Seminar 11 Week 12 - 0902

Seminar 11 Week 12 - 0902 - SOLUTIONS TO SELF STUDY...

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Unformatted text preview: SOLUTIONS TO SELF STUDY QUESTIONS 1 a) b) 4 a) b) Cost behaviour analysis is the study of how specific costs respond to changes in the level of activity within a company. Cost behaviour analysis is important to management in planning business operations and in deciding between alternative courses of action. The relevant range is the range of activity that a company expects to operate during the year. Disagree. The behaviour of both fixed and variable costs are linear only over a certain range of activity. Brief Exercise 15.3 1 2 3 a) b) c) d) e) f) $50 20% $380 24% $800 $480 ($250 - $200) ($50 / $250) ($500 – $120) ($120 / $500) ($320 / 40%) ($800 – $320) Exercise 15.2 Massey & Co a) The determination as to whether a cost is variable, fixed or mixed can be made by comparing the cost in total and on a per-unit basis at two different levels of production. Variable Costs Fixed Costs Mixed Costs b) Vary in total but remain constant on a per-unit basis. Remain constant in total but vary on a per-unit basis. Contain both a fixed element and a variable element. Vary both in total and on a per-unit basis. Using these criteria as a guideline, the classification is as follows: Direct materials Direct labour Electricity Variable Variable Mixed Rent Maintenance Supervisors’ salaries Page 2 of 4 Fixed Mixed Fixed Problem Set A 15.1 Cute Nails Salon a) Variable costs (per manicure) Manicurists’ commission 7.00 Rent .50 Supplies 5.00 Total variable 12.50 Fixed costs (per month) Salaries Rent Advertising Power Magazines Depreciation Total fixed Breakeven in units $25x = $12.5x + $11,875 $12.5x = $11,875 x = 950 units or manicures Breakeven in dollars x = .50xa + $11,875 .50x = $11,875 x = $23,750 b) a (c) Cute Nails Salon d) Profit = $37,500 – [($12.50 x 1,500) + $11,875] = $6,875 Page 3 of 4 $12.5 ÷ $25 10,050 800 300 280 45 400 11,875 Problem Set B 15.1 The University Barber Shop a) Variable costs (per manicure) Barbers’ commission Electricity Barber supplies Total variable 3.50 .20 .30 4.00 Fixed costs (per month) Barbers’ salaries Rent Magazines Electricity Advertising Total fixed b) Breakeven in units $10x = $4x + $7,800 $6x = $7,800 x = 1,300 units or haircuts Breakeven in dollars x = .40xa + $7,800 .60x = $7,800 x = $13,000 a c) The University Barber Shop d) Profit = $15,000 – [($4.00 x 1,500) + $7,800] = $1,200 Page 4 of 4 $4 ÷ $10 $6,600 800 25 175 200 7,800 ...
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This note was uploaded on 04/14/2010 for the course ACCT 1002 taught by Professor Angela during the Three '10 term at University of Sydney.

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