hw_solution_5

hw_solution_5 - 5-22 a Cost estimate with new costs and...

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Unformatted text preview: 5-22 a. Cost estimate with new costs and volume. This Year’s Cost (at last year’s volume) (1) x (2) = (3) $756,000 × 546,000 × 462,000 × 792,000 Last Year’s Cost Cost Item Direct materials (1) $630,000 Cost Change (1 + Cost Increase) (2) × 120% × 104% × 100% × 110% = = = = Growth in Volume (4) 220,000 210,000 220,000 210,000 220,000 210,000 (fixed) This Year’s Cost (3) x (4) = (5) = $792,000 = 572,000 = 484,000 Direct 525,000 labor................... Variable 462,000 overhead............ Fixed 720,000 Overhead........... Total $2,337,000 costs.................. b. Costs per unit: Last year: This year: = 792,000 $2,640,000 $11.13 $12.00 (= $2,337,000 ÷ 210,000) (= $2,640,000 ÷ 220,000) 5-24 a. Variable cost = = Fixed costs = = = or Fixed costs b. Maintenance costs = $125,000 + ($1 x 2,600,000) = $125,000 + $2,600,000 = $2,725,000 = = $1,950,000 – ($1 x 1,825,000) $125,000 Highest activity – lowest activity 2,375,000 – 1,825,000 Total costs – variable costs $2,500,000 – ($1 x 2,375,000) $125,000 = $1 Note that 2,600,000 visitors is outside the range of the cost observations, so this estimate may not be reliable. c. Whether this is ethical depends on the reason for dropping the observation. If you are convinced that the higher number of visitors represents such unusual activity that this should be treated as an outlier, then you should eliminate the observation. If, however, the reason for dropping the observation is that someone does not like the result, then you should not change the analysis. ...
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hw_solution_5 - 5-22 a Cost estimate with new costs and...

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