Accounting overheads Accounting, Finance, SPSS Math Problem (Math Problem Sample)

Part A: Marginal Costing
1 Product cost in marginal costing
Football Netballs
Material cost: 65
Labor 55
Packaging21
Variable overheads11
Total costs 1412
TC-Add 50% mark-up (1.5*14)21(1.5*12)18
Contribution (before mark-up)5.54.5
Contribution (after mark-up) (19.5-21)-1.5(16.5-18)-1.5
Fixed costs are not affected mark-up 41,532
2 Reasons
Jane and the 2 Van drivers and the 2 vans are indirectly involved in the production of the football and netballs. Hence they do not affect the total cost in the calculation of contribution margin.
* The negative contribution margin indicates that the variable costs and variable expenses of the company exceed the sales of the company. The company should reduce its expenses in total. The management should also work to increase its sales to counteract the effect of the negative contribution.
* Negative breakeven point in the company is as a result of low sales turnover. The company should find ways to increase their sales by focusing on customers who bring in high contributions and also by reducing total fixed costs. Increasing sales will also help to offset the fixed costs.
*
3 Determining the BEP
BEP = total fixed costs
Contribution
* Footballs: BEP in units = 41,532/5.57,551.24 per unit