Managerial Accounting and controlDr. Mohamed Youssef

Lecture 3

Example: X Y

Sales Mix 1 3USP 20 15UVC (18) (6) UCM 2 9

CM per package = 2+3 x9 = 29WACM = 29/4 = 7.25BEP IN UNIT = F.C /WACM =2900/7.25

So in Sales Mix

BEP IN UNIT = F.C /WACM BEP IN $ = F.C /WACM %Q = (F.C+[ TNI/(1-INCOME TAX)])/UCM

Example: D S

Sales Mix 15000 5000F.C 300,000 900,000USP 20 18UVC (14) (6) UCM 6 12

CM = 6 X 15000+12 X 5000 = 90000+60000=150,000F.C = 300,000+900,000= 1,200,000WACM = 150,000 / 20000=7.5

BEP IN UNIT = F.C /CM =1.200.000 / 7.5=160,000

D = 160,000 X (3 /4) = 120,000S = 160,000 X (1 /4) = 40,000

Example: sales (12,000 units) per Month

Direct Material used $32Direct Manufacturing labor 20Variable manufacturing overhead 15Fixed manufacturing overhead 6Variable nonmanufacturing overhead 3Fixed nonmanufacturing overhead 4Total costs 80

Chapter 2 & 5 1

Managerial Accounting and controlDr. Mohamed Youssef

Lecture 3

Compute

1) Fixed manufacturing overhead per unit for monthly production level of 10,000

Fixed manufacturing / unit= 6Fixed manufacturing / unit in 10,000= 6 x 12000/10000 = 7.2

2) Total manufacturing and non manufacturing costs during month when 9000 units are produced and 8000 units are sold

Total Manufacturing variable cost / unit= 32+20+15 = 67Total Manufacturing fixed cost / unit = 6Total nonManufacturing variable cost / = 3Total nonManufacturing fixed cost / unit = 4

For fixed non manufacturing cost = 4 x 12000 = 48000For fixed manufacturing cost = 6 x 12000 = 72000For variable manufacturing cost = 67x 9000 = 603000For variable non manufacturing cost = 3 x 8000 = 24000Total manufacturing cost = 72000+603000 =675000Total non manufacturing cost = 48000+24000 =72000

Example:

Variable manufacturing costesDirect Material $600,000Direct Manufacturing labor 500,000Manufacturing overhead 40,000Fixed manufacturing overhead 600,000Total costs 1,740,000

40000 50000 60000uc 37,80 34,80 32,80F.C. 600000 600000 600000F. / u 15 12 10V.c/ u 22,80 22,80 22,80

.Q = total variable cost / unit variable cost = 600,000+500,000+40,000/22,80

= 50000

Chapter 2 & 5 2

Managerial Accounting and controlDr. Mohamed Youssef

Lecture 3

Chapter 5: Relevant Information and Decision Making: MarketDecisions.

Relevant information: Is the predicted future costs and revenues that will differ among the alternatives.

Irrelevant information: Is the predicted future costs and revenues not changed among the alternatives.

Note: To predict the future and to make our design we must ignore the irrelevant in formations.

Part 1 : reject or accept a special order

Example: A1 A2

F.C 5000 5000 irrelevantV.C 1550 3900 relevant

Note: And we must use one of the prediction method like ( high low ,BEP,C/V/P,ARR,NPV ….)

Example: Design to accept or reject special order

Income statementSales (1000x $20) 20000Less: V.C (1000x $9) (9000)CM 11000Less: F.C. (5000)Less: admin (V.c+F.c)(500+700)

(1200)

Operating income 6000

So if we have special order with 500 units with usp 12 $ so shall we accept?

If usp > Manufacturing variable cost per unit accept this orderIf usp < Manufacturing variable cost per unit reject this order

Chapter 2 & 5 3

Managerial Accounting and controlDr. Mohamed Youssef

Lecture 3

The Decision Process

Chapter 2 & 5 4

Historical InformationHistorical Information Other Information

Other Information

Prediction MethodPrediction Method

Decision ModelDecision Model

Implementation and EvaluationImplementation and Evaluation

Predictions as Inputsto Decision Model

Decisions by Managers

with Aid of Decision Model

Feedback

(B)(A)

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