Managerial Accounting Week 2

Peer Graded Assignment

Mridul Mathur

Part A - JW Sports Supplies Cost Categorization and Calculation

Assumptions :
Quantity 1,500
Price / Unit $100
Revenue $150,000
(A)

Cost Category Type Reason

Direct Material Variable, Mfg Direct Material will vary according to units made, If no units are made, the direct material cost will be zero owing to no material requirement. So, it is a Variable Mfg cost
Direct Labor Variable, Mfg Direct Labor will vary according to units made, If no units are made, the direct material cost will be zero owing to no labor requirement. So, it is a Variable Mfg cost
Rent Fixed, Mfg Rent is afixed Manufacturing cost, since irrespective of production volume, the rent still has to be paid
Depreciation Fixed, Mfg Depreciation is a fixed Manufacturing cost, since irrespective of production volume, the asset will still lose it's book value over time and require depreciation
Electricity Mixed, Mfg Electricity is a mixed manufacturing cost, as there is a component required to run machines which will vary with production volume, however, the lighting component will remain fixed
Other Mfg. Mixed, Mfg Other Mfg is a mixed manufacturing cost, as cost material such as thread/ order processing although will vary with production units; however, labor such as maintainance will have a fixed component
Selling Fixed, Non Mfg Selling is a fixed salary paid to sales executives, therefore should be a fixed, non manufacturing cost
Sales Commission Variable, Non Mfg Sales commission will vary with no. of units sold, thus is a variable non manufacturing cost
Administrative Fixed, Non Mfg Administrative cost consists of non mfg cost such as accounting payroll etc, that will remain fixed irrespective of no. of units, therefore is a fixed non mfg

(From Exhibit 4) Component Calculation Cost for 1500 Units

Amount Amount Variable / Unit Total Variable Total Fixed Variable Cost Fixed Cost Product/ Period/ Non Mfg. Non Mfg. Non. Mfg.
Cost Category Total Cost Variable Fixed Mfg. Fixed
(T1) (T2) (V = ΔT /ΔQ) VC = (V* Q) FC = T - VC (V * 1500) (FC) Mfg. Mfg. Variable Variable Fixed

Units produced and Sold (Q) 1,200 1,900 1,500

Direct Material 36,000 57,000 30 36,000 0 45,000 0 45,000 Y Y 45,000 - - -

Direct Labor 18,000 28,500 15 18,000 0 22,500 0 22,500 Y Y 22,500 - - -
Rent 5,000 5,000 0 0 5,000 0 5,000 5,000 Y Y - 5,000 - -
Depreciation 4,000 4,000 0 0 4,000 0 4,000 4,000 Y Y - 4,000 - -
Electricity 4,400 5,800 2 2,400 2,000 3,000 2,000 5,000 Y Y Y 3,000 2,000 - -
Other Mfg. 19,600 21,700 3 3,600 16,000 4,500 16,000 20,500 Y Y Y 4,500 16,000 - -
Selling 8,000 8,000 0 0 8,000 0 8,000 8,000 Y Y - - - 8,000
Sales Commission 12,000 19,000 10 12,000 0 15,000 0 15,000 Y Y - - 15,000 -
Administrative 5,000 5,000 0 0 5,000 0 5,000 5,000 Y Y - - - 5,000
Total 112,000 154,000 90,000 40,000 130,000 75,000 27,000 15,000 13,000
(B) (C ) (E ) (F)

Part B - Functional Income Statement for Price / Unit @ $100, Unit @ 1,500

Revenue (A) $150,000

- Manufacturing Cost - Variable (B) 75,000 (Included Direct Material, Direct Labor, Elec (V), Other Mfg (V))
- Manufacturing Cost - Fixed (C ) 27,000 (Included Rent, Depreciation, Elec (F), Other Mfg (F))
= Gross Margin (D) $48,000 D = A - (B+C)
- Non Manufacturing - Variabe (E ) 15,000 (Included Sales Commission)
- Non Manufacturing - Fixed (F ) 13,000 (Included Selling, Administrative)
= Profit (G) $20,000 G = D -E -F

Part C - Contribution Margin Income Statement for Price / Unit @ $100, Unit @ 1,500

Revenue (A) $150,000

- Variable Manufacturing Cost (B) 75,000 (Included Direct Material, Direct Labor, Elec (V), Other Mfg (V))
- Variable Non Manufacturing Cost (E ) 15,000 (Included Sales Commission)
= Contribution Margin (D) $60,000 D = A - (B+E)
- Fixed Manufacturing Cost (C ) 27,000 (Included Rent, Depreciation, Elec (F), Other Mfg (F))
- Fixed Non Manufacturing Cost (F) 13,000 (Included Selling, Administrative)
= Profit (G) $20,000 G = D - C -F

Mridul Mathur_Week2_JW Inc Statements 1804.xlsx