Professional Documents
Culture Documents
41
11.
12.
14.
15.
16.
17.
42
19.
20.
EXERCISES
31
1.
Number of Units
0
100,000
200,000
300,000
400,000
500,000
Total Cost
$240,000
240,000
240,000
240,000
240,000
240,000
2.
32
1.
Miles Traveled
0
5,000
10,000
15,000
20,000
25,000
Total Cost
$
0
6,500
13,000
19,500
26,000
32,500
33
1.
Number of Units
0
10,000
20,000
30,000
40,000
50,000
Total Cost
$10,000
10,000
10,000
20,000
20,000
30,000
2.
43
34
Resource
Jet rental
Hotel rooms
Buffet
Favor package
Buses
Flexible/Committed
Committed
Committed
Flexible
Flexible
Committed
Cost Behavior
Fixed
Fixed
Variable
Variable
Step
35
1.
Resource
Plastic1
Direct labor and
variable overhead2
Mold sets3
Other facility costs4
Total
Total Cost
$ 10,800
Unit Cost
$0.027
8,000
20,000
10,000
$ 48,800
0.020
0.050
0.025
$0.122
2.
Plastic, direct labor, and variable overhead are flexible resources; molds and
other facility costs are committed resources. The cost of plastic, direct labor,
and variable overhead are strictly variable. The cost of the molds is fixed for
the particular action figure being produced; it is a step cost for the
production of action figures in general. Other facility costs are strictly fixed.
44
36
1.
X-ray film and developing supplies are likely to vary with the number of
pacemakers produced. As production increases, we would expect more film
and developing supplies to be used. Inspectors and X-ray machines should
remain constant within the relevant range.
2.
3.
4.
5.
6.
45
37
1.
2.
3.
Activity availability =
Calls available
=
80,000 calls
=
4.
Total cost of
committed resources
$1,200,000
$1,200,000
Activity usage
Calls made
70,000 calls
+ Unused capacity
+
Unmade calls
+
10,000 calls
Cost of
= activity used +
= ($15 70,000) +
=
$1,050,000
+
Cost of
unused capacity
($15 10,000)
$150,000
46
38
1.
Committed resource charges: monthly fee, activation fee, cancellation fee (if
triggered by contract cancellation prior to one year)
Flexible resource charges: all additional charges for airtime, long distance
and roaming
2.
Plan 1:
Minutes available
60 minutes
=
=
Minutes used
45 minutes
+
+
Unused minutes
15 minutes
Plan 2:
Minutes available
120 minutes
=
=
Minutes used
45 minutes
+
+
Unused minutes
75 minutes
Plan 1 is more cost effective. Jana will have some unused capacity (on
average, 15 minutes a month), and the overall cost will be lower by $10 per
month.
3.
Plan 1*:
Minutes available
60 minutes
=
=
Minutes used
90 minutes
+
+
Unused minutes
( 30) minutes
Plan 1*:
Minutes available
=
60 minutes
=
Additional minutes =
Minutes used
60 minutes
30 minutes
+
+
Unused minutes
0 minutes
*There are a number of ways to illustrate the use of minutes with Plan 1. Here
are two possibilities. The problem, of course, is that all included monthly
minutes are used, and Jana must purchase additional minutes.
Plan 2:
Minutes available
120 minutes
=
=
Minutes used
90 minutes
+
+
Unused minutes
30 minutes
Plan 2 is now more cost effective, as the monthly cost is $30. Under Plan 1,
Jana will pay $20 plus $30 (30 minutes $1.00) or $50 per month. (The $1.00
additional charge includes the airtime and regional roaming charge.)
47
39
1.
Cost
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
0
500
1,000
48
1,500
39
Concluded
1697.097
243.6784
0.967026
8
6
4.64678
0.350304
The least-squares method is better because it uses all eight data points
instead of just two.
49
310
1.
Cost
500
1,000
Number of Moves
The scattergraph provides evidence for a linear relationship, but the
observation for 300 moves may be an outlier.
2.
50
310
Concluded
497.50
987.0073
0.926208
8
6
18.425
1.954566
Normally, we would prefer the least-squares method since the data appear to
be linear. However, the third observation may be an outlier. If the third
observation (300 moves and $3,400 of cost) is dropped, the R 2 rises to 99
percent. The new cost formula would be
Cost = $1,411 + $17.28 (moves)
The higher fixed cost is much more in keeping with what we observed with
the scatterplot in requirement 1.
51
311
1.
2.
5370
367.0967
0.958144
5
3
X Coefficient(s)
Std. Err. of Coef.
9.62
1.160862
52
312
1.
Depreciation:
Variable rate = ($170,000 $170,000)/(48,000 24,000) = 0
Fixed cost = $170,000 $0(24,000) = $170,000
Depreciation = $170,000
Depreciation is purely fixed.
Power usage:
Variable = ($16,320 $8,160)/(48,000 24,000) = $0.34
Fixed cost = $8,160 $0.34(24,000) = $0
Power usage = $0.34(machine hours)
Power usage is purely variable.
