Please complete in Excel document with correct formulas and attach. Cost Classif

Question

Please complete in Excel document with correct formulas and attach.

Cost Classification: The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY.

A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs.

C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information.

Cost of goods sold of $35 per unit

Labor = $400/month

One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.

Advertising fees = $3,000

Bank fees = $200

Phone/internet = $150 per month

Shipping = $3 per unit

Utilities = $100 per month

Office Supplies = $900

Conference Exhibitor Fee = $3000

Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200

Please complete in Excel document and attach.

Explanation / Answer

(A) Classify each of the costs as Variable and fixed costs Cost of Goods sold Variable cost labour per Month Fixed Part time Employee Fixed Advertising Fee Fixed bank fee Fixed Phone / Interenet Fixed Shipping Variable cost Utilities Fixed Office supplies Fixed Conference Exhibitor Fee Fixed Total travel for conference Fixed (B)    Fixed cost are period costs. These are fixed and does not change inrespect of Volume of products produced or services offered. Varaible costs are the costs that are change along with volume of the Products. Once we know about fixed and variable costs, then these are helpful to find out how many products need to be produced and sold to reach the Breakeven pint of the business. to know the Break even point we need to Differntiate the Costs as variable and Fixed costs. Break even point in Units =   Fixed Cost /(Sale price - variable cost per unit) . its also heps to reach a targeted profit ,   For targeted profit   Units need to be Produced = (Fixed Cost + Target profit ) / (Sale price - varaible cost per unit) (C ) Budgeted income Statement Particulars Amount In $ Amount In $ Sales              $85*600 51000 less:variable costs            Cost of Goods sold   600*$35 21000             Shipping Costs    $3 *600 1800 22800 Contribution 28200 Less: Fixed costs labour per Month    $400*12 4800 Advertising Fee 3000 part time employee $10* 40*12 4800 bank fee 200 Phone / Interenet   $150*12 1800 Utilities     $100*12 1200 Office supplies 900 Conference Exhibitor Fee 3000 Total travel for conference 1200 20900 Net Income before taxes 7300 less: Income tax   $11700*28% 2044 Net income After taxes 5256 Break Even Analysis Break even points = Fixed cost / Contribution per unit = $16100/(85-38) =342.55 Contribution margin per Unit =Selling price per unit - variable cost per unit =$85-$35-$3=$47 Total Contribution margin =units Sold * Contribution per Unit =600*$47 =$28200

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