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Assignment Questions

Budgeting in Managerial Accounting

: Module 5 ? SLP Managerial Accounting – Budgeting

Differential analysis involves knowing which costs are relevant, i.e. future costs that vary among alternatives. It is important to know what information to use and not just how to execute the analysis.
Lewis Company (accounting information provided in the prior module- located at the bottom of this paper) receives an offer to make a new product, called C, for a new customer. The customer wants to buy 1,100 units. Product C has the same cost structure as product B with three exceptions. The new customer is only willing to pay $245 per unit, direct materials costs will decrease by $15 per unit and Lewis does not have to incur any variable selling and administrative expenses.
Required
? Make a list of the expenses and amounts that are relevant for this decision. How much with the sale of this product contribute to the profitability of Lewis?
? What if the company only pays $225 per unit? How does this change the contribution towards profitability?
? If you were the manager, would you accept this order? What considerations, other than financial would enter into your decision?
Modular SLP Expectations: It is important to answer the questions as posed. The document should be two to four pages and written in a clear and concise manner or present tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved. You can turn in the spreadsheet instead. The content should be equivalent to the page length suggested for a word processing document.
Module 4 ? SLP -Managerial Accounting – Variable Costing
We’re using a different fictitious company for the last two modules, the managerial accounting portion of this course. Below find production and sales information for Lewis Company.
Product information Prod B

Beginning inventory 0
Units produced 10,000
Units sold 9,000

Selling price per unit $300
Variable costs per unit
Direct material 120
Direct labor 60
Variable overhead 40
Variable selling and administrative 10

Fixed costs
Fixed manufacturing overhead 250,000
Fixed selling and administrative 100,000

Lewis Company
Absorption Income Statement
For the period ending Dec. 31, 2012

Sales $2,700,000
Cost of goods sold 2,205,000
Gross profit (margin) $495,000
Selling and administrative expenses 180,000
Net income $315,000

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