Caramanzana, Camille CBSM41Assignment # 1

Case 3-521) Materials Usage ($94 x 20,000 units) $ 1,880,000.00

Direct Labor ($16 x 20,000 units) $ 320,000.00 Overhead ($80 x 20,000 units) $ 1,600,000.00 Selling ($7 x 20,000 units) $ 140,000.00 Total Variable Cost $ 3,940,000.00 # of units produced 20,000.00 Total unit variable cost $ 197.00

Garner Company should accept the order because the variable cost would result to $15income per unit.

2) Coefficient Determination is important because it asses how well a model be useful for the future outcomes. It also test the reliablity of the cost formulas. In all formulas, the overheadactivity has the lowest coefficient determination this may be a problem because only56% of variability on overhead is explained by direct labor hours. This has bearing to therequirement 1 because if the percentage is low it would effect the variability of the overheadcost. The management should indentify the possible drivers in order to have immediateaction about this.

3) Materials Usage ($94 x 20,000 units) $ 1,880,000.00 Direct Labor ($16 x 20,000 units) $ 320,000.00 Overhead

X1 Labor ($85 x 20,000 units) $ 1,700,000.00 X2 Setups ($5000 x 12 units) $ 60,000.00 X3 Engr. Hrs ($300 x 600 units) $ 180,000.00

Selling ($7 x 20,000 units) $ 140,000.00 Total Variable Cost $ 4,280,000.00 # of units produced $ 20,000.00 Total unit variable cost $ 214.00

In this case, Garner Company should not accept the order because the variable cost would result to $2 lose.

The other infromation I would like to have is the Step Cost Behavior because it displays thethe level output in advance. Through this, you can make sound decision because you can easily monitor and handle the unecessary situations in case there are special orders.

July 14, 2015MGNT ACTG 1Mr. Sancho Castro

future outcomes. It also test the reliablity of the cost formulas. In all formulas, the overhead

requirement 1 because if the percentage is low it would effect the variability of the overhead

The other infromation I would like to have is the Step Cost Behavior because it displays the

you can easily monitor and handle the unecessary situations in case there are special orders.

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