Unformatted text preview: f the Contribution (CM) Format
Th
The CM income statement format is used as an
internal planning and decision making tool. Uses
of this approach include:
1. CVP analysis
2. Budgeting
3. Segmented reporting of profit data
4. Special decisions such as pricing and makeorbuy analysis
15 Contribution (CM) Format Used primarily for
external reporting. Used primarily by
management.
16 Mixed Costs
The
The total mixed cost line can be expressed
as an equation: Y = a + bX
Where: Y = the total mixed cost
a = the total FC (the Y intercept) Y
Total Utility Cost b = the VC per unit of activity
(the slope of the line)
X = the level of activity Variable
Cost per KW
KW X
Activity (Kilowatt Hours) Fixed Monthly
Utility Charge
17 Mixed Costs Example
If your fixed monthly utility charge is $40, your VC is $0.03 per kwh,
and your monthly activity level is 2,000 kwh, what is the amount of
kwh,
your utility bill? Y = a + bX
Y = $40 + ($0.03 × 2,000)
Y = $100 18 Scattergraph Method Maintenance Cost
1,000’s of Dollars Use one data point to estimate the total level of activity
and
and the total cost.
Y Total maintenance cost = $11,000
20 **
** 10 * ** *
** Intercept = FC: $10,000 0 0 1 2 3 4 X Patientdays in 1,000’s
Patient days = 800
19 Scattergraph Method
Make a quick estimate of VC per unit and determine the
cost
cost equation.
Total
Total maintenance at 800 patients
Less: Fixed cost
Estimated total variable cost for 800 patients VC per unit = $1,000
800 $ 11,000
10,000
$ 1,000 = $1.25/patientday Y = $10,000 + $1.25X
Total maintenance cost Number of patient days...
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 Spring '08
 Fagan,K
 Cost Accounting, VC Per Unit Example

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