Xueqin Chen

Chapter 5
33. A.Variable cost per unit=
($1,721-$1,399) ( 105,000-
98,000)
=0.0!
"i#e$ costs=1,721-(105,000%0.0!)= $--3,109
&ost e'uation (= -3109)0.0!#
*. +tilit( cost o, pro$ucin- 120,000 units =-3,109)0.0!%120,000=$211

&. .e-ression anal(sis (=513.!20)0.010258/
+tilit( cost o, pro$ucin- 120,000 units=513.!2)0.010258%120,000=$17.58

.e-ression is a statistical tool t0rou-0 all 1 1ont0s $ata points , t0e 0i-02lo3
1et0o$ $eri4es a strai-0t line bet3een 5ust t3o o, t0e $ata points .+sin- t0e 0i-0est
an$ lo3est le4el o, acti4it(,3e $i$ not use t0e re1ainin- $ata point. 6, one o, points
selecte$ is unusual.1a( not be a -oo$ 1easure o, t0e ,i#e$ an$ 4ariable co1ponents
o, t0e 1i#e$ cost. 7o use t0e 0i-02lo3 esti1ate 3oul$ a,,ect our pre$iction o, total
o4er0ea$ costs ne#t 1ont0. 80e re-ression 1et0o$ 1uc0 accurate t0an t0e 0i-02lo3
esti1ate pre$iction o, total o4er0ea$ costs in t0e ,uture.
1.
A.&ost per unit 2 Absorption &ostin-
9irect 1aterial $25
9irect labor 35
Variable o4er0ea$ 15
"i#e$ o4er0ea$
Total per unit $79
B. Variable &ostin-

9irect 1aterial $25
9irect labor 35
Variable o4er0ea$ 15
Total per unit $75

C. ( 100,000 +nits pro$uce$ an$ 105,000 units 7ol$) i, per units sales price is /
Absorption Costing
7ales 105,000%/
:ess ; &ost o, -oo$s sol$ 8,295,000
<ross pro,it 105,000/ -8,295,000
=et operatin- inco1e 105,000/ -8,295,000

Variable Costing
7ales 105,000%/
:ess ; Variable costs 7,875,000
&ontribution 1ar-in 105,000%/ - 7,875,000
:ess ; "i#e$ costs 00,000
=et operatin- inco1e 105,000/-8,275,000
9i,,erence =($105,000/ -$ 8,295,000 ) - ($105,000/-$8,275,000)= -$20,000
Variable &ostin- net operatin- inco1e is 0i-0er t0an Absorption &ostin- .
D.
( 100,000 +nits pro$uce$ an$ 70,000 units 7ol$) i, per units sales price is /
Absorption Costing
7ales $70,000%/
:ess ; &ost o, -oo$s sol$ 5,530,000
<ross pro,it 70,000/ -5,530,000
=et operatin- inco1e $70,000/ -5,530,000

Variable Costing
7ales $70,000%/
:ess ; Variable costs 5,250,000
&ontribution 1ar-in 70,000/-5,250,000
:ess ; "i#e$ costs 00,000
=et operatin- inco1e $70,000/-5,!50,000
9i,,erence =($70,000/ -$ 5,530,000 ) - ($70,000/-$5,!50,000)= $ 120,000
Absorption &ostin- net operatin- inco1e is 0i-0er t0an Variable &ostin- .
E.
( 100,000 +nits pro$uce$ an$ 100,000 units 7ol$) i, per units sales price is /
Absorption Costing
7ales $100,000%/
:ess ; &ost o, -oo$s sol$ 7,900,000
<ross pro,it 100,000/ -7,900,000
=et operatin- inco1e $100,000/ -7,900,000

Variable Costing
7ales $100,000%/
:ess ; Variable costs 7,500,000
&ontribution 1ar-in 100,000/-7,500,000
:ess ; "i#e$ costs 00,000
=et operatin- inco1e $100,000/-7,900,000
9i,,erence =($100,000/ -$ 7,900,000) - ($100,000/-$7,900,000)= $ 0
=o $i,,erence in net operatin- inco1e bet3een t3o 1et0o$s.
F. Absorption costin- is re'uire$ b( <AA> an$ 1ust be use$ 30ene4er a co1pan(
pro4i$es ,inancial state1ents to t0e outsi$e t0e co1pan(.
Chapter 6
19.
A.
6, # is t0e sales price o, per s(ste1
7ales $10,000%/
:ess ; Variable costs ;
?anu,acturin- costs 50,000
&ontribution 1ar-in $10,000/--50,000
:ess ; "i#e$ &osts;
7@A costs $20,000
At0er ,i#e$ costs 10,000
8otal ,i#e$ costs 30,000
=et operatin- inco1e $10,000/-$50,000-$30,000=$30,000
/=11
7ale price is $11 per s(ste1
*.
7ales $110,000
:ess ; Variable costs ;
?anu,acturin- costs 50,000
&ontribution 1ar-in $ !0,000
:ess ; "i#e$ &osts;
7@A costs $20,000
At0er ,i#e$ costs 10,000
8otal ,i#e$ costs 30,000
=et operatin- inco1e $30,000
&ontribution 1ar-in (per unit)= !0,000210,000=$!
&ontribution 1ar-in ratio= !0,0002110,000=55B
*reaC-e4en(units)=$35,000$!= 5833 units
*reaC-e4en($)= $30,00055B= $5,55
&.
.e$uce Variable &osts
6, # is t0e Variable &osts
110,000-/-30,000=35,000
/=$5,000
7o Variable &osts $e$uce $5,000, 10B, 30ic0 is $5,000, s0e can increase 0er return
on in4est1ent to 35B
7ales $110,000
:ess ; Variable costs ;
?anu,acturin- costs 5,000
&ontribution 1ar-in $ !5,000
:ess ; "i#e$ &osts;
7@A costs $20,000
At0er ,i#e$ costs 10,000
8otal ,i#e$ costs 30,000
=et operatin- inco1e $35,000
21.
A.
7ales $3,000,000
:ess ; Variable costs ;
9irect 1aterials $800,000
9irect labor 700,000
"actor( o4er0ea$ 300,000
7ellin- e#pense 120,000
A$1inistrati4e e#pense 30,000
8otal Variable &osts 1,950,000
&ontribution 1ar-in $1,050,000
:ess ; "i# cost
"actor( o4er0ea$ 50,000
7ellin- e#pense 180,000
A$1inistrati4e e#pense 70,000
8otal "i# costs 700,000
=et operation inco1e $350,000

&ontribution 1ar-in ratio= 1,050,000
3,000,000 = 35B
*reaC e4en ($)= 700,000
35B = $ 2,000,000
B.
7ales -Variable &osts - "i#e$ &osts = 8ar-et >ro,it ( be,ore ta# )
7ales = $700,000 )$1,950,000)$ 700,000 = $ 3,350,000
$ 3,350,000 re4enue 1ust D6A -enerate to ac0ie4e &0risEs -oal.