MBA Program

Accounting for Managerial Decisions

Spring 2018-2019

Dr. Mohamed Salem

Assignment no: 2
Date: 5th of March 2019

Student list no. Student Name: ID:

(7) Ahlam Hossein Dehghan U18102943

(8) Mohammed saleem qadi U18102979

( 10 ) Noor Ali Elabed U18103055

( 17 ) Safieh Fayiz Hasan U18103249

Exercise 2-5:
Classify each cost as being variable or fixed with respect to the number of units of products or
services sold by the organization by placing an x in the appropriate column.

Cost Behavior

Cost ( Measure of Activity ) Variable Fixed

1. The cost of small glass plates used for lab tests in a hospital X
(number of lab tests performed).

2. A boutique jewelry store's cost of leasing retail space in a X

mall (Dollar sales).

3. Top management salaries at FedEx (Total sales). X

4. Electrical costs of running production equipment at a X
Toyota factory (Number of vehicles produced).

5. The cost of insuring a dentist's office against fire (Patient- X

visits)

6. The cost of commissions paid to salespersons at a Honda X

dealer (Total sales)

7. The cost of heating the intensive care unit at Swedish X

Hospital (Patient-days).

8. The cost of batteries installed in trucks produced at a GM X

factory (Number of trucks produced)

9. The salary of a university professor (Number of students X

taught by the professor)

10. The costs of cleaning supplies used at a fast-food restaurant X

to clean the kitchen and dining areas at the end of the day
(Number of customers served).
 MBA Program
Accounting for Managerial Decisions
Spring 2018-2019

Dr. Mohamed Salem

Assignment no: 3
Date: 5th of March 2019

Student list no. Student Name: ID:

(7) Ahlam Hossein Dehghan U18102943

(8) Mohammed saleem qadi U18102979

( 10 ) Noor Ali Elabed U18103055

( 17 ) Safieh Fayiz Hasan U18103249

PROBLEM 2-23 High-Low Method: Contribution Format Income Statement: [L04, LO5]

Required:

1. Using the high-low method, estimate a cost formula for shipping expense.
2. In the first quarter of Year 3, the company plans to sell 21,000 units at a selling price of $5o per
unit. Prepare a contribution format income statement for the quarter.

Answer:

1. Budgeted Income statement for the first quarter of year 3 :

Y= ax+b
b= (high cost of activity – low cost of activity)\ (high activity level – low activity level)
= (y2-y1)\(x2-x1)
B= (232,000 – 160,000)\ (25000-16000) = 8 per unit.
Fixed cost = total cost – total variable cost
Fixed cost = 232,000 – (8*25000)
Fixed cost = 32,000
Y=32000+8X

2. Contribution Income statement

Sales . . . . . . . . . . . . . . . . . . . . . . . . 21,000 *50=1,050,000

Variable expenses:

Cost of goods sold . . . . . . . . . . . . 21,000*20=420,000

Sales commission . . . . . . . . . . . . . 5%*1,050,000=52500

Shipping expense . . . . . . . . . . . . . . 21,000*8=168,000

Total variable expense . . . . . . . . . . 640,500

Contribution margin . . . . . . . . . . . . . . 409,500

Fixed expenses:

Advertising cost . . . . . . . . . . . . . 170,000

Administration salaries . . . . . . . . 80,000

Shipping expense . . . . . . . . . . . . . 32,000

Depreciation expense . . . . . . . . . . . 50,000

Total fixed cost . . . . . . . . . . . . . . . . . 332,000

Net Income . . . . . . . . . . . . . . . . . . . . . 77,500