chapter 2 exercise solutions

8/9/2019 Chapter 2 Exercise Solutions

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2. 2-16 (15 min.) Computing and interpreting manufacturing unit costs.3.4. 1.

(in millions)5. Supreme Deluxe Regular

Total

6. Direct material cost $ 89.00 $ 57.00 $60.00$206.00

7. Direct manuf. labor costs 16.00 26.00 8.0050.00

8. Manufacturin o!er"ea# costs 48.00 78.00 24.00 150.00

9. otal manuf. costs 153.00 161.00 92.00406.00

10. %i&e# costs allocate# at a rate

11. of $15M÷

$50M (#irect mf.12. labor) e'ual to $0.30 er

13. #ir. manuf. labor #ollar

14. (0.30×

$16 26 8) 4.80 7.80 2.40 15.00

15. *ariable costs $148.20 $153.20 $89.60$391.00

16. +nits ro#uce# (millions) 125 150 14017. ,ost er unit (otal manuf.18. costs - units ro#uce#) $1.2240 $1.0733 $0.657119. *ariable manuf. cost er unit20. (*ariable manuf. costs

21.

÷

+nits ro#uce#) $1.1856 $1.0213 $0.640022.23. (in millions)

24. Supreme Deluxe Regular

Total

25. ase# on total manuf. cost

26. er unit ($1.2240×

150

27. $1.0733×

190 $0.6571×

220) $183.60 $203.93 $144.56 $532.0928. ,orrect total manuf. costs base#29. on !ariable manuf. costs lus30. fi&e# costs e'ual

31. *ariable costs ($1.1856×

150 $177.84 $194.05 $140.80 $512.69

32. $1.0213×

190 $0.64×

220)33. %i&e# costs 15.0034. otal costs $527.69

35.36. "e total manufacturin cost er unit in re'uirement 1 inclu#es $15 million of in#irect

manufacturin costs t"at are fi&e# irresecti!e of c"anes in t"e !olume of outut er mont"/


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"ile t"e remainin !ariable in#irect manufacturin costs c"ane it" t"e ro#uction!olume. i!en t"e unit !olume c"anes for uust 2014/ t"e use of total manufacturin cost er unit from t"e ast mont" at a #ifferent unit !olume le!el (bot" in areate an# at t"ein#i!i#ual ro#uct le!el) ill o!erestimate total costs of $532.09 million in uust 2014relati!e to t"e correct total manufacturin costs of $527.69 million calculate# usin !ariable

manufacturin cost er unit times units ro#uce# lus t"e fi&e# costs of $15 million.3.3!. 2-1 (15 min.) Direct" indirect" fixed" and #aria$le costs.3%.

40. 1. east#irect/ !ariable41. %lour#irect/ !ariable42. acain materials#irect (or coul# be in#irect if small an# not trace# to eac" unit)/

!ariable43. Dereciation on o!ensin#irect/ fi&e# (unless units of outut #ereciation/ "ic"

t"en oul# be !ariable)44. Dereciation on mi&in mac"inesin#irect/ fi&e# (unless units of outut

#ereciation/ "ic" t"en oul# be !ariable)45. ent on factor: buil#inin#irect/ fi&e#46. %ire ;nsurance on factor: buil#inin#irect/ fi&e#47. %actor: utilitiesin#irect/ robabl: some !ariable an# some fi&e# (e../ electricit: ma:

be !ariable but "eatin costs ma: be fi&e#)48. %inis"in #eartment "ourl: laborers#irect/ !ariable (or fi&e# if t"e laborers are

un#er a union contract)49. Mi&in #eartment manaerin#irect/ fi&e#50. Materials "an#lers#een#s on "o t"e: are ai#. ;f ai# "ourl: an# not un#er union

contract/ t"en in#irect/ !ariable. ;f salarie# or un#er union contract/ t"en in#irect/ fi&e#51. ,usto#ian in factor:in#irect/ fi&e#52.

• Dereciation on mi&in mac"ines

• Mi&in Deartment manaer

• Materials "an#lers (of t"e Mi&in Deartment)

• Mac"inist (runnin t"e mi&in mac"ines)

• Mac"ine Maintenance ersonnel (of t"e Mi&in Deartment)

• Maintenance sulies (if searatel: i#entifie# for t"e Mi&in Deartment)


3/16

59.


