Contribution and Fixed and Variable Costs in Manufacturing Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor. Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment Manufacturing costs are costs that are directly incurred in connection with manufacture of goods. Examples are Direct materials and Manufacturing Overhead Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization. Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs. In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus. Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales. Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs. To Compute: Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Provide answer

Bright Manufacturing produces a product that requires 4.2 hours of labor per unit. The standard cost of labor is $6.50 per hour. However, the actual labor used was 4.0 hours per unit, and the actual cost of labor was $6.40 per hour. Bright Manufacturing produced 1,200 units during the period.** Calculate the labor price variance.

I need correct solution general accounting question

Answer 2

Question

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Answer 6

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

Answer 7

Chapter 6, Problem 5AE

5.

a)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Breakeven point, Margin of Safety and Operating Leverage after changing inputs of Sales, Selling Price Per unit, Variable and fixed expenses.

Answer 8

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Answer 9

5.

b)

To determine

Concept Introduction:

Contribution and Fixed and Variable Costs in Manufacturing

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced.

Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced.

Examples are costs of factory rent, depreciation on plant and equipment

Manufacturing costs are costs that are directly incurred in connection with manufacture of goods.

Examples are Direct materials and Manufacturing Overhead

Contribution is the difference between the Sales revenue and the Variable cost per unit. This is an indicator of the contribution of the goods manufactured to the profit and bottom line of the organization.

Breakeven point represents that level of sales in units and in dollars, where the contribution would equal the fixed costs.

In other words, there would no profit, no loss and no operating income, since the contribution would be sufficient only to cover the fixed costs, thus leaving no surplus.

Margin of Safety represents that portion of the sales over the breakeven point, that acts as a buffer to protect the company’s revenue, in the event that there is a drop in the sales.

Operating Leverage is the degree to which the contribution and net operating income are related and represents the relation between the Sales and Variable costs.

To Compute:

Changes in Operating leverage due to reduction in selling price

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 6.A - The Cheyenne Hotel in Big Sky, Montana, has...Ch. 6.A - Least-Squares Regression LOS11 Bargain Rental Car...Ch. 6.A - Prob. 3E Ch. 6.A - Archer Company is a wholesaler of custom-built...Ch. 6.A - George Caloz&Freres, located in Grenchen,...Ch. 6.A - Least-Square. Regression; Scattergraph; Comparison...Ch. 6.A - Cost Behaviour; High4æw Method; Contribution...Ch. 6.A - Nova Company’s total overhead cost at various...Ch. 6.A - High-Low Method; Contribution Format Income...Ch. 6.A - Least-Squares Regression Method; Scattergraph;...

Solution Summary: The author explains the concepts of contribution and fixed and variable costs in manufacturing, and breakseven point, Margin of Safety and Operating Leverage.

Want to see the full answer?

Chapter 6 Solutions