Westinghouse Company manufactures major appliances. Because of growing interest in its product, it has just had its most successful year. In preparing the Chapter 2 Cost - Concepts and C!assification Concepts and C!assification Given the following facts, complete the requirements below: 41 Problem 8 Westinghouse Company manufactures major appliances. VOLUME IN MACH. HRS. ELECTRICITY COST MONTH JULY AUGUST SEPTEMBER ОСТОВER NOVEMBER DECEMBER 6-MONTH TOTAL 6,000 5,000 4,500 4,000 P 60,000 53,000 49,500 46,000 42,500 39,000 P290,000 3.500 3,000 26.000 Using the high-low method compute 1 The variable cost per machine hour 2 The monthly fixed electricity costs 3 The total electricity costs if 4,800 machine hours are projected to be used next month
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.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