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60. ?f course t"e :east an# flour ill also be a #irect cost of t"e Mi&in Deartment/ but it isalrea#: a #irect cost of eac" in# of brea# ro#uce#.2-1! (15@20 min.) Classificationof costs" ser#ice sector.

61.62. ,ost ob=ect> Aac" in#i!i#ual focus rou

63. ,ost !ariabilit:> Bit" resect to t"e number of focus rous64. "ere ma: be some #ebate o!er classifications of in#i!i#ual items/ eseciall: it" rear#to cost !ariabilit:.

65.66. Cost &tem 6. D or & 6!. ' or (

69. 70. D 71. *72. 73. ; 74. %75. , 76. ; 77. *a

78. D 79. ; 80. %81. A 82. ; 83. *84. % 85. ; 86. %

87. 88. D 89. *90. C 91. ; 92. * b

93. ; ; %94.95. aome stu#ents ill note t"at "one call costs are !ariable "en eac" call "as a searate c"are. ;t ma: be a

fi&e# cost if Maret %ocus "as a flat mont"l: c"are for a line/ irresecti!e of t"e amount of usae.

96. basoline costs are liel: to !ar: it" t"e number of focus rous. Coe!er/ !e"icles liel: ser!e multile uroses/ an# #etaile# recor#s ma: be re'uire# to e&amine "o costs !ar: it" c"anes in one of t"e man: uroses ser!e#.

%.

%!. 2-1% (15@20 min.) Classification of costs" merc)andising sector.99.

100. ,ost ob=ect> D*Ds sol# in mo!ie section of store101. ,ost !ariabilit:> Bit" resect to c"anes in t"e number of D*Ds sol#102. "ere ma: be some #ebate o!er classifications of in#i!i#ual items/ eseciall: it"

rear# to cost !ariabilit:.103.

1*4. Cost &tem 1*5. D or & 1*6. ' or (

107. 108. D 109. %110. 111. ; 112. %113. , 114. D 115. *116. D 117. D 118. %119. A 120. ; 121. %

122. % 123. ; 124. *125. 126. ; 127. %128. C 129. D 130. *

131.

132.


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133. 2-2* (15@20 min.) Classification of costs" manufacturing sector.

134. ,ost ob=ect> :e of car assemble# (eana or Murano)135. ,ost !ariabilit:> Bit" resect to c"anes in t"e number of eanas assemble#136. "ere ma: be some #ebate o!er classifications of in#i!i#ual items/ eseciall: it"

rear# to cost !ariabilit:.

137.13!. Cost &tem 13%. D or & 14*. ' or (

141. 142. D 143. *144. 145. ; 146. %147. , 148. D 149. %150. D 151. D 152. *153. A 154. D 155. *156. % 157. ; 158. *159. 160. D 161. *162. C 163. ; 164. %

165.

166. 2-21 (20 min.) 'aria$le costs" fixed costs" total costs.

167. 1.16!. +inutes,mo

nt)

16%.

*

1*.

5*

11.

1**

12.

15*

13.

2**

14.

24*

15.

3**

16.

32.5

1.

35*

1!.

4**

1%.

45*

1!*.

51*

1!1.

54*

1!2.

6**

1!3.

65*

1!4. lan

/0,mont)

185.0

186.5187.

10188.

15189.

20190.

24191.

30192.32.75

193.35

194.40

195.45

196.51

197.54

198.60

199.65

2**. lan

/0,mont)

201.15

202.15

203.15

204.15

205.15

206.15

207.19.80

208.22

209.23.80

210.27.80

211.31.80

212.36.60

213.39

214.43.80

215.47.80

216. lan C

/0,mont)

217.22

218.22

219.22

220.22

221.22

222.22

223.22

224.22

225.22

226.22

227.22

228.22

229.23.50

230.26.50

231.29

232.

