (CMR)=.20 or 20%Contribution Margin per unit=$.30 per
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