Strategic Cost Analysis

Overview of the Subject3

QUESTION 1: CVP Analysis3

Part1-- (What is the breakeven point in each quarter)3

Part2-- (Acceptance or not acceptance of government contract)4

Part34

Question 2: Multiproduct CVP analysis5

Part A5

Part b)6

Question 3: Relevant Costs/Decision Making7

Number 17

Question 4: Relevant Cost Analysis7

Question 5: Absorption vs. Variable Costing8

Part1 : Income Statement Calculation with the help of Absorption costing Method8

Part 2: Income Statement Calculation with the help of Variable costing Method8

Part 3 (Comment on the Results)9

Strategic Cost Analysis

Overview of the Subject

Managerial Accounting control is involved in the governing of the financial system. The management has a major responsibility for developing and maintaining an effective control system of accounting functions. The applications of Managerial control give an opportunity for the quality assurance and to assess the weaknesses of this operation. This provides an opportunity to find solutions related to the problems before starting the business operations. There is a need to keep running the business operations in a smooth manner. The process of analysis, implementation and design has collaboration with each other because of the system of control (Coombs et al, 2005). The effectiveness of the system is not possible when the Managerial accounting does not monitor all the procedures in a correct way. They try to ensure law and regulatory compliance which is designed in such a way to help the company comply with all the procedures. The Managerial control is also quite helpful in protecting the company from any kind of abuse and fraud, in order to make sure that all the information is acquired in an accurate and timely manner (Needles et al, 2010).

QUESTION 1: CVP Analysis

Part1-- (What is the breakeven point in each quarter)

Break event point is the point that makes the overall profit equals to zero. At breakeven point company does not incur any profit or loss. Breakeven point help companies in the determination of the sales level that is essential in recovering the incurred cost. The Formula to calculate Breakeven Point is as follow

Be Point = (p)(x) = (v)(x) + (FC) + Profit

Whereas,

p = price per unitx = number of unitsv = variable cost FC = Fixed cost

TC = Total Cost

FC = Fixed Cost

VC = Variable Cost

X = Sales Unit

Total sales units of Meals during 1st quarter = 36000 / 3.60 = 10000 meals unit

TC = FC + VC + X

Variable Cost =VC = (67000 - 49000) / (17500 - 10000)

Variable Cost =VC = 2.40 dollars per unit

Fixed Cost =FC = 67000 - (2.40 * 17500) = 25000 dollars

Break Even Point of Ford Food =BE = 20833 Units of meals

Part2-- (Acceptance or not acceptance of government contract)

Description

Government contract not accepted

Government contract Accepted

Units sold

17500

25000 (17500 + 7500)

Total revenue

63000

87000

Total variable Cost

Direct labor cost

-21000

-33000

Direct Material cost

-10500

-15000

FOH costing

-10500

-15000

Total FC

-25000

-28000

Operating Profit / Loss

-4000

-4000

Part3

Variable cost = VC = 15000 + 15000 + 30000) / 25000 = 2.52 dollars per unit of meal

We have to find X (number of meals)

6800 = 24000 +3.60 X - 18900 - 28000 - 2.52 X

6800 = 1.08 X - 22900

29700 = ...