The Mendel Paper Company's Concern About The Variable Cost Of The Place Mats?
Case 2B (Mendel Paper Company)
Tara McKnight
BUS630: Managerial Accounting
Prof Moustafa Ahmed
July 14, 2014
Mendel Paper Company
Introduction
The paper will talk about the Mendel Paper Company’s concern in regards to their four basic paper product lines. It will show the cost and price data for the next fiscal quarter, plus showing the contribution margins per unit and the revisions. The paper will include the break-even point for sales mix along with the margin of safety for the estimated sales volume of the original estimates and the revised estimates as well. Lastly, it will address Herbert’s concern about the variable cost of the place mats.
Original Estimated Contribution …show more content…
To get the Total Sales of each item is to multiply the volume and the selling price like for the computer paper: 3,000 x 14 = 420,000. To get the Material cost, have to multiply the volume and the material cost of each item and like for the computer paper: 3,000 x 6 = 180,000. Lastly, to get the total Variable overheads, would have to multiply the Variable Overhead per unit by the volume like for the computer paper: 1.5 x 3,000 = 45,000. For the Grand Total Sales is to add all the Total Sales of each item: $420,000 + $840,000 + $540,000 + $680,000 = $2,480,000. In order to get the Contribution Margin, for an example for the computer paper:
Total Sales = 420,000 – Material cost = 180,000 – Variable overheads = 45,000 (total) = $195,000. So for the Contribution Margin: Computer Paper is $195,000; Napkins is $228,000; Place Mats is $270,000; and Poster Board is $320,000 and the grand total of the contribution margin is $1,013,000. To get the Contribution Margin per unit, take the Contribution Margin and divide that by the volume number: Computer paper - $195,000/30,000 is $6.50 per unit; Napkins - $228,000/ 120,000 is $1.90 per unit; Place Mats - $270,000/45,000 is $6.00 per unit; and Poster Board - $320,000/80,000 is $4.00 per …show more content…
For (a) - the Break even= Contribution Margin from the original estimates is $1,013,000 and for (b) - the Margin of Safety, take the grand total sales number of all items and the total contribution margin and subtract it: $1,013,000 – 2,480,000 = $1,467,000 and to get the percentage, take the total from the subtracted formula ($1,467,000) and divide it by the grand sales total (2,480,000) = $1,467,000/2,480,000 = 59.15%.
Revised Estimates – Break-even/Margin of Safety (4)
For (a) - the Break even= Contribution Margin from the original estimates is $992,500 and for (b) - the Margin of Safety, take the grand total sales number of all items and the total contribution margin and subtract it: $992,500 – 2,550,000 = $1,557,500 and to get the percentage, take the total from the subtracted formula ($1,557,500) and divide it by the grand sales total (2,550,000) = $1,557,500/2,550,000 =
Tara McKnight
BUS630: Managerial Accounting
Prof Moustafa Ahmed
July 14, 2014
Mendel Paper Company
Introduction
The paper will talk about the Mendel Paper Company’s concern in regards to their four basic paper product lines. It will show the cost and price data for the next fiscal quarter, plus showing the contribution margins per unit and the revisions. The paper will include the break-even point for sales mix along with the margin of safety for the estimated sales volume of the original estimates and the revised estimates as well. Lastly, it will address Herbert’s concern about the variable cost of the place mats.
Original Estimated Contribution …show more content…
To get the Total Sales of each item is to multiply the volume and the selling price like for the computer paper: 3,000 x 14 = 420,000. To get the Material cost, have to multiply the volume and the material cost of each item and like for the computer paper: 3,000 x 6 = 180,000. Lastly, to get the total Variable overheads, would have to multiply the Variable Overhead per unit by the volume like for the computer paper: 1.5 x 3,000 = 45,000. For the Grand Total Sales is to add all the Total Sales of each item: $420,000 + $840,000 + $540,000 + $680,000 = $2,480,000. In order to get the Contribution Margin, for an example for the computer paper:
Total Sales = 420,000 – Material cost = 180,000 – Variable overheads = 45,000 (total) = $195,000. So for the Contribution Margin: Computer Paper is $195,000; Napkins is $228,000; Place Mats is $270,000; and Poster Board is $320,000 and the grand total of the contribution margin is $1,013,000. To get the Contribution Margin per unit, take the Contribution Margin and divide that by the volume number: Computer paper - $195,000/30,000 is $6.50 per unit; Napkins - $228,000/ 120,000 is $1.90 per unit; Place Mats - $270,000/45,000 is $6.00 per unit; and Poster Board - $320,000/80,000 is $4.00 per …show more content…
For (a) - the Break even= Contribution Margin from the original estimates is $1,013,000 and for (b) - the Margin of Safety, take the grand total sales number of all items and the total contribution margin and subtract it: $1,013,000 – 2,480,000 = $1,467,000 and to get the percentage, take the total from the subtracted formula ($1,467,000) and divide it by the grand sales total (2,480,000) = $1,467,000/2,480,000 = 59.15%.
Revised Estimates – Break-even/Margin of Safety (4)
For (a) - the Break even= Contribution Margin from the original estimates is $992,500 and for (b) - the Margin of Safety, take the grand total sales number of all items and the total contribution margin and subtract it: $992,500 – 2,550,000 = $1,557,500 and to get the percentage, take the total from the subtracted formula ($1,557,500) and divide it by the grand sales total (2,550,000) = $1,557,500/2,550,000 =