Accounting unit 5
This assignment focuses on cost analysis and behavior, including identifying cost behaviors, estimating products, and preparing a contribution margin income statement.
Use a Word document to complete the following in your Financial and Managerial Accounting textbook:
· Exercises 18-1, 18-2, 18-3, 18-4, 18-8, and 18-12, pages 835837.
Exercise 18-1 Cost behavior in graphs C1
Following are five graphs representing various cost behaviors. (1) Identify whether the cost behavior in each graph is mixed, step-wise, fixed, variable, or curvilinear. (2) Identify the graph (by number) that best illustrates each cost behavior: (a) Factory policy requires one supervisor for every 30 factory workers; (b) real estate taxes on factory; (c) electricity charge that includes the standard monthly charge plus a charge for each kilowatt hour; (d) commissions to salespersons; and (e) costs of hourly paid workers that provide substantial gains in efficiency when a few workers are added but gradually smaller gains in efficiency when more workers are added.
Page 836Exercise 18-2 Cost behavior defined
The left column lists several cost classifications. The right column presents short definitions of those costs. In the blank space beside each of the numbers in the right column, write the letter of the cost best described by the definition.
Exercise 18-3 Cost behavior identification C1
Following are five series of costs A through E measured at various volume levels. Identify each series as either fixed, variable, mixed, step-wise, or curvilinear.
Exercise 18-4 Measurement of cost behavior using a scatter diagram P1
A company reports the following information about its unit sales and its cost of sales. Each unit sells for $500. Use these data to prepare a scatter diagram. Draw an estimated line of cost behavior and determine whether the cost appears to be variable, fixed, or mixed.
Exercise 18-8 Contribution margin A1
A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $205 per pair and cost $164 per pair in variable costs to make.
1. Compute the contribution margin per pair.
2. Compute the contribution margin ratio.
3. Describe what the contribution margin ratio reveals about this new jeans line.
Exercise 18-12 Computing sales to achieve target income C2
Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $135 per unit. The companys annual fixed costs are $562,500. Management targets an annual pretax income of $1,012,500. Assume that fixed costs remain at $562,500. Compute the (1) unit sales to earn the target income and (2) dollar sales to earn the target income.
