TACC507 T6 FINAL EXAM 我整理.docx - TACC507 T6 FINAL EXAM The structure of the final exam It includes 8 parts Part 1 Determine variable and fixed

TACC507 T6 FINAL EXAM 我整理.docx - TACC507 T6 FINAL...

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TACC507 T6 FINAL EXAM The structure of the final exam. It includes 8 parts. Part 1: Determine variable and fixed costs from the semi-variable costs. Please be familiar with the High- low method. (10 mark) Example 1: the high-low method 考原题,背公式 Hello Co. has recorded the following total costs during the last five years. Year Output volume Total cost Units $ 2010 13,000 29,000 2011 16,000 32,400 2012 18,000 34,000 2013 12,000 28,000 2014 15,000 32,000 Required Calculate the total cost that should be expected in 2015 if output is 17,000 units. Step 1: Period with highest activity 2012, Period with lowest activity 2013 Step 2: Ch = 34,000; Cl = 28,000; Uh = 18,000; Ul = 12,000
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Step 3: V = (Ch – Cl) / (Uh – Ul) = (34,000 – 28,000) / (18,000 – 12,000) = $1 per unit Step 4: Fixed costs = Ch – Uh * V = 34,000 – 18,000*1 = $16,000 Therefore, Costs in 2015 for output 17,000 units are: Fixed costs + Variable costs = 16,000 + 17,000*1 = 34,000 Part 2: Relevant costing. Keep in mind that overhead allocated should be disregarded in decision making. Example Case: the relevant cost of labour – customer order, accept or not ( 会改东西,解题步骤不变,改数 --- 结果变,改变不重要的东西 ) A company has been making a machine to order for a customer, but the customer has since gone into liquidation, and there is no prospect that any money will be obtained from the winding up of the company. Costs incurred to date in manufacturing the machine are $50,000 and progress payments of $15,000 had been received from the customer prior to the liquidation. The sales department has found another company willing to buy the machine for $34,000 once it has been completed. To complete the work, the following costs would be incurred: (a) Materials: these have been bought at a cost of $6,000. They have no other use, and if the machine is not finished, they would be sold for scrap for $2,000. (b) Further labour costs would be $8,000. Labour is in short supply, and if the machine is not finished, the work force would be switched to another job, which would earn $30,000 in revenue, and incur direct costs of $12,000 and absorbed (fixed) overhead of $8,000. (c) Consultancy fees $4,000. If the work is not completed, the consultant's contract would be cancelled at a cost of $1,500. (d) General overheads of $8,000 would be added to the cost of the additional work. Assess whether the new customer's offer should be accepted. Solution Costs incurred in the past, or revenue received in the past, are not relevant because they cannot affect a decision about what is best for the future. Costs incurred to date of $50,000 and revenue received of $15,000 are not relevant and should be ignored.
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Similarly, the price paid in the past for the materials is irrelevant. The only relevant cost of materials affecting the decision is the opportunity cost of the revenue from scrap which would be forgone – $2,000. Labour costs ($) Labour costs required to complete work 8 000 Opportunity costs: contribution forgone by losing other work $(30 000 – 12 000) 18 000 Relevant cost of labour 26 000 The incremental cost of consultancy from completing the work is $2,500.
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