Maintenance:
Variable rate = ($149,000 $101,000)/(48,000 24,000) = $2.00
Fixed cost = $101,000 $2.00(24,000) = $53,000
Maintenance = $53,000 + $2.00(machine hours)
Maintenance is a mixed cost.
2.
Depreciation = $170,000
Power usage = $0.34(32,000) = $10,880
Maintenance = $53,000 + $2.00(32,000) = $117,000
3.
53
313
1.
2.
3.
4.
314
1.
2.
3.
Since total setup cost is $40,500 for the following month, a 50 percent
decrease would reduce setup cost to $20,250, saving $20,250 for the month.
54
315
1.
2.
3.
4.
316
1.
2.
55
316
Concluded
3132.136
2273.337
0.950539
10
8
X Coefficient(s)
Std. Err. of Coef.
25.20682
2.0322010
317
1.
2.
3.
4.
5.
a
c
a
e
e
56
PROBLEMS
318
1.
Salaries:
Senior accountantfixed
Office assistantfixed
Internet and software subscriptionsmixed
Consulting by senior partnervariable
Depreciation (equipment)fixed
Suppliesmixed
Administrationfixed
Rent (offices)fixed
Utilitiesmixed
57
318
Concluded
3.
Fixed
Salaries:
Senior accountant
Office assistant
Internet and subscriptions
Consulting
Depreciation (equipment)
Supplies
Administration
Rent (offices)
Utilities
Total cost
Unit
Variable Cost
$2,500
1,200
100
2,400
125
500
2,000
200
$9,025
5.00
10.00
6.50
1.10
$22.60
58
319
1.
4512.98701298698
3456.24317476605
0.633710482694768
10
8
13.3766233766234
3.59557461331427
59
319
Continued
5632.28109733183
2390.10628259277
0.824833789433823
10
8
0.0449642991356633
0.0073259640055344
60
319
4.
Concluded
752.104072925631
1350.46286973443
0.951068418023306
10
7
0.0333883151096915
0.00495524841198368
7.14702865269395
1.68182916088492
R2 = 0.95, or 95%
Multiple regression with both variables explains 95 percent of the variability
in receiving cost. This is the best result.
320
1.
The order should cover the variable costs described in the cost formulas.
These variable costs represent flexible resources.
Materials ($94 20,000)
Labor ($16 20,000)
Variable overhead ($80 20,000)
Variable selling ($7 20,000)
Total additional resource spending
Divided by units produced
Total unit variable cost
$ 1,880,000
320,000
1,600,000
140,000
$ 3,940,000
20,000
$
197
Garner should accept the order because it would cover total variable costs
and increase income by $15 per unit ($212 $197), for a total increase of
$300,000.
61
320
Concluded
2.
The correlation coefficients indicate the reliability of the cost formulas. Of the
four formulas, overhead activity may be a problem. A correlation coefficient
of 0.75 means that only about 75 percent of the variability on overhead cost is
explained by direct labor hours. This should have a bearing on the answer to
Requirement 1 because if the percentage is low, there are activity drivers
other than direct labor hours that are affecting variability in overhead cost.
What these drivers are and how resource spending would change need to be
known before a sound decision can be made.
3.
$ 1,880,000
320,000
1,700,000
60,000
180,000
140,000
$ 4,280,000
20,000
$
214
The order would not be accepted now because it does not cover the variable
activity costs. Each unit would lose $2 ($212 $214).
It would also be useful to know the step-cost functions for any activities that
have resources acquired in advance of usage on a short-term basis. It is
possible that there may not be enough unused activity capacity to handle the
special order, and resource spending may also be affected by a need (which,
in this case, would be unexpected) to expand activity capacity.
62
321
1.
236.211171346831
1788.59942408259
0.993939842186014
14
11
40.8752113255057
2.2207348945557
35307.5122042085
970.201096681915
10081.3333333337
94.8068211329403
0.999887905585866
8
6
34.9533333333331
0.151087766637518
63
321
Concluded
19964.2403242688
12.0521931978647
0.999999089146329
6
4
50.0216788702923
0.0238700194326353
322
1.
2498.64388489202
285.68025751244
0.931469268038633
9
7
2.50691546762592
0.257009448534317
64
322
2.
Continued
8742.90441176471
1084.01688314397
0.0132730147072237
9
7
6.05073529411757
19.7184534227446
65
322
4.
Concluded
1493.26459143964
49.8369756378367
0.998212354162525
9
6
2.60557879377433
0.0453173582286768
13.7142023346307
0.916289112797867
66
2.
Assuming that the data were acquired illicitly, Brindons instincts were on
target. To analyze the data and be party to its use would most certainly
violate the standard of integrity. Management accountants should not engage
in or support any activity that would discredit the profession. In addition,
Brindon would violate the standard of confidentiality if he chose to analyze
the data. Management accountants should refrain from using confidential
information acquired in the course of their work for unethical advantage,
either personally or through a third party (II-3).
RESEARCH ASSIGNMENT
324
Answers will vary.
67