0 100 200 300 400 500 600

0

10

20

30

40

50

60

Plan A Plan B Plan C

Number of long-distance minutes

Total Cost

233. 2. ;n eac" reion/ s"ton c"ooses t"e lan t"at "as t"e loest cost. %rom t"e

ra" (or from calculations)E/ e can see t"at if s"ton e&ects to use 0@150 minutes of lonF#istance eac" mont"/ s"e s"oul# bu: lan for [email protected] minutes/ lan an# for more t"an 327.5 minutes/ lan ,. ;f s"ton lans to mae 100 minutes of lonF#istance callseac" mont"/ s"e s"oul# c"oose lan for 240 minutes/ c"oose lan for 540 minutes/c"oose lan ,.

234.

235. EGet x be t"e number of minutes "en lan an# lan "a!e e'ual cost236. $0.10 x H $15


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237. x H $15 - $0.10 er minute H 150 minutes.238. Get y be t"e number of minutes "en lan an# lan , "a!e e'ual cost

239. $15 I $0.08 ( y @ 240) H $22240. $0.08 ( y @ 240) H $22 @ $15 H $7

241. y @ 240 H

$7 87.5

$0.08

=

242. y H 87.5 I 240 H 327.5 minutes243. 2-22 (15@20 min.) 'aria$le costs and fixed costs.244.245. 1. *ariable manufacturin cost er !e"icle

246. teel $1/500 er urfer 247. ires 625 er urfer 248. Direct manufacturin labor 700 er urfer 249. otal $2/825 er urfer

250.251. %i&e# manufacturin costs er mont"252. lant manaement costs ($1/200/000 - 12)

$ 100/000253. ,ost of leasin e'uiment ($1/800/000 - 12)

150/000254. ,it: license (for 110 surfers or 550 tires)

74/500255. otal fi&e# manufacturin costs $324/500

256.257. %i&e# costs er mont" (1 surfer taes 5 tires)258. 0 to 100 surfers er mont" H

$100/000 I $150/000 I $50/000 H $300/000259. 101 to 200 surfers er mont" H $100/000

I $150/000 I $74/500 H $324/500260. More t"an 200 surfers er mont" H $100/000

I $150/000 I $200/000 H $450/000261.262. 2.


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263.264.265. "e concet of rele!ant rane is otentiall: rele!ant for bot" ra"s. Coe!er/ t"e

'uestion #oes not lace restrictions on t"e unit !ariable costs. "e rele!ant rane for t"e totalfi&e# costs is from 0 to 100 surfers 101 to 200 surfers more t"an 200 surfers. Bit"in t"ese

ranes/ t"e total fi&e# costs #o not c"ane in total.266.


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267. 3.26!.

26%. 'e)icles

roduc

ed

2*. per+ont)

21.

22. Tiresroduce

d

23. per+ont)

24.

25.

26. (ixed Cost

2. per+ont)

2!.

2%.

2!*. nit (ixed

2!1. Cost per 'e)icle

2!2.

2!3. nit'aria$le

2!4. Costper

'e)icle

2!5.

2!6. nitTotal

2!. Costper

'e)icle

2!!. /1 2!%. /2 /1 5

2%*. /3 2%1. /4 (C - /1 2%2. /5 2%3. /6 /4 /5

294. (a)100

295. 500 296. $300/000

297. $300/000 - 100 H$3/000

298. $2/825 299. $5/825

306. (b)225

307. 1/125 308. $450/000

309. $450/000 - 225 H$2/000

310. $2/825 311. $4/825

312.313. "e unit cost for 100 !e"icles ro#uce# er mont" is $5/825/ "ile for 225 !e"icles it is

onl: $4/825. "is #ifference is cause# b: t"e fi&e# cost increment of $150/000 (an increase

of 50J/ $150/000 - $300/000 H 50J) bein srea# o!er an increment of 125 (225 @ 100)!e"icles (an increase of 125J/ 125 - 100). "e fi&e# cost er unit is t"erefore loer.

314.

315. 2-23 (20 min.) 'aria$le costs" fixed costs" rele#ant range.316.317. 1. "e ro#uction caacit: is 4/400 =a breaers er mont". "erefore/ t"e current

annual rele!ant rane of outut is 0 to 4/400 =a breaers K 12 mont"s H 0 to 52/800 =a breaers.

