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Managerial Accounting and Organizational Controls

In: Business and Management

Submitted By adneff
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Managerial Accounting and Organizational Controls
Unit 1 Individual Project
By Allen Neff

For this project I will be using the supplied data below: Suppose we are running a restaurant and have identified certain costs along with the number of annual units sold of 1000. Item: Raw Materials (cost for hamburgers) Total Annual Cost: 650 Item: Building Rent Total Annual Cost: 9000 Raw materials: The raw materials for the hamburgers are a variable cost. Variable costs are a cost that changes in direct proportion to changes in the cost-driver level. (Horngren, Sundem and Stratton, 2005) As the production of hamburgers increases so does the total annual cost of the raw materials. Conversely as the production of hamburgers decreases so does the total annual cost of the raw materials. Building rent: Building rent is a fixed cost. Fixed costs are un-expired assets or expenses whose total does not change in proportion to the activity of a business, within the relevant time period or scale of production. (Fixed Cost) Building rent is a constant cost throughout the year or the life of the contract. This cost does not change with an increase or decrease in production of hamburgers.
(2) What is the cost per unit of each?
The cost per unit of the material is: 650 (current total annual cost of raw materials) / 1000 (total annual units sold) = $0.65
The cost per unit for rent is: 9000 (total annual cost) / 1000 (total annual units sold) = $9.00 (3)What would be the total annual cost and unit cost of fixed and variable costs at 6000 units of sales?
6000 Units Total annual cost of variable cost = 6000 (total annual units sold )* 0.65 (cost per unit of the material) = $3900 Variable cost per unit is: 3900(total annual cost) / 6000 (total annual units sold) - $0.65

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