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    Stbdecisions

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    The document discusses three objectives for a class on managerial accounting: 1) Applying CVP analysis when a firm produces multiple products, 2) Filling idle capacity, and 3) Rationing scarce capacity. It then presents two problems. The first problem provides cost data for a yogurt shop over four years and asks to determine the shop's cost structure and estimate profitability of increasing demand. The second problem provides budget data for a company that produces two laptop models and has excess production capacity. It asks to evaluate proposals to increase demand.

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    Stbdecisions

    Uploaded by

    RoshanPanicker
    30 views9 pages
    The document discusses three objectives for a class on managerial accounting: 1) Applying CVP analysis when a firm produces multiple products, 2) Filling idle capacity, and 3) Rationing scarce capacity. It then presents two problems. The first problem provides cost data for a yogurt shop over four years and asks to determine the shop's cost structure and estimate profitability of increasing demand. The second problem provides budget data for a company that produces two laptop models and has excess production capacity. It asks to evaluate proposals to increase demand.

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    stbdecisions

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    The document discusses three objectives for a class on managerial accounting: 1) Applying CVP analysis when a firm produces multiple products, 2) Filling idle capacity, and 3) Rationing scarce capacity. It then presents two problems. The first problem provides cost data for a yogurt shop over four years and asks to determine the shop's cost structure and estimate profitability of increasing demand. The second problem provides budget data for a company that produces two laptop models and has excess production capacity. It asks to evaluate proposals to increase demand.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    30 views9 pages

    Stbdecisions

    Uploaded by

    RoshanPanicker
    The document discusses three objectives for a class on managerial accounting: 1) Applying CVP analysis when a firm produces multiple products, 2) Filling idle capacity, and 3) Rationing scarce capacity. It then presents two problems. The first problem provides cost data for a yogurt shop over four years and asks to determine the shop's cost structure and estimate profitability of increasing demand. The second problem provides budget data for a company that produces two laptop models and has excess production capacity. It asks to evaluate proposals to increase demand.

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    of 9

    Hao

    Xue

    Managerial Accounting

    2016 Spring

    Decision Making in the Short-Term


    Class handout
    Class Objectives: We continue our journey on the examination of how the managerial accounting
    information can help facilitate short-term decision making. Assuming our capacity (the
    maximum value of an activity a company can sustain with available resources) is fixed, we are
    going to learn
    (1) how to apply CVP analysis when the firm produce multiple products
    (2) how to fill in capacity when it is idle.
    (3) how to ration capacity when it is scarce.


    Problem 1
    The Trend Yogurt Shoppe is entering its fifth year of operation. After overcoming several minor
    difficulties in both the production and marketing of its product during the initial year of operation, the
    shops situation has been steadily improving. However, the shop has the capacity to produce and sell
    75,000 cups of yogurt a year, but only sold 32,000 cups in 2013 at a price of $3 a cup. In 2014, keeping
    the price at $3 a cup, sales are projected to be 36,000 cups.
    While Trends management tracks the cups of yogurt sold and total costs incurred each month, they are
    woefully unaware of which costs do and do not vary with the cups of yogurt sold (i.e., which costs are
    fixed and which costs are variable). Trends management is hoping that you can figure out their cost
    structure and estimate the profitability of their proposed plan to increase demand. To this end, they
    have provided you with the following data for the first 4 years of operations:

    Year

    Cups of Yogurt Sold

    Total Costs

    2010

    8,000

    $60,000

    2011

    20,000

    $67,500

    2012

    22,000

    $73,500

    2013

    32,000

    $103,500


    ***Requirements are on the next three pages***

    Hao Xue

    Managerial Accounting

    2016 Spring


    Problem 2
    LearningWare manufactures and distributes laptop computers. The company primarily markets its products to elementary,
    middle, and high schools and their students around the country. LearningWare manufactures two models, the Standard and
    Deluxe Laptop. The company uses the same production machinery to manufacture both of these laptops.
    The company manufactures these two models to meet customer specifications and therefore does not keep an inventory of
    completed laptops.
    The projected 2014 annual data (budget) for LearningWare is found below.
    Standard

    Deluxe

    30,000

    20,000

    $220.00

    $330.00

    Direct Material per unit

    $50.00

    $90.00

    Direct labor per unit

    $50.00

    $70.00

    Variable mfg. overhead per unit @ $12 per Machine Hour

    $36.00

    $60.00

    Projected Sales volume


    Price per unit

    Machine Hours Total Capacity

    Totals

    230,000 Hours

    Machine Hours Per Unit


    Machine Total Hours (at projected sales)

    3 Hours

    5 Hours

    90,000 Hours

    100,000 Hours

    Machine Hours Projected Excess Capacity

    Fixed Manufacturing overhead

    40,000 Hours

    $900,000

    Selling and Administrative Costs (All Fixed)

    190,000 Hours

    $1,000,000

    $1,900,000
    $1,000,000

    Noticing that LearningWare is projected to have excess capacity in 2014 (assume machine hours
    is the only production constraint), management is considering several proposals to increase
    demand. Management will implement at most one of the proposals described in parts A through
    C on the pages that follow. Thus, evaluate each proposal independently.

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