318.319. 2. ,urrent annual fi&e# manufacturin costs it"in t"e rele!ant rane are $1/300 K

12 H $15/600 for rent an# ot"er o!er"ea# costs/ lus $9/500 - 10 H $950 for #ereciation/

totalin $16/550.320. "e !ariable costs/ t"e materials/ are 10 cents er =a breaer/ or $3/720 ($0.10 er =a breaer K 3/100 =a breaers er mont" K 12 mont"s) for t"e :ear.321.322. 3. ;f #eman# c"anes from 3/100 to 6/200 =a breaers er mont"/ or from 3/100 K

12 H 37/200 to 6/200 K 12 H 74/400 =a breaers er :ear/ eetum ill nee# a secon#mac"ine. ssumin eetum bu:s a secon# mac"ine i#entical to t"e first mac"ine/ it illincrease caacit: from 4/400 =a breaers er mont" to 8/800. "e annual rele!ant raneill be beteen 4/400 K 12 H 52/800 an# 8/800 K 12 H 105/600 =a breaers.

323. ssume t"e secon# mac"ine costs $9/500 an# is #ereciate# usin strai"tFline#ereciation o!er 10 :ears an# Lero resi#ual !alue/ =ust lie t"e first mac"ine. "is ill a##

$950 of #ereciation er :ear.324. %i&e# costs for ne&t :ear ill increase to $17/500 from $16/550 for t"e current :ear I$950 (because rent an# ot"er fi&e# o!er"ea# costs ill remain t"e same at $15/600). "at is/total fi&e# costs for ne&t :ear e'ual $950 (#ereciation on first mac"ine) I $950(#ereciation on secon# mac"ine) I $15/600 (rent an# ot"er fi&e# o!er"ea# costs).

325. "e !ariable cost er =a breaer ne&t :ear ill be 90J K $0.10 H $0.09. otal !ariablecosts e'ual $0.09 er =a breaer K 74/400 =a breaers H $6/696.


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326. ;f eetum #eci#es not to increase caacit: an# meet onl: t"at amount of #eman# for"ic" it "as a!ailable caacit: (4/400 =a breaers er mont" or 4/400 K 12 H 52/800 =a breaers er :ear)/ t"e !ariable cost er unit ill be t"e same at $0.10 er =a breaer.nnual total !ariable manufacturin costs ill increase to $0.10 K 4/400 =a breaers ermont" K 12 mont"s H $5/280. nnual total fi&e# manufacturin costs ill remain t"e same/

$16/550.327.


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2.24 (20 min.) Cost dri#ers and #alue c)ain.328.

1. ;#entif: customer nee#s ("at #o smart"one users ant)Desin of ro#ucts an# rocesses

329. erform maret researc" on cometin bran#sDesin of ro#ucts an# rocesses

330. Desin a rotot:e of t"e M, smart"oneDesin of ro#ucts an# rocesses331. Maret t"e ne #esin to cell "one comaniesMaretin332. Manufacture t"e M, smart"onero#uction333. rocess or#ers from cell "one comaniesDistribution334. acae t"e M, smart"onesro#uction335. Deli!er t"e M, smart"ones to t"e cell "one comaniesDistribution336. ro!i#e online assistance to cell "one users for use of t"e M, smart"one

,ustomer er!ice337. Mae #esin c"anes to t"e M, smart"one base# on customer fee#bac

Desin of ro#ucts an# rocesses338. 2.

33%. 'alueC)ain

Categor7 34*. cti#it7 341. Cost Dri#er

342. Design

of

products

and

processes

343. ;#entif: customer nee#s 344.


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smart"ones to cell "onecomanies

"one comanies

371. Customer

ser#ice

372. ro!i#e onFlineassistance to cell "oneusers for use of t"e M,

smart"one

373.


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35. 2-25 (10@15 min.) Cost dri#ers and functions.36.

3. 1.

3!. (unction 3%. Representati#e Cost Dri#er

380. 1. ccounts a:able


13/16

3%%. 2-26 (20 min.) Total costs and unit costs400.401. 1.4*2. 9um$er of guests

5* 1** 15* 2** 25* 3**

403. *ariable cost er uest404. ($80 caterer c"are @405. $5 #iscount for a#!ertisin) $75 $75 $75 $75 $75 $75

$75406. %i&e# ,osts $14/000 $14/000 $14/000 $14/000 $14/000 $14/000

$14/000407. *ariable costs (number of 408. uests K !ariable cost er409. uest) 0 3/750 7/500 11/250 15/000 18/750

22/500410. otal costs (fi&e# I !ariable) $14/000 $17/750 $21/500 $25/250 $29/000 $32/750

$36/500

411.

