sol_q13_23 - Exercise 13-23. Strategic analysis of...

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Exercise 13-23. Strategic analysis of operating income 1. Operating income for each year is as follows: 2008 2009 Revenue ($40,000 × 200; $42,000 × 210) $8,000,000 $8,820,000 Costs Direct materials costs ($8 × 300,000; $8.50 × 310,000) 2,400,000 2,635,000 Manufacturing conversion costs* ($8,000 × 250; 8,100 × 250) 2,000,000 2,025,000 Selling & customer service costs ($10,000 × 100; $9,900 × 95) 1,000,000 940,500 Design costs ($100,000 × 12; $101,000 × 12) 1,200,000 1,212,000 Total costs 6,600,000 6,812,500 Operating income $1,400,000 $2,007,500 Change in operating income $607,500 F * conversion costs are all manufacturing costs except direct materials (i.e., conversion costs consist of direct labor and fixed and variable manufacturing overhead). 2. The Growth Component Revenue effect of growth = Actual units of Actual units of Selling output sold output sold price in 2009 in 2008 in 2008 - × = (210 - 200) × $40,000 = $400,000 F Units of input required Actual units of Cost effect Input to produce inputs of growth price 2009 output used to produce for variable costs in 2008 in 2008 2008 output = - × Cost effect of growth for fixed costs = Actual units of capacity in 2008 if adequate to produce 2009 output in 2008
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This note was uploaded on 04/28/2011 for the course ACCOUNTING 2521 taught by Professor Byzalov during the Spring '11 term at Temple.

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sol_q13_23 - Exercise 13-23. Strategic analysis of...

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