They also had to decide whether to lower the price of their product 101 to match Sampra's price. Case questions: 1) Warner's decision to continue manufacturing of product 103 was reasonable and appropriate...

This should mean substantial losses to the bottom line. However, Berkshire must take into account the forecasting for the entire period. If projections are sound then as Table 2 shows, production of an additional 750,000 units at the current unit sales price would essentially cancel out the increase in forecasted operating income for the first half of 1974...

Examples are taxes, administration and security costs. Variable costs – Variable costs are costs that change with the volume of output. The cost of materials and labor are examples...

COST OF GOODS MANUFACTURED SCHEDULE Direct Materials: Raw Materials Inventory _______ Add: Purchases of raw materials _______ Raw Materials Available for Use _______ Deduct: Raw Materials Inventory _______ Raw Materials ________ Direct Labor ________ Manufacturing Overhead: Rent on Facilities ________ Insurance ________ Indirect Labor ________ Utilities ________ Maintenance, factory ________ Depreciation, factory ________ Total Overhead Costs ________ Total Manufacturing Costs ________ Work in process inventory ________ Deduct: Work in process inventory ________ Cost of Goods Manufactured ________ COST OF GOODS SOLD Beginning Finished Goods Inventory ________ Add: Cost of Goods Manufactured ________ Cost of Goods Available for Sale ________ Deduct: Finished Goods Inventory, ________ Cost of Goods Sold ________ INCOME STATEMENT Sales ________ Less: Cost of Goods Sold _______ Gross Margin ________ Less: Administrative Expenses _______ Less: Selling Expenses _______ Net Operating Income ________ ******************************************************************************************************* JOINT PRODUCT COSTING Units Price Total Product A (# of Units) x Unit Price = $$$ Product B Total Revenue, if processed further Less: Additional Opportunity Costs ($$$) Total Cost of Processing Net Disadvantage of Processing _______________________________________ Alternative Method: Revenue if processed further $$$$ Revenue if Sold As Is -($$$) Incremental Revenue Incremental Cost of Processing -($$$) Incremental Disadvantage $$$$ MAKE/BUY DECISION Make Buy (Seller Offering Goods) Direct Materials Direct Labor Variable Overhead (% x #) Total Cost to Make Cost To Buy Cost Saving ****************************************************************************************************** FLEXIBLE BUDGETING Original Budget Actual Costs Direct Materials Direct Labor Variable Overhead Fixed Overhead Total (Note: Divide Units by each of the above to get Unit Price) Cost Formula: Total Cost = Variable Cost + Fixed Cost (SP x SQ) (AQ x SP) (AQ x AP) (2-3) Original Budget Flexed Budget Actual (Units) (Units) Cost Variance Item (Always Given) (Always Given) (Price divided by Units = Unit Price) (Note: Subtract Flexed Budget # from Actual # to get Variance) CONTRIBUTION MARGIN INCOME STATEMENT Sales (Unit Price x Units Sold) ____________ Variable Costs: Manufacturing (Unit Cost x Units Sold) _________ Selling and Administrative (Unit Cost x Units Sold) ________ ____________ Contribution Margin ____________ Fixed Costs Manufacturing ________ Selling and Administrative ________ ____________ Operating Income ____________ (TRADITIONAL) Sales __________ Cost of Goods Sold Variable: ________ Fixed ________ __________ Gross Profit __________ Selling and Administrative Expenses Variable _______ Fixed _______ __________ Operating Income __________ NET PRESENT VALUE FOR LEASE/BUY METHODS Note: Annual Cash Inflows: (use 14C-4 table) Single Years: (Use 14C-3 table) Item Year Amt of Cash Flows PV Factor PV of Cash Flows (NOW) ($$$) (%) ($$$$) (Note: NOW values are always in deficit) ********************************************************************************************************* MACRS and NET PRESENT VALUE (NET PRESENT VALUE) (1) (2) ITEM YEARS AMOUNT TAX EFFECT CASH FLOWS PV FACTOR PRESENT VALUE (1 ? TAX RATE) (1 X 2) MACRS TABLE COST OF EQUIPMENT MACRS% DEP...