412.

0 50 100 150 200 250 300

$F

$5/000

$10/000

$15/000

$20/000

$25/000

$30/000

$35/000

$40/000

%i&e# costs

*ariables ,osts

otal ,osts

9um$er of :uests

Costs

413. 2.

414. 9um$er of guests

415.

*

416. 5

*

41.

1**

41!.

15*

41%. 2

**

42*. 2

5*

421. 3

**

422. otal costs423. (fi&e# I !ariable)

424.$14/00

0

425. $17/7

50

426.$21/50

0

427.$25/25

0

428. $29/0

00

429. $32/750

430. $36/500

431. ,osts er uest (total

costs÷

number of uests) 432.

433.

$355 434.$215

435.

$168.33

436. $

145 437. $131

438. $

121.67

439.440. s s"on in t"e table abo!e/ for 150 atten#ees t"e total cost ill be $25/250/ an# t"e

cost er atten#ee ill be $168.33.441.442. s s"on in t"e table in re'uirement 2/ for 200 atten#ees/ t"e total cost ill be $29/000/

an# t"e cost er atten#ee ill be $145.


14/16

443.444. A s"oul# c"are customers base# on t"e number of uests. s t"e number of uests

increase/ A coul# offer rice #iscounts because its fi&e# costs oul# be srea# o!er alarer number of uests.

445.

446. lternati!el:/ A coul# c"are a flat fee of $10/000 lus a marin for t"emusic. "e caterin costs oul# t"en !ar: less it" t"e number of uests because onl:$4/000 of fi&e# costs oul# be srea# o!er t"e number of uests. %or 100 uests/ t"e fi&e#caterin cost er uest oul# be $40 ($4/000 - 100 uests) for 200 uests/ it oul# be $20($4/000 - 200 uests). ANs total cost oul# be $115 (!ariable cost er uest of $75 I fi&e#caterin cost er uest of $40) for 100 uests an# $95 (!ariable cost er uest of $75 I fi&e#caterin cost er uest of $20) for 200 uests.

44.

44!. 2-2 (25 min.) Total and unit cost" decision ma8ing.449.450. 1.

451.

0 5000 10000 15000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Fixed Costs Variable Costs

Total Man!a"trin# Costs

Number of Flanges

Total Manufacturing Costs

452.453.


15/16

460.461. lternati!el:/462. t %loraNs rice of $10 er flane>463. e!enue 464.

$10465.K

466.5/000

467.H

468.$50/000

469. *ariable costs 470.$3.80 471.K 472.5/000 473.H 474.19/000

475. %i&e# costs 476. 477.478. 479. 480. 38/000

481. ?eratin loss 482. 483.484. 485.486. $(7/000)

487.488. a:leNs lassors cannot sell belo $10 er flane an# mae a rofit. t %loraNs rice

of $10 er flane/ t"e coman: "as an oeratin loss of $7/000.489.490. 3. ;f a:leNs lassors ro#uces 10/000 units/ t"en total in!entoriable cost ill be>

491. *ariable cost ($3.80 K 10/000) I fi&e# manufacturin costs/ $28/000 H totalmanufacturin costs/ $66/000.492.493.2!erae (unit) in!entoriable (manufacturin) cost ill be $66/000 - 10/000 units H $6.60 er flane

494. +nit total cost inclu#in bot" in!entoriable an# erio# costs ill be495. ($66/000 I $10/000) - 10/000 H $7.60 er flane/ an# a:leNs lassors ill be able to

sell t"e flanes for less t"an %lora an# still mae a rofit.496.497. lternati!el:/498. t %loraNs rice of $10 er flane>499. e!enue 500.

$10501.K

502. 10/000

503.H

504.$100/000

505. *ariablecosts

506.$3.80

507.K

508. 10/000

509.H

510.38/000

511. %i&e# costs 512. 513. 514. 515. 516. 38/000

517. ?eratinincome

518. 519. 520. 521. 522. $24/000

523.

