Business Costs Product or Period Cost Variable or Fixed Cost Per Unit Cost (Variable) Annual Cost (Fixed)
Question:
Business Costs | Product or Period Cost | Variable or Fixed Cost | Per Unit Cost (Variable) Annual Cost (Fixed) |
Artist - contract | Product | Fixed | $10,000 |
Artist - design fee | Product | Fixed | $3,600 |
Computer/Printer | 90% Product | Fixed | $5,400 |
Computer/Printer | 10% Period | Fixed | $600 |
Depreciation - Computer/Printer | 90% Product | Fixed | $1,800 |
Depreciation - Computer/Printer | 10% Period | Fixed | $200 |
Depreciation - Heat Press Machine | Product | Fixed | $1,500 |
Heat Press Machine | Product | Fixed | $4,500 |
Liability Insurance | Period | Fixed | $3,600 |
Mall Rent (Manufacutring) | 90% Product | Fixed | $27,000 |
Mall Rent (Non-Manufacturing) | 10% Period | Fixed | $3,000 |
Owners (shared) | Period | Fixed | $12,000 |
Parties | Period | Fixed | $4,000 |
Storage Unit (Manufacturing) | Product | Fixed | $1,500 |
Inkjet Cartridges | Product | Variable | $0.10 |
Inkjet Cartridges | Period | Variable | $0.02 |
Laser Paper | Period | Variable | $0.02 |
Student Workers (3) | Product | Variable | $0.80 |
Student Workers (3) | Period | Variable | $0.40 |
T-shirts | Product | Variable | $3.75 |
Transfer Paper | Product | Variable | $0.40 |
Wrapping Paper/Box | Period | Variable | $0.20 |
Fixed (a) = | $68,200.00 | (included list of fixed business costs) | |
Variable (b) = | $5.69 | (included list of variable business costs) | |
Y =68200+5.69X |
Questions are- Please answer with how on however many you can!
1. Assume that you make and sell 7,800 t-shirts in the first year. Use your cost formula to calculate your first year’s total cost. If you sell these t-shirts at $15 each, how much would net profit be in the first y e a r ? Year ending 12/31/2020.
Now you have developed your cost estimates, let’s do some evaluations on this proposed business. a. Continue to assume that 7,800 t-shirts will be made and sold in the first year. What is your product cost per unit under absorption costing? What is your product cost per unit under variable costing?
b. Based on the estimated sales level of 7,800 t-shirts for the first year, prepare your company’s (forecasted) income statement for the year ended on 12/31/2020 using both (1) the traditional format based on the absorption costing and (2) the contribution format based on the variable costing.
c. Calculate contribution margin per T-shirt and contribution margin ratio. d. Calculate how many T-shirts you need to sell in order to break-even. Calculate how much sales in dollars you need to make in order to break-even. (Use break-even f o r m u l a s .)
e. Calculate how many T-shirts you need to sell in order to make $10,000 target profit for the year.
f. Continue to assume that 7,800 T-shirts will be made and sold during the first year. Calculate your (1) margin of safety and (2) degree of operating leverage (DOL) for your business. What do these figures tell you about how risky your business is?
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav