Beruflich Dokumente
Kultur Dokumente
=
$232 $208.52
10.1%
$232
=
$250 $222
11.2%
$250
=
Profits vary within a narrow 1 percent range. The cost differences
among the three classes of customer appear to explain the price differences.
15
Measuring Profit
Absorption Costing
Also referred to as full costing
Required for external financial reporting
Assigns all manufacturing costs, direct
materials, direct labor, variable overhead, and
a share of fixed overhead to each unit of
product
Each unit of product absorbs some of the
fixed manufacturing overhead in addition to
the variable costs incurred to manufacture it.
16
Lasersave, Inc., a company that recycles used toner
cartridges for laser printers. During August the firm
manufactured 1,000 cartridges at the following costs:
Direct materials $ 5,000
Direct labor 15,000
Variable overhead 3,000
Fixed overhead 20,000
Total manufacturing cost $43,000
During August, these cartridges were sold at $60
each. Variable marketing cost was $1.25 per unit.
Fixed expenses were $12,000.
Absorption-Costing
Measuring Profit
17
Measuring Profit
Absorption-Costing
*Direct materials ($5 x 1,000) $ 5,000
Direct labor ($15 x 1,000) 15,000
Variable overhead ($3 x 1,000) 3,000
Fixed overhead 20,000
Total manufacturing overhead
and cost of goods sold $43,000
1,000 units produced; 1,000 units sold
18
*Direct materials ($5 x 1,250) $ 6,250
Direct labor ($15 x 1,250) 18,750
Variable overhead ($3 x 1,250) 3,750
Fixed overhead ($16 per unit) 20,000
Total manufacturing overhead $48,750
Add: Beginning inventory 0
Less: Ending inventory (9,750)
Cost of goods sold $39,000
Measuring Profit
Absorption-Costing
Production exceeded sales by 250
units; fixed overhead of $16 per unit is
carried in inventory thus reducing cost
of goods sold and increasing net
income
1,250 units produced; 1,000 units sold
19
Measuring Profit
Variable-costing
Also referred to as direct costing
Assigns only unit-level variable
manufacturing costs to the product
Direct materials
Direct labor
Variable overhead
Fixed overhead is treated as a period cost
20
*Direct materials $ 5,000
Direct labor 15,000
Variable overhead 3,000
Total variable manufacturing expenses $23,000
Add: Variable marketing expenses 1,250
Total variable expenses $24,250
Measuring Profit
21
Measuring Profit
*1,300 $39 = $50,700
22
Measuring Profit
23
Alden Company manufactures two products: basic
fax machines and multi-function fax machines. The
multi-function fax uses more advanced technology;
therefore, it is more expensive to manufacture.
Profit by Product Line
Basic Multi-Function
Number of units 20,000 10,000
Direct labor hours 40,000 15,000
Price $200 $350
Prime cost per unit $55 $95
Overhead per unit $30 $22.50
Profitability of Segments
24
Profitability of Segments
Profit by Product Line
25
Profitability of Segments
Profit by Product Line
26
Profitability of Segments
Profit by Product Line
27
Profitability of Segments
Profit by Product Line
28
Alpha Beta Gamma Delta Total
Sales $ 90 $ 60 $ 30 $120 $300
Cost of goods sold 35 20 11 98 164
Gross profit $ 55 $ 40 $ 19 $ 22 $136
Division expenses -20 -10 -15 -20 -65
Corporate expenses -3 -2 -1 -4 -10
Operating income
(loss) $ 32 $ 28 $ 3 $ -2 $ 61
Profitability of Segments
Divisional Profit
29
Profitability of Segments
Customer profitability
Companies that assess the profitability of
various customer groups can more
accurately target their markets and
increase profits.
1) Identify the customer
2) Determine which customers add value to the
company
30
Analysis of Profit-Related
Variances
Overall Sales Variance
[actual vs. expected revenue]
Sales Price Variance Price Volume Variance
31
Analysis of Profit-Related
Variances
( )
Sales price Actual Expected Quantity
= -
variance price price sold
( )
Price volume Actual Expected Expected
= -
variance volume volume price
The sales price and price volume variances are labeled favorable if
the variance increases profit above the amount expected. They are
labeled unfavorable if the variance decreases profit below the amount
expected.
32
Analysis of Profit-Related
Variances
Contribution Margin Variance
[actual vs. expected contribution margin]
Sales Mix Variance
Contribution Margin
Volume Variance
33
Analysis of Profit-Related
Variances
( ) ( )
( ) ( )
P1 actual units P1 budgeted CM
- P1 budgeted units - Budgeted average unit CM
P2 actual units P2 budgeted CM
+
- P2 budgeted units - Budgeted average unit CM
Birdwell, Inc.:
36
Analysis of Profit-Related
Variances
Actual Budgeted
Actual Budgeted
industry average
market share - market share
sales unit
percentage percentage
in units CM
| |
|
|
\ .
Market share variance =
Budgeted Budgeted
Actual Budgeted
market average
industry sales - industry sales
share unit
in units in units
percentage CM
| |
|
|
\ .
Market size variance =
37
Limitations of Profit Measurement
Limitations of profitability analysis
Focus on past performance
Emphasis on quantifiable measures
Impact on behavior
Successful firms measure far more than
accounting profit.
COST MANAGEMENT
Guan Hansen Mowen
COPYRIGHT 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license.
38
End Chapter 19