Question

How the costing concepts would apply to a service organi TANINU 1 TUL LAPA TUW mie costing concert manager in a service organization handle material costs? vice organization. How ps to decorators and consumen October $39.000 20.800 220-2B Deco-Lampz Ltd. is a small company that sells decorative lamps to de company's income statements for the last three months are shown below: August September Sales in units 200 300 Sales revenue $30,000 $45,000 Cost of goods sold 16,000 24,000 Gross profit 14,000 21,000 Operating expenses Salaries and wages expense 5,900 6,350 Depreciation expenses 580 580 Shipping expense 1,400 2,100 Office expense 120 170 Total operating expenses 8,000 9,200 Income from operation $ 6,000 $11,800 18,200 6,170 581 1,820 $ 9,480 Instructions (a) Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed (b) Calculate the cost per unit for each of the variable expenses. (c) Using the high-low method, determine the variable cost per unit and the fixed cost component for each mixed costs. anagement has projected that the sales volume in November will increase to 400 lamps. Using the formation determined above, prepare a CVP income statement up to income from operato (Show expense items individually.) nent up to income from operations for November P20-3B Clearwater Corporation produces LC tod1 water Corporation produces LOKAL, a fruit drink. The beverage is sold for 50 cc for 50 cents per 500-ml boale the fol

Answer 1

a.

cost of goods sold	variable
salaries and wages expense	mixed cost
depreciation expense	fixed cost
shipping expense	variable cost
office expense	mixed cost

b.

	cost per unit
cost of goods sold ($16,000/200)	$80
shipping expense ($1400/200)	$7

c.

	fixed component	variable component
salaries and wages expense	$5000	$4.50
office expense	$20	$0.50

working:

salaries and wages expense:

variable portion = ($6350 - $5900) / (300-200)

=>$4.50. per unit

fixed portion:

consider august expense.

5900 = ($4.50 *200 units) + fixed portion

=>fixed portion= 5900-900=>5000.

office expense:

variable poriton = (170-120) / (300-100)

=>$0.50 per unit

fixed portion :

consider august expense:

120 = ($0.50*200 units) +fixed portion

=>fixed portion =>120-100

=>$20.

d.

CVP income stament for november:

sales in units	400
sales revenue ($30,000/200*400)	$60,000
less: cost of goods sold ($80 per unit *400)	(32,000)
Gross profit	$28,000
operating expenses
salaries and wages expense (5000 + ($4.5*400))	(6,800)
depreciation expenses	(580)
shipping expense ($7 *400)	(2800)
office expense ($20 + ($0.50*400))	(220)
total operating expenses	(10,400)
income from operation	$17,600