Class_9_MGR

# Class_9_MGR - MANAGERIAL ACCOUNTING - IIE 211 CLASS 9 Korea...

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MANAGERIAL ACCOUNTING - IIE 211 CLASS 9 LECTURE NOTES 1. REVIEW CHAPTER 6 2. REVIEW CHAPTER 6 EXERCISE 4 3. HW: CHAPTER 6 EXERCISES 5 HW due CLASS 10 (TH) 1. CHAPTER 6 PROBLEM 19 2. CHAPTER 6 REVIEW PROBLEM 21 Korea U Intranet http://iie.korea.ac.kr/intranet/ Garrison Text Site www.mhhe.com/ garrison11e eBook Text Site http://ebooks.primisonline.com 1

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MANAGERIAL ACCOUNTING - IIE 211 CLASS 9 THE CONTRIBUTION APPROACH A contribution format income statement is very useful in CVP analysis  since it highlights cost behavior. EXAMPLE: Last month’s contribution income statement for Nord  Corporation, a manufacturer of exercise bicycles, follows: Total Per  Unit Percen t Sales ( 500 bikes )............ \$250,000 \$500 100% Less variable expenses. .   150,000       300       60            Contribution margin. ......   100,000 \$200   40     % Less fixed expenses. ......     80,000     Net operating income. .... \$      20,000     CONTRIBUTION MARGIN: The amount that sales (net of variable expenses) contributes toward  covering fixed expenses and then toward profits. The unit contribution margin remains constant so long as the selling price  and the unit variable cost do not change. 2
MANAGERIAL ACCOUNTING - IIE 211 CLASS 9 REVIEW Exercise 6-4  1. The following table shows the effect of the proposed change in monthly  advertising budget: Sales With Additional Current Advertising Sales Budget Difference Sales \$180,000 \$189,000 \$ 9,000  Less variable expenses. ..   126,000       132,300         6,300       Contribution margin. ......... 54,000 56,700 2,700  Less fixed expenses. .......     30,000         35,000           5,000       Net operating income. ...... \$      24,000     \$      21,700     \$(2,300 ) Assuming no other important factors need to be considered, the  increase in the advertising budget should

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## This note was uploaded on 10/09/2011 for the course ACCOUNTING 211 taught by Professor Edwardl.monsour during the Summer '07 term at Korea University.

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Class_9_MGR - MANAGERIAL ACCOUNTING - IIE 211 CLASS 9 Korea...

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