Chapter 18 - Problem 18-1B (20 minutes) The managerial...

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Problem 18-1B (20 minutes) The managerial accounting professional must do more than assign value to ending inventory and cost of goods sold. S/he must understand the industry and the current business environment of the company. The managerial accounting professional must be able to estimate the costs and benefits of business plans. This can include, for example, cost/benefit analyses of (1) a JIT manufacturing system and/or (2) a new computer or technology system to better serve the customer. Specifically for the home electronics industry, the managerial accountant must estimate the potential revenue of new home electronic lines and the costs of production. To estimate the revenue and costs of production the managerial accountant must understand the home electronics industry and the related competitive forces in the global home electronics industry. Problem 18-2B (10 minutes) 1. B 6. C 2. C 7. B 3. A 8. A 4. B 9. C 5. B 10. C
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Problem 18-3B (45 minutes) Part 1 Cost classification and amounts Cost by Behavior Cost by Function Costs Variable Fixed Product Period Plastic for CDs—$1,500 .................. $ 1,500 $ 1,500 Wages of assembly workers— $30,000 ...................................... 30,000 30,000 Cost of factory rent—$6,750 ........... $ 6,750 6,750 Systems staff’s salary—$15,000 ..... 15,000 $ 15,000 Labeling (12,000 outsourced)— $3,750 total ................................ 3,750 3,750 Cost of office equipment rent— $1,050. ........................................... 1,050 1,050 Upper management salaries— $120,000 ..................................... 120,000 120,000 Annual fees for cleaning service—$4,520 .......................... 4,520 4,520 Sales commissions—$0.50 per CD . $0.50 x CDs sold $0.50 x CDs sold Machinery depreciation—$18,000 ... 18,000 18,000 Part 2 HIP-HOP Calculation of Manufacturing Cost per CD For Year Ended December 31, 2008 Item Total cost Per unit cost * Variable production costs Plastic for CDs. ........................................ $ 1,500 $ 0.10 Wages of assembly workers. ................. 30,000 2.00 Labeling. ................................................... 3,750 0.25 Total variable cost. .................................. 35,250 2.35 Fixed production costs Cost of factory rent. ................................ 6,750 0.45 Machinery depreciation. ......................... 18,000 1.20 Total fixed costs. ..................................... 24,750 1.65 Total manufacturing costs $60,000 $4.00 * Total cost / 15,000 CDs.
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Problem 18-3B (continued) Part 3 If 10,000 CDs are produced, we would expect the cost of the plastic for the CDs to decrease to $1,000 (10,000 CDs x $0.10/CD), but the cost per unit will stay at $0.10 per CD. Variable costs decrease in total as the number of units produced decreases, but the unit cost remains constant. Part 4
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Chapter 18 - Problem 18-1B (20 minutes) The managerial...

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