Question: As EEC's corporate business financial analyst, you will need to have a clear understanding of the different types of costs (variable, fixed, and mixed) that the company carries. Review EEC's journal activity. Define and identify its variable, fixed, and mixed costs.
Next, determine what affect a sales volume increase or decrease will have on unit fixed cost, unit variable cost, total fixed cost, and total variable cost.
1500 to 1750 words, excluding title page/reference.
Eddison Electronic Company
Journal Entries 2005
| |
Activity |
|
| 1 |
Sales not on account |
$29,440 |
| 2 |
Sales on account |
28,060 |
| 3 |
Selling Expense |
3,220 |
| 4 |
Administrative Expense |
6,210 |
| 5 |
Supplies Factory |
3,450 |
| 6 |
Insurance Factory |
920 |
| 7 |
Indirect Labor |
6,900 |
| 8 |
Factory Salaries |
288 |
| 9 |
Factory Property Tax |
173 |
| 10 |
Maintenance Expense Factory |
2,001 |
| 11 |
Depreciation Expense Factory |
3,726 |
| 12 |
Utilities Factory |
828 |
| 13 |
Purchases of Raw Materials |
17,250 |
| 14 |
Direct Labor Factory |
3,450 |
| 15 |
Raw Material Inventory, January 1 |
2,070 |
| 16 |
Raw Material Inventory, December 31 |
1,380 |
| 17 |
Work in Process Inventory, January 1 |
4,140 |
| 18 |
Work in Process Inventory, December 31 |
2,300 |
| 19 |
Finished Goods Inventory, January 1 |
5,980 |
| 20 |
Finished Goods Inventory, December 31 |
4,830 |
| 21 |
Bad Debt Expense |
276 |
| 22 |
Accounts Receivable, net |
9,430 |
| 23 |
Prepaid Expenses |
840 |
| 24 |
Land |
2,760 |
| 25 |
Plant and Equipment |
37,950 |
| 26 |
Cash 1/1/05 |
4,646 |
| 27 |
Accounts Payable |
14,410 |
| 28 |
Interest Expense |
28 |
| 29 |
Notes Payable, 10% |
2,070 |
| 30 |
Bonds Payable 8% |
8,510 |
| 31 |
Stockholders' Equity |
31,510 |
| 32 |
Retained Earnings |
6,670 |
| 33 |
Income tax rate |
30% |
Eddison Electronics Company
1.5GB Chip Project - USA
| |
Plan |
Actual
2005 |
Difference |
| Investment in Equipment |
$5,000,000 |
$5,000,000 |
$0 |
| |
|
|
|
| Income |
|
|
|
| Sales |
$5,250,000 |
$6,000,000 |
$750,000 |
| Variable Expenses |
2,500,000 |
2,800,000 |
$300,000 |
| Contribution Margin |
$2,750,000 |
$3,200,000 |
$450,000 |
| Less Fixed Expenses: |
|
|
|
| Costs |
900,000 |
950,000 |
$50,000 |
| Depreciation |
500,000 |
500,000 |
$0 |
| Net Operating Income |
$1,350,000 |
$1,750,000 |
$400,000 |
| |
|
|
|
| Cash Flow |
|
|
|
| Sales |
$5,250,000 |
$6,000,000 |
$750,000 |
| Less Variable Expenses |
2,500,000 |
2,800,000 |
300,000 |
| Contribution Margin |
2,750,000 |
3,200,000 |
450,000 |
| Less Costs |
900,000 |
950,000 |
$50,000 |
| Net Annual Cash Inflow |
$1,850,000 |
$2,250,000 |
$400,000 |