EXECUTIVE SUMMARY Boston Creamery‚ Inc‚ is an ice cream company that manufactures and distributes ice cream to wholesalers and retailers. In 1973‚ the company had installed a new financial planning and control system that compares budgeted results against actual results and be able to highlight things that needed corrective actions or commend things that resulted in a favorable overall variance. This year‚ the division has a favorable operating income variance of $71‚700. Highlights: · Jim
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not only the budgeted profit‚ but also: * the output and sales level at which there would neither profit nor loss (break-even point) * the amount by which actual sales can fall below the budgeted sales level‚ without a loss being incurred (the margin of safety) In marginal costing‚ marginal cost varies directly with the volume of production or output. On the other hand‚ fixed cost remains unaltered regardless of the volume of output within the scale of production already fixed by management. In
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Sales | $8‚583 | $8‚102 | $10‚711 | Variable Costs | | | | Cost of Goods Sold | $4‚326 | $4‚132 | $5‚570 | Commissions | $429 | $405 | $536 | Total Variable Costs | $4‚755 | $4‚537 | $6‚106 | Contribution Margin | $3‚828 | $3‚565 | $4‚605 | | | | | Fixed Costs | | | | Salaries | $2‚021 | $2‚081 | $3‚215 | Advertising | $254 | $250 | $257 | Administrative Expenses | $418 | $425 | $435 |
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The relationship between cost volume and profit is shown by cost-volume-profit analysis. it is an analytical tool for analyzing the relationship among cost‚ price‚ profit‚ sales and production volume. Mainly there are three element in cost-volume-profit analysis. It is highly essential for the management to have the complete knowledge about the inter relationship among the cost‚ volume and profit. for this purpose cost-volume-profit analysis can be regarded as a sophisticated method or analytical
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signal with financial leverage or taxes. Computing operating leverage would be easy if the proportion of fixed and variable costs could be known with certainty. Consider a stylized example: Operating leverage is computed by dividing the contribution margin (revenues less variable costs) by the operating income. In this case‚ operating leverage is 1.50 (300/200). So‚ a 10% increase in revenues should yield a 15% increase in operating income (10% * 1.5). As seen above‚ a 20% increase in sales yielded
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Variable Cost = 148+2321+40+(1372+94)*1.05 +32 = 4080.3 k Old Contribution = 9.41*750-4007 = 3050.5 k New Contribution = 8.64*1000-4080.3 = 4559.7 k Since the contribution margin is higher at 8.64$ therefore the company should decrease price. * 4. Answer 3 Profit is dependent on Total Contribution‚ because a product with higher contribution margin but lower sales won’t be able to give profits to the company. Hence‚ Actual total contribution decides profitability of the product. Thus‚ Product 101 is
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worries that the discount will hurt brand image as premium products. Furthermore‚ marketing’s consultants also think that discount has a negative impact on company’s profit. The argument between two departments focuses on the contribution margin. As a result‚ contribution margin is the key to solving the problem in this case. Approach: The consultant and sales manger use two ways to calculate the variable cost (VC). The consultant (Exhibit 1) added all the expense together‚ including direct labor
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Analyzing Flare Fragrances Co.‚ Inc. Joseph J Fortunato CR 504 Marketing Management May‚ 31‚ 2011 About Flare Fragrances: Flare Fragrances Company‚ a small women’s perfume manufacturer‚ was started in 1955. Since inception‚ Flare has grown to be the #4 player in the U.S. women’s fragrance market. For 2008 EOY estimates were $221 million dollars up 2% over 2007 sales. In 1975 Flare introduced the brand “Loveliest” which was their sole focus until 1996 when they introduced
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Bridgestone Behavioral Health Center: Cost-Volume-Profit (CVP) Analysis INTRODUCTION In June of the current year Dr. Thomas Russell‚ Executive Director‚ and Susan Smyth‚ Accountant‚ at the Bridgestone Behavioral Health Center were discussing the necessity of gaining a better understanding of how to monitor the Center’s operating and financial performance. Located in Cleveland‚ Ohio‚ Bridgestone provides prevention‚ intervention‚ and treatment services for individuals with substance abuse problems
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week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow‚ the traditional method refers to maximizing the contribution margin per unit for each product‚ and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product. Table 7.5 A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of
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