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
