Seminar 4 Cost Accounting (2016)Ejercicio Inglés
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SEMINAR 4 COST ACCOUNTING
1. Sales mix, new and upgrade customers
Data S.A is a top-selling electronic spreadsheet product. Data is about to release
version 5. It divides its customers into two groups: new customers and upgrade
customers (those who previously purchased Data 4 or earlier versions). Although the
same physical product is provided to each customer group, sizable differences exist
in selling prices and variable marketing costs:
The fixed costs of Data S.A 5th version are $14,000,000. The planned sales mix in
units is 60% new customers and 40% upgrade customers.
Required: a) What is the Data S.A, 5th version breakeven point in units, assuming that the planned 60%:40% sales mix is attained? Total units: New units: 80.769,228 Upgrade units: 53.846, 156 b) If the sales mix is attained, what is the operating income when 200,000 total units are sold? c) Show how the breakeven point in units changes with the following customer mixes: i. New 50% and Upgrade 50% ii. New 90% and Upgrade 10% iii. Comment on the results Using the same formula as (a): I. Break Even Point Total Units: 140.000 II. Break Even Point Total Units: 120.689 III. Clearly the higher the proportion of new units sold the better margin and thus the less amount of units needed to reach breakeven.
SEMINAR 4 COST ACCOUNTING 2. CVP analysis, margin of safety Technology Solutions sells a ready-to-use software product for small businesses. The current selling price is $300. Projected operating income for2011 is $490,000 based on a sales volume of 10,000 units. Variable costs of producing the software are $120 per unit sold plus an additional cost of $5 per unit for shipping and handling. Technology Solutions annual fixed costs are $1,260,000.
Required: a) Calculate Technology Solutions breakeven point and margin of safety in units.
Breakeven point: BP = Fixed costs/UCM = 1,260,000/175 = 7,200 units Margin of safety (reduction on sales that can occur before the BP is reached) = 10,000 7,200 = 2,800 units b) Calculate the company’s operating income for 2011 if there is a 10% increase in unit sales.
If there is an increase of 10% in units → Quantity = 11,000 units Income statement Revenues 300*11,000 -Variable cost Productions cost 120*11,000 Shipping costs 5*11,000 Contribution Margin = 1,925,000 -Fixed costs 1,260,000 = Operative income 665,000$ c) For 2012, management expects that the per unit production cost of the software will increase by 30%, but the shipping and handling costs per unit will decrease by 20%.
Calculate the sales revenue Technology Solutions must generate for 2012 to maintain the current year’s operating income if the selling price remains unchanged, assuming all other data as in the original problem.
We want to maintain operative income of 665,000$ Variable costs have changed: Production costs (increased 30%) = 156$/u Shipping costs (decreased 20%) = 4$/u Operative income + Fixed costs = Contribution margin (original) =1,750,000 CM + UVC*Q = USP*Q 1,750,000 + 160*Q = 300*Q → Q = 12,500 units So, sales revenue = 300*12,500 = 3,750,000$ ...