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Budgeted Costs and Contribution Margin Analysis

Joan Hill, President of Hill & Hill Pens, was looking forward to receiving the company’s second quarter income statement. She knew that the sales budget of 20,000 units sold had been met during the second quarter and that this was an increase of 25% over the first quarter sales units. She was happy about the increase in sales, since Hill & Hill Pens was about to approach its bank for additional loan money for expansion purposes. She anticipated the strong second-quarter results would be a rea

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13 views7 pages

Budgeted Costs and Contribution Margin Analysis

Joan Hill, President of Hill & Hill Pens, was looking forward to receiving the company’s second quarter income statement. She knew that the sales budget of 20,000 units sold had been met during the second quarter and that this was an increase of 25% over the first quarter sales units. She was happy about the increase in sales, since Hill & Hill Pens was about to approach its bank for additional loan money for expansion purposes. She anticipated the strong second-quarter results would be a rea

Uploaded by

haafi
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Budgeted quantity (Units) 20,000

Budgeted/Standard costs Per unit Total


Direct materials $32.00 $640,000.00
2 meteres * $16 per meter
Direct labour $30.00 $600,000.00
2 hours at $15 per hour
Variable overhead
2 hours at $9 per hour $18.00 $360,000.00

Total budgeted variable cost per unit $80.00 $1,600,000.00

Fixed overheads
2 hours at $23 per hour $46.00
(Applied rate - Budgeted)

Total cost per unit - Budgeted $126.00

Budgeted usage Usage Budgeted cost


Direct materials (meters) 40,000 $640,000.00
20,000 units × 2 meteres per unit
Direct labour (Hours) 40,000
20,000 units × 2 hours per unit
Actual quantity of materials

Material price variance


(AQ × AP) (AQ × SP) Variance
775 800 25

Material efficiency variance


(AQ × SP) - Standard allowed for actual (SQ × SP)
608 640 32
Favorable

Unfavorable
Hill & Hill Pens
Contribution margin income statements
For the First Two Quarters
First Quarter Second Quarter Hello,
Units sold 16,000 20,000
Sales price per unit ($) 100.00 100.00 Given the current delay in resp
Sales 1,600,000.00 2,000,000.00 you may contact me via www.s
Less: Variable costs because i am readily available
Manufacturing
($30 × units sold) (480,000.00) (600,000.00) If you would like, please registe
Selling and admin. My user name is "Haafi".
($5 × units sold) (80,000.00) (100,000.00) You may contact me quickly thr
Total variable costs (560,000.00) (700,000.00) You may also visit the following
[Link]
Contribution margin 1,040,000.00 1,300,000.00
It also enables you to get your
Fixed Costs
Manufacturing (800,000.00) (800,000.00) I look forward to talk with you
Selling and admin. (230,000.00) (230,000.00)
Total fixed costs (1,030,000.00) (1,030,000.00) Thank you.
Aown
Operating income 10,000.00 270,000.00

Working notes:
(W-1) Sales price 1st Quarter 2nd Quarter
Sales revenue ($) 1,600,000.00 2,000,000.00
Actual units sold 16,000 20,000
Sales price ($ Per unit) 100.00 100.00

(W-2) Closing inventory 1st Quarter 2nd Quarter


Units
Opening inventory 3,000 7,000
Purchases / COGM 20,000 14,000
Closing inventory (7,000) (1,000)
Sales (W-1) 16,000 20,000

(W-3) Cost per unit (Absorption Amount ($) Units $ Per unit
Beginning inventory 210,000 3000 70.00
COGM 1,400,000 20000 70.00
Closing inventory 490,000 7000 70.00

Absorption cost per unit 70.00


Represented by:
Variable manufacturing cost per 30.00
Fixed manufacturing cost per uni 40.00
Total 70.00
Given the current delay in responding to your queries
you may contact me via [Link] to get in touch with me quickly
because i am readily available on the above site.

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My user name is "Haafi".
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It also enables you to get your work done in a relatively low cost.

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Thank you.
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