Drake Company produces a single product. Last year's income statement is as follows: Sales (23,000 units) Less: Variable costs $1,384,600 938,400 Contribution margin $ 446,200 Less: Fixed costs 258,500 Operating income S 187,700 Required: 1. Compute the break-even point in a) units and b) sales revenue. (In your computations, round the contribution margin per unit to the nearest cent and round the contribution margin ratio to four decimal places. Round your final answers to the nearest whole unit or dollar.) 2. What was the margin of safety in dollars for Drake Company last year? (Round your final answer to the nearest whole dollar.) 3. Suppose that Drake Company is considering an investment in new technology that will increase fixed costs by $227,800 per year, but will lower variable costs to 48 percent of sales. Units sold will remain unchanged. a) Prepare a budgeted income statement assuming Drake makes this investment. (Round all amounts to the nearest dollar.) b) What is the new break- even point in units, assuming the investment is made? (In your computations, round the unit contribution margin to the nearest cent. Round your final answer to the nearest whole unit.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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