Managerial Accounting And Control Dr. Mohamed Youssef Lecture 3 Example:

Managerial Accounting and control Dr. Mohamed Youssef Lecture 3 Example: X Sales Mix USP UVC UCM

Y 1 20 (18) 2

3 15 (6) 9

CM per package = 2+3 x9 = 29 WACM = 29/4 = 7.25 BEP IN UNIT = F.C /WACM =2900/7.25 So in Sales Mix BEP IN UNIT BEP IN $

= F.C /WACM = F.C /WACM %

Q = (F.C+[ TNI/(1-INCOME TAX)])/UCM Example: D Sales Mix F.C USP UVC UCM

S 15000 300,000 20 (14) 6

5000 900,000 18 (6) 12

CM = 6 X 15000+12 X 5000 = 90000+60000=150,000 F.C = 300,000+900,000= 1,200,000 WACM = 150,000 / 20000=7.5 BEP IN UNIT = F.C /CM =1.200.000 / 7.5=160,000 D = 160,000 X (3 /4) S = 160,000 X (1 /4)

Example:

= 120,000 = 40,000

sales (12,000 units) per Month

Direct Material used Direct Manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Variable nonmanufacturing overhead Fixed nonmanufacturing overhead Total costs Chapter 2 & 5

$32 20 15 6 3 4 80 1

Managerial Accounting and control Dr. Mohamed Youssef Lecture 3 Compute 1) Fixed manufacturing overhead per unit for monthly production level of 10,000 Fixed manufacturing / unit= 6 Fixed manufacturing / unit in 10,000= 6 x 12000/10000 = 7.2 2) Total manufacturing and non manufacturing costs during month when 9000 units are produced and 8000 units are sold Total Manufacturing variable cost / unit= 32+20+15 = 67 Total Manufacturing fixed cost / unit =6 Total nonManufacturing variable cost / =3 Total nonManufacturing fixed cost / unit =4 For fixed non manufacturing cost = 4 x 12000 = 48000 For fixed manufacturing cost = 6 x 12000 = 72000 For variable manufacturing cost = 67x 9000 = 603000 For variable non manufacturing cost = 3 x 8000 = 24000 Total manufacturing cost = 72000+603000 =675000 Total non manufacturing cost = 48000+24000 =72000 Example: Variable manufacturing costes Direct Material Direct Manufacturing labor Manufacturing overhead Fixed manufacturing overhead Total costs uc F.C. F. / u V.c/ u

40000 37,80 600000 15 22,80

$600,000 500,000 40,000 600,000 1,740,000 50000 34,80 600000 12 22,80

60000 32,80 600000 10 22,80

. Q = total variable cost / unit variable cost = 600,000+500,000+40,000/22,80 = 50000

Chapter 2 & 5

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Managerial Accounting and control Dr. Mohamed Youssef Lecture 3

Chapter 5: Relevant Information and Decision Making: Market Decisions. Relevant information:

Is the predicted future costs and revenues that will differ among the alternatives.

Irrelevant information:

Is the predicted future costs and revenues not changed among the alternatives. Note: To predict the future and to make our design we must ignore the irrelevant in formations.

Part 1 : reject or accept a special order Example: A1 F.C V.C

A2 5000 1550

5000 3900

irrelevant relevant

Note: And we must use one of the prediction method like ( high low ,BEP,C/V/P,ARR,NPV ….) Example:

Design to accept or reject special order

Income statement Sales (1000x $20) Less: V.C (1000x $9) CM Less: F.C. Less: admin (V.c+F.c) (500+700) Operating income

20000 (9000) 11000 (5000) (1200) 6000

So if we have special order with 500 units with usp 12 $ so shall we accept? If usp > Manufacturing variable cost per unit accept this order If usp < Manufacturing variable cost per unit reject this order

Chapter 2 & 5

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Managerial Accounting and control Dr. Mohamed Youssef Lecture 3

The Decision Process (B)

(A) 1 Historical Information Historical Information

Other Information Other Information

2

Predictions as Inputs to Decision Model

Prediction Method Prediction Method

Decisions by Managers

3 Decision Model Decision Model

with Aid of Decision Model

4 Implementation and Evaluation Implementation and Evaluation

Feedback

Chapter 2 & 5

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