Alden Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs. Month Units Sold Total Cost Month Units Sold Total Cost 1 315,500 $ 153,000 7 364,500 $ 311,084 2 160,500 96,750 8 265,500 147,250 3 260,500 201,100 9 76,900 69,500 4 200,500 95,500 10 145,500 126,125 5 285,500 197,000 11 89,500 89,500 6 185,500 107,500 12 95,500 86,150 Problem 21-2A Part 2 2. Predict future total costs when sales volume is (a) 371,000 units and (b) 411,000 units.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Problem 21-2A Cost behavior estimation LO P1
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[The following information applies to the questions displayed below.]
Alden Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs.
| Month | Units Sold | Total Cost | Month | Units Sold | Total Cost | |||||||||||||||
| 1 | 315,500 | $ | 153,000 | 7 | 364,500 | $ | 311,084 | |||||||||||||
| 2 | 160,500 | 96,750 | 8 | 265,500 | 147,250 | |||||||||||||||
| 3 | 260,500 | 201,100 | 9 | 76,900 | 69,500 | |||||||||||||||
| 4 | 200,500 | 95,500 | 10 | 145,500 | 126,125 | |||||||||||||||
| 5 | 285,500 | 197,000 | 11 | 89,500 | 89,500 | |||||||||||||||
| 6 | 185,500 | 107,500 | 12 | 95,500 | 86,150 | |||||||||||||||
Problem 21-2A Part 2
2. Predict future total costs when sales volume is (a) 371,000 units and (b) 411,000 units.
![Required information
Problem 21-2A Cost behavior estimation LO P1
[The following information applies to the questions displayed below.]
Alden Co's monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to
use these data to predict future fixed and variable costs.
Month
Units Sold
Total Cost
Month
Units Sold
Total Cost
315,500
160,500
260,500
200,500
$153,000
96,750
201,100
1
7
$311,084
364,500
265,500
76,900
145,500
89,500
95,500
2
8
147,250
69,500
126,125
89,500
86,150
3
95,500
197,000
107,500
4
10
285,500
185,500
5
11
12
Problem 21-2A Part 2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F473e532b-e44d-41cf-9bcf-3ab918aca620%2Fed9764b7-93ac-4521-b8bf-9f2507bb6563%2Fdtrl6_processed.png&w=3840&q=75)
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