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Acting on Words: An Integra... Strategic and Competitive A... Introduction to Financial Ac... Managerial Accounting: Tool... Shop Now Q 13 2015 2016 1. Units of LCX1 produced and sold 1,000,000 1,150,000 2. Selling price $27 $25 3. Direct materials (square centimetres 3,000,000 2,900,000 of silicon wafers) 4. Direct material cost per square $1.40 $1.50 centimetre 5. Manufacturing processing capacity 3,750,000 3,500,000 (in square centimetres of silicon wafer) 6. Conversion costs (all manufacturing $16,050,000 $15,225,000 costs other than direct material costs) 7. Conversion cost per unit of capacity $4.28 $4.35 (Row 6+Row 5) 8. R&D employees 40 39 13 W Pg. 10 Pg. 137 Aa # 5 OF\f2015 2016 Revenue ($27 per unit x 1,000,000 units; $25 per unit x 1,150,000 units) $27,000,000 $28,750,000 Costs Direct material costs ($1.40/sq. cm. x 3,000,000 sq. cm.; $1.50/sq. cm. x 2,900,000 sq. cm.) 4,200,000 4,350,000 Conversion costs ($4.28/sq. cm. x 3,750,000 sq. cm.; $4.35/sq. cm. x 3,500,000 sq. cm.) 16,050,000 15,225,000 R&D costs ($100,000 x 40 employees; $100,000 x 39 employees) 4,000,000 3,900,000 Total costs 24,250,000 23,475,000 Operating income $ 2,750,000 $ 5,275,000 Change in operating income $2,525,000 F 13Revenue effect Actual un of product differentiation = Selling price Selling price in 2016 in 2015 x output soru component in 2016 = ($25 - $27) X 1,150,000 = $2,300,000 UCost effect of Units of input price recovery for = Input price Input price required to X in 2016 variable costs in 2015 produce 2016 output in 2015 Cost effect of price recovery for = ($1.50 per sq.cm. - $1.40 per sq.cm.) x 3,450,000 sq.cm. = $345,000 U direct materialsActual units of capacit 2013, if adequate to produce Cost effect of Price per Price per 2016 output in 2015 unit of unit of OR price recovery for = X If 2015 capacity inadequate to fixed costs capacity capacity in 2016 in 2015 produce 2016 output in 2015, units of capacity required to produce 2016 output in 2015 The cost effects of price recovery conversion and R&D fixed costs are: Conversion costs = ($4.35 per cm - $4.28 per cm ) * 3,750,000 cm = $262,500 UActual units of Cost effect of Units of input Input input used productivity for required to X price produce 2016 variable costs to produce in 2016 2016 output output in 2015 Chipset's quality and yield improvements reduced the quantity of direct materials (inputs) required to generate higher productivity in 2016 relative to 2015: Actual units of capacity in 2015, if adequate to produce Cost effect of Actual units of 2016 output in 2015 Price per OR unit of productivity for = capacity X fixed costs in 2016 If 2015 capacity inadequate capacity to produce 2016 output in 2015, in 2016 units of capacity required to produce 2016 output in 2015Conversion costs = (3,500,000 sq. cm. - 3,750,000 sq. cm.) * $4.35 per sq. cm. = $1,087,500 F R&D costs = (39 employees - 40 employees) * $100,000 per employee = $100,000 F
