Handy’s Hats makes the world’s best hats. Information for the last eight months follows: Month Number of Hats Produced Total Cost January 4,750 5,900 February 3,150 4,850 March 2,600 4,200 April 4,800 6,125 May 6,400 7,655 June 7,350 8,575 July 5,600 7,000 August 8,550 9,555 Suppose that Handy’s expects to sell 6,000 hats during the month of September and that each hat sells for $2.75. Handy performed a least-squares regression and obtained the following results: Coefficients Intercept 1,855.99 X Variable 1 0.90 Prepare Handy’s contribution margin income statement for the month of September. (Round your answers to 2 decimal places.) HANDY'S HATS Contribution Margin Income Statement Month of September Contribution Margin Net Operating Income
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.
Handy’s Hats makes the world’s best hats. Information for the last eight months follows:
| Month | Number of Hats Produced | Total Cost |
| January | 4,750 | 5,900 |
| February | 3,150 | 4,850 |
| March | 2,600 | 4,200 |
| April | 4,800 | 6,125 |
| May | 6,400 | 7,655 |
| June | 7,350 | 8,575 |
| July | 5,600 | 7,000 |
| August | 8,550 | 9,555 |
Suppose that Handy’s expects to sell 6,000 hats during the month of September and that each hat sells for $2.75.
Handy performed a least-squares regression and obtained the following results:
| Coefficients | |
| Intercept | 1,855.99 |
| X Variable 1 | 0.90 |
Prepare Handy’s contribution margin income statement for the month of September. (Round your answers to 2 decimal places.)
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Havana Hats makes the world’s best hats. Information for the last eight months follows: Variable cost per unit
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