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Mendel Paper Company

BUS 630 Managerial Accounting

Erik Ortega

November 28, 2015

Introduction

This paper will discuss the Mendel Paper company and their concern regarding their four basic paper product lines. I will be showing the cost and price data for the next fiscal quarter and will include the contribution margins per unit as well as the revisions. In the paper, I will also include a break-even point for the given sales mix along with the margin of safety for the estimated sales volume. Finally, I will be commenting on Herbert’s concern about the variable cost of the pace mats.

Original Estimated Contribution Margins (Part 1)

* Computer Paper has 6 units per hour at a $9.00 variable overhead per hour

* Napkins has 10 units per hour at a $6.00 variable overhead per hour

* Place mats has 5 units per hour at a $12.00 variable overhead per hour

* Poster board has 4 units per hour at $8.00 variable overhead per hour

Below is the breakdown:

Computer paper, Napkins, Place Mats, Poster Board

Volume: 30,000, 120,000, 45,000, 80,000

Selling Price: $14, $7, $12, $8.50

Material Cost: $6, $4.50, $3.60, $2.50

Variable overheads: $9, $6, $12, $8

Variable Overhead per unit: 1.5, 0.6, 2.4, 2

Total Sales: $420,000, $840,000, $540,000, $680,000 $2,480,000

Material Cost: $180,000, $540,000, $162,000, $200,000

Variable Overheads: $45,000, $72,000, $108,000, $6,000

Calculations

In order to get the variable overhead per unit is to divide the variable overheads by the units per hour. With the total sales of each item, you must multiply the volume and the selling price. For example: Computer paper is 3,000 x 14 which gives you $420,000. To get the material cost, you must multiply the volume and the material cost of every item such as: computer papter is 3,000 x 6 which gives you $180,000. Finally, to get the variable overheads, you would need to ly the variable overheads per unit by the volume. For example:...