ch12-AFM102s2012

Sales 5000 units 40 per unit less variable expenses

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Unformatted text preview: nits @ $40 per unit) Less variable expenses: Direct materials (5,000 units @ $14 per unit) Direct labour (5,000 units @ $8 and $5 per unit) Variable overhead (5,000 units @ $2 per unit) Total variable expenses Contribution margin Less fixed expense: Other Rent on new machine Total fixed expenses Operating income Current Situation $ 200,000 Situation W ith New Machine $ 200,000 Differential Costs and Benefits - 70,000 40,000 10,000 120,000 80,000 70,000 25,000 10,000 105,000 95,000 15,000 15,000 62,000 3,000 65,000 30,000 (3,000) (3,000) 12,000 We can efficiently analyze the decision by 62,000 looking at the different costs and revenues62,000 $ 18,000 and arrive at the same solution. Net Advantage to Renting the New Machine Decrease in direct labour costs (5,000 units @ $3 per unit) Increase in fixed rental expenses Net annual cost saving from renting the new machine Managerial Accounting $ $ 15,000 (3,000) 12,000 $ 12-6 Total and Differential Cost Approaches Using the differential approach is desirable for two reasons: 1. Only rarely will enough inform...
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This test prep was uploaded on 04/09/2014 for the course AFM 102 at Waterloo.

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