524. a:leNs lassors can sell at a rice belo $10 er flane an# still mae a rofit. "ecoman: earns oeratin income of $24/000 at a rice of $10 er flane. "e coman: illearn oeratin income as lon as t"e rice e&cee#s $7.60 er flane.

525.526. "e reason t"e unit cost #ecreases sinificantl: is t"at in!entoriable (manufacturin)

fi&e# costs an# fi&e# erio# (nonFmanufacturin) costs remain t"e same rear#less of t"enumber of units ro#uce#. o/ as a:leNs lassors ro#uces more units/ fi&e# costs aresrea# o!er more units/ an# cost er unit #ecreases. "is means t"at if :ou use unit costs to


16/16

mae #ecisions about ricin/ an# "ic" ro#uct to ro#uce/ :ou must be aare t"at t"e unitcost onl: alies to a articular le!el of outut.

52.

52!. 2-2! (20@30 min.)&n#entoria$le costs #ersus period costs.529.

530. 1. Manufacturing-sector companies urc"ase materials an# comonents an# con!ertt"em into #ifferent finis"e# oo#s.531. Merchandising-sector companies urc"ase an# t"en sell tanible ro#ucts it"outc"anin t"eir basic form.

532. Service-sector companies ro!i#e ser!ices or intanible ro#ucts to t"eir customersfor e&amle/ leal a#!ice or au#its.

533. ?nl: manufacturin an# merc"an#isin comanies "a!e in!entories of oo#s for sale.534.535. 2. Inventoriable costs are all costs of a ro#uct t"at are rear#e# as an asset "ent"e: are incurre# an# t"en become cost of oo#s sol# "en t"e ro#uct is sol#. "ese costs for a

manufacturin coman: are inclu#e# in orFinFrocess an# finis"e# oo#s in!entor: (t"e: arein!entorie#) to buil# u t"e costs of creatin t"ese assets.536. Period costs are all costs in t"e income statement ot"er t"an cost of oo#s sol#."ese costs are treate# as e&enses of t"e erio# in "ic" t"e: are incurre# because t"e: are resume# not to benefit future erio#s (or because t"ere is not sufficient e!i#ence to conclu#et"at suc" benefit e&ists). A&ensin t"ese costs imme#iatel: best matc"es e&enses to re!enues.537.538. 3. (a)Gettuce an# tomatoes urc"ase# for resale b: tar maretin!entoriable cost of amerc"an#isin coman:. ;t becomes art of cost of oo#s sol# "en t"e lettuce an# tomatoes aresol#.

(b) Alectricit: use# for li"tin at Ma:ta refrierator assembl: lantin!entoriable cost of amanufacturin coman:. ;t is art of t"e manufacturin o!er"ea# t"at is inclu#e# in t"emanufacturin cost of a refrierator finis"e# oo#.

(c) Dereciation on a"ooONs comuter e'uiment use# to u#ate #irectories of ebsiteserio#cost of a ser!ice coman:. a"ooO "as no in!entor: of oo#s for sale an#/ "ence/ noin!entoriable cost.

(#) Alectricit: use# to ro!i#e li"tin for tar MaretNs store aisleserio# cost of amerc"an#isin coman:. ;t is a cost t"at benefits t"e current erio#/ an# it is not traceable tooo#s urc"ase# for resale.

(e) Dereciation on Ma:taNs assembl: testin e'uimentin!entoriable cost of a manufacturincoman:. ;t is art of t"e manufacturin o!er"ea# t"at is inclu#e# in t"e manufacturin cost of arefrierator finis"e# oo#.

(f) alaries of tar MaretNs maretin ersonnelerio# cost of a merc"an#isin coman:. ;t is acost t"at is not traceable to oo#s urc"ase# for resale. ;t is resume# not to benefit future erio#s (or at least not to "a!e sufficientl: reliable e!i#ence to estimate suc" future benefits).

() errier mineral ater consume# b: a"ooONs softare enineerserio# cost of a ser!icecoman:. a"ooO "as no in!entor: of oo#s for sale an#/ "ence/ no in!entoriable cost.

(") alaries of a"ooONs maretin ersonnelerio# cost of a ser!ice coman:. a"ooO "as noin!entor: of oo#s for sale an#/ "ence/ no in!entoriable cost.539.

chapter 2 exercise solutions

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