COST ACCOUNTING:

Overview: Classifying a company?s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost-volume-profit (CVP) analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers.

For Milestone One, you will use the MDE Manufacturing Budget (Table I) to analyze costs, contribution margin, and breakeven point for the bird feeder division of

the company. In Tab 1 of your Student Workbook, classify costs as either product or period costs. Briefly explain the difference between the types of costs. Then,

analyze the actual costs and, using Tab 2 of your Student Workbook, complete a cost-volume-profit analysis to determine how many bird feeders must be sold at

the current cost and sales price level to earn a $10,000 profit and how much the sales price would have to increase to earn a $10,000 profit at the same cost and

sales volume level. Submit the Student Workbook with Tabs 1 and 2 completed with your cost calculations and a 1?2 page Word document that explains the

implications of your findings and addresses all of the critical elements in Section I.

Specifically, the following critical elements must be addressed:

I. Costs

a) Classify all product and period costs appropriately.

b) Compute a cost-volume-profit analysis. What are the implications of this analysis?

c) Compute contribution margin per unit and contribution margin ratio.

d) Determine the breakeven quantity and the breakeven revenue accurately.

e) Determine if the company is breaking even. What are cost-volume-profit analysis implications on short-term planning?

Guidelines for Submission: Your paper must be submitted using the Student Workbook to present your calculations and a 1?2 page Microsoft Word document

with double spacing, 12-point Times New Roman font, and one-inch margins to explain your findings.

* Please view the attached documents forMDE Manufacturing Budget (Table I) andStudent Workbook with Tabs 1 and 2 completed.

\fMilestone One, Part I Product Costs Period Costs Milestone One, Part II Use Table I on the MDE Manufacturing Budget to complete your calculations. Totals Budget Sales Price per Unit Variable Costs Materials - Cedar Materials - Plastic Factory Worker Labor Materials - Indirect Shipping ($2.25/ea) Sales Commissions ($2/unit sold) Variable Cost per Unit Contribution Margin Fixed Costs Factory Depreciation Factory Utilities Factory Maintenance and Repairs Office Rent Advertising Liability Insurance Office Depreciation Office Salaries Total Fixed Costs Using Budgeted Amounts Breakeven Point - Using Actual Amounts + 10,000 profit Using actual amounts + 10,000 profit 3,000 Totals Actual 2,585 Breakeven Point - Units at Current Sales Price New Contribution Margin Current Variable Costs New Sales Price Milestone Two, Part I Use Tables I through IV on the MDE Manufacturing Budget to complete your calculations. Refer to Exhibit 7-2 on page 253 of the text Budget Model Units Sold Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Costs Fixed Manuf. Overhead Total Costs Gross Margin Actual 47,000 $991,700 Flexible Budget Variance $4,700 Favorable/ Unfavorable Favorable From Flexible Budget Calculations Sheet Flexible Budget 47,000 $987,000 Sales Volume Variance ($63,000) Favorable/ Unfavorable Unfavorable Static Budget 50,000 $1,050,000 Milestone Two, Part II Use the variance supporting calculation tab to complete your calculations. Price Variance Direct Materials - Cedar Direct Materials - Plastic Direct Labor Spending Variance Variable Manufacturing Overhead Efficiency Variance Efficiency Variance Revenues Variable Costs DM-Plastic DM-Cedar Direct Manuf. Labor Variable Manuf. Overhead Total Variable Manufacturing Costs Fixed Manufacturing Overhead Total Manufacturing Costs Gross Margin Budgeted Unit Amounts $ 21.00 4.50 Actual Volume 47,000 47,000 Flexible Budget Amount $987,000 211,500 Use Tables III and IV on the MDE Manufacturing Budget to complete your calculations. Development of Price and Efficiency Variances - Calculatio Actual Feet per Unit DM-Plastic DM-Cedar Actual Labor Cost per Hour Direct Manuf. Labor Actual Costs Incurred (Actual Input Qty. Actual Price) Actual Feet per Unit Actual Units Actual Input Qty. Budgeted Pric Actual Price per Ounce Actual Units Direct Material Plastic $ $ Price Variance $ Price Variance Direct Material Cedar $ Actual Units - Actual Hours per Unit Actual Cost per Hour Actual Units Direct Manufacturing Labor $ $ Actual Costs Price Variance Actual Input Qty. Budgeted Pric Actual Costs Actual Units Variable manufacturing overhead $ $ Spending Variance e and Efficiency Variances - Calculations Actual Feet Used Actual Units Actual Labor Costs Actual Labor Hours Actual Cost Actual Units $ $ Actual Hours per Unit Budgeted Feet per Unit $ - $ - Efficiency Variance Budgeted Cost per Hour Actual Units - Budgeted Hours Budgeted Cost per per Unit Hour $ $ Budgeted Cost per Ounce Efficiency Variance $ $ Actual Units $ Actual Labor Hours per Unit Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Actual Input Qty. Budgeted Price Actual Feet per Budgeted Cost Unit per Ounce Actual Cost per Unit - Efficiency Variance Actual Input Qty. Budgeted Price Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Actual Feet per Budgeted Cost Unit per Foot $ Actual Units - Budgeted Feet per Unit $ $ Efficiency Variance - Budgeted Cost per Foot