# Project #39217 - Accounting

## Cost Behavior

### Assignment Overview

Jokkmok Industries

Mr. Rosen is the manager of a division of Jokkmok Industries. He is one of several managers being considered for the position of CEO, as the current CEO is retiring in a year.

All divisions use standard absorption costing. The division has the capacity to produce 50,000 units a quarter and quarterly fixed overhead amounts to \$800,000. Mr. Rosen has been looking at the report for the first three months of the year and is not happy with the results.

Division Income Statement

For the Quarter Ending March 31, 2014

Production: 25,000 units

Â  Â

Sales (25,000 units)

Â

\$2,500,000

Cost of goods sold

Â

1,800,000

Gross profit

Â

\$700,000

Selling & general expenses

Â

300,000

Net income

Â

\$400,000

The sales forecast for the second quarter is 25,000 units. Mr. Rosen had budgeted second quarter production at 25,000 units but changes it to 50,000 units, which is total capacity for a quarter. The sales forecasts for each of the last two quarters of the year remain at 25,000 units. Actual fixed costs incurred remain constant in total and variable costs remain constant on per unit basis. All selling & general expenses are fixed.

### Case Assignment

Required:

Computations:

• Convert the divisional absorption income statement to a contribution margin income statement for the quarter. Click here for an example showing how to convert from one approach to another. This example is for guidance only and the numbers have no bearing on Jokkmok Industries. You can also find several videos on YouTube that explain the difference between the two types of income statements.
• Prepare absorption and contribution margin income statements for the succeeding quarter for the division.
• Compute production costs per unit for both approaches and for both quarters.

Discussion:

• Did Mr. Rosen improve his performance for the second quarter? Indicate the information you used for your assessment.
• Can you make any suggestions for reporting in the future?
• Do you think Mr. Rosen should be seriously considered for the CEO position? Why or why not?
• Discuss three shortcomings of the absorption approach for internal decision-making.

### Assignment Expectations

It is important to answer the questions as posed. The discussion should be 4 to 6 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

 Subject Business Due By (Pacific Time) 09/09/2014 12:00 am
TutorRating
pallavi

Chat Now!

out of 1971 reviews
amosmm

Chat Now!

out of 766 reviews
PhyzKyd

Chat Now!

out of 1164 reviews
rajdeep77

Chat Now!

out of 721 reviews
sctys

Chat Now!

out of 1600 reviews

Chat Now!

out of 770 reviews
topnotcher

Chat Now!

out of 766 reviews
XXXIAO

Chat Now!

out of 680 reviews