CHAPTER 2
Basic Cost Management Concepts and Accounting for Mass
Customization Operations
Exercise 2-24
Case I: $ 84000
Case II: $ 99,000
Case III: $ 318000
Exercise 2-25
1. Total Compensation = $ 800
2. Direct Labor Cost = $ 720
Overhead = $ 80
Exercise 2-26
1. Total Compensation = $ 740
2. Total Overtime Premium = $ 20
3. Direct Labor = $ 720
Overhead = $ 20
EXERCISE 2-28
1.
Product cost, variable, direct material
2.
Period cost, variable
3.
Product cost, variable, either direct material or manufacturing overhead (i.e.,
indirect material) depending on how significant the cost is
4.
Product cost, variable, manufacturing overhead
5.
Period cost, fixed
6.
Period cost, fixed
7.
Product cost, fixed, manufacturing overhead
8.
Product cost, variable, direct labor
9.
Period cost, variable
10.
Product cost, variable, direct material
11.
Product cost, fixed, manufacturing overhead
12.
Product cost, variable, direct material
Exercise 2-29
[The following figures are obtained using Raw Material Beginning Balance of $60,000
(not $50,000 as given in the problem)on January 1, 20X1.]
1. Cost of Goods Manufactured = $ 835000
2. Cost of Goods Sold = $ 820000
3. Net Income = $ 105000
Exercise 2-30
(a) $42,000
(c) 25,000
(e) $67,000
(b) $42,000
(d) 35,000
(f) $77,000
(g) $ 84 (h) $ 70
(j)
50 (k)
50
(m) $134 (n) $120
(i) $ 60
(l)
50
(o) $110
Exercise 2-31
[The following figures are obtained using numbers (that are quite different from the ones
given in the problem. In particular, the answers are based on monthly rental $100, call
cost $0.25 each, and number of calls in January 6,000and February 5,000 ]
1.January = $ 1600
February = $ 1350
2.Cost per phone call: J = $ .267 (rounded)
F = $ .27
3. Fixed component = $ 100 and Variable component = $ 1,500
4. $ .25
5. $ .267
Exercise 2-32
Sunk Cost.
Exercise 2-33
Annual Differential Cost = $ 33000
Exercise 2-34
1. Opportunity Cost
2. Yes
Exercise 2-35
1. Rs. 100
2. Opportunity Cost
PROBLEM 2-37
1.
1.
2.
3.
4.
5.
6.
7.
8.
Income statement
Balance sheet
Income statement
Income statement
Cost-of-goods-manufactured schedule
Income statement
Cost-of-goods-manufactured schedule
Cost of-goods-manufactured schedule
9.
10.
11.
Balance sheet, cost-of-goods-manufactured schedule
Income statement
Income statement
PROBLEM 2-38
1. Manufacturing Overhead = $ 513000
2. Cost of Goods Manufactured = $ 913200
3. Cost of Goods Sold = $ 926400
4. Net Income = $ 154420
5. 11,340 units
PROBLEM 2-39
The Work in Process destroyed by the fire = $ 103000
PROBLEM 2-40
1. $ 5,20,000
2. Net Income = $ 168000
3. a) No change
b) No change
c) No change
d) Increase
Problem 2-42
1. a. Total Prime Costs = $ 2,680,000
b. Total Manufacturing Overhead = $ 534,000
c. Total Conversion Costs = $ 1114000
d. Total Product Costs = $ 3214000
e. Total Period Costs = $ 279000
2. $15,000 in rental cost for sales office space rental is an opportunity cost
Problem 2-43
1. Cost of goods manufactured
SAN FERNANDO FASHIONS COMPANY
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X2
Direct material:
Raw-material inventory, January 1 ...........................................
Add: Purchases of raw material................................................
Raw material available for use ..................................................
Deduct: Raw-material inventory, December 31 .......................
Raw material used .....................................................................
Direct labor .....................................................................................
Manufacturing overhead:
Indirect material .........................................................................
Indirect labor ..............................................................................
Utilities: plant .............................................................................
Depreciation: plant and equipment ..........................................
Other ...........................................................................................
Total manufacturing overhead ..................................................
Total manufacturing costs ............................................................
Add: Work-in-process inventory, January 1 ................................
Subtotal ..........................................................................................
Deduct: Work-in-process inventory, December 31 .....................
Cost of goods manufactured ........................................................
2. COGS = $ 580000
3. Net Income = $ 130000
Problem 2-44
1. Total Cost of Wages = $ 608
2. a. 456
b. 12
c. 32
$ 40,000
180,000
$220,000
25,000
$195,000
200,000
$ 10,000
15,000
40,000
60,000
80,000
205,000
$600,000
40,000
$640,000
30,000
$610,000
d. 108
PROBLEM 2-46
1.
$45
2.
$18
3.
The $82 is an opportunity cost of using Gaines on the flight departing from
Topeka on August 11. The cost should be assigned to the August 11 flight
departing from Topeka.
PROBLEM 2-50
Cost Item Number
1.
2.
3.
4.
5.
6.
7.
8.
9.
Product Cost or Period Cost
Period
product
product
product
product
Period
product
Period
product
PROBLEM 2-51
Direct material ...............................................
Direct labor ....................................................
Manufacturing overhead
Utilities (primarily electricity) .................
Depreciation on plant and equipment ...
Insurance .................................................
Supervisory salaries ...............................
Property taxes .........................................
Selling costs
Advertising ..............................................
Sales commissions.................................
Variable or
Fixed
V
V
20x2
Forecast
$3,600,000
2,640,000
V
F
F
F
F
168,000
230,000
160,000
300,000
210,000
F
V
195,000
108,000
Administrative costs
Salaries of top management and staff ..
Office supplies ........................................
Depreciation on building
and equipment .....................................
PROBLEM 2-52
1.
f, average cost
2.
e, marginal cost
3.
c, sunk cost
4.
a, opportunity cost
5.
d, differential cost
6.
b, out-of-pocket cost
7.
e, marginal cost
PROBLEM 2-53
1.
b, d, e, k
2.
a, c, e, k
3.
4.
a, d, e, j
5.
d, e, i
6.
7.
d, e, i
8.
a, d, e, k
9.
a, d, e, k
10.
11.
12.
a, c, e
13.
d, e, k
14.
e, k
15.
b, d, e, k
F
F
372,000
40,000
80,000
PROBLEM 2-56
1.
b, c, g, h, j, m
2.
a, c, i, j, l
3.
b, d, i, j, m
4.
a, d, i, j, l
5.
a, c, i, j, l
6.
7.
a, c, i, j, l
8.
9.
b, d, k, m
10.
a, c, i, j, m
11.
b, c, i, j, l
12.
a, c, i, j, l
13.
b, c, g, j, l
14.
b, d, i, j, l
15.
b, c, i, j, l
PROBLEM 2-58
1. The firm will realize a net benefit by purchasing Part MR24 if the outside supplier
charges a price less than $14.
2. The company will be indifferent between the two alternatives if it requires 48,000
units of Part MR24 each month.
Case 2-60
1. a. 60,000 copies
b.
Anticipated Annual Volume
060,000
60,000225,000
225,000 and higher
Optimal Model Choice
1024S
1024M
1024G
2.
. a. the real cost of endor for the special order is $4,600.
b. The real cost of using the tatooine in the special order is $15,000.
3. The station's management should be indifferent between the two shows, since each
would generate revenue of $100,000.
