Chapter_8_Part_C_Notes

Chapter_8_Part_C_Notes - Hill Computers Inc Segmented...

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Hill Computers Inc. Segmented Income Statement For the Coming Year Consumer Small Business Computers Computers Total Sales $ 62,400,000 $ 276,000,000 $ 338,400,000 Variable cost of goods sold (56,000,000) (259,800,000) (315,800,000) Variable selling expense (6,000,000 ) (8,400,000 ) (14,400,000 ) Contribution margin $ 400,000 $ 7,800,000 $ 8,200,000 Less direct fixed expenses: Direct fixed overhead (120,000 ) (200,000 ) (320,000 ) Segment margin $ 280,000 $ 7,600,000 $ 7,880,000 Less common fixed expenses: Common fixed overhead (700,000) Common selling and administrative (3,460,000 ) Operating income $ 3,720,000
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Order Quantity and Total Ordering and Carrying Costs The order quantity used should minimize the total cost of ordering and carrying inventory. Total inventory-related costs = Ordering cost + Carrying cost = PD / Q + CQ /2 where P = the cost of placing and receiving an order (or the setup cost for a production run) D = the known annual demand Q = quantity (the number of units ordered each time an order
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Chapter_8_Part_C_Notes - Hill Computers Inc Segmented...

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