Accounting Assignment 1 Solutions

Accounting Assignment 1 Solutions - ASSIGNMENT #1 SUGGESTED...

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Unformatted text preview: ASSIGNMENT #1 SUGGESTED SOLUTION Question #1 Cost Behavior Required: a) Identify all of the types of costs behaviors that have been uncovered and that should be included in the estimated production costs of the projects. Identify any that should not be included. ( 2 marks ) Cable costs are a stepped variable cost ( as the cost increases after a certain point) Cable installers Step VC ( some students my deem a VC ) Engineers stepped fixed cost Logistics mixed costs Installation equipment FC Sales costs are not a production cost and should not be included. b) Using the hi/lo method, provide the cost function of the logistics support costs. ( 6 marks ) Hi 6500 meters Lo 3000 meters 250 meters is an obvious outlier and should NOT be used First you must isolate the Logistics costs: meters 6500 3000 Total costs $250,675 $ 125,550 Remove: Installers 6500/100 x $1100 3000/100 x $1100 71,500 33,000 Engineers $5000 flat 5,000 5,000 Cable ( m x $17.50) 113,750 52,500 Amort (flat $2500) 2,500 2,500 Sales costs ($3,000) 3,000 3,000 $54,925 $ 29,550 Variable portion = $54,925 - $29,550 = $25,375 = $7.25 6,500m 3,000m 3,500m TC=FC + VC(x) $29,550 = Q + 7.25(3000) Q= $7,800 Or $54,925 = Q + 7.25(6500) Q= $7,800 Cost function = $7,800 + $7.50 (quantity) c) The Henry Angus project is estimated to be 6,750 meters of cable. Guy would like you to prepare a detailed analysis of this project. Ensure that you use the best information that you have in order to portray what the different costs of the project would be. ( 3 marks ) Total costs COST or * Installers * 6800/100 x $1100 74,800 $ 74,250 Engineers 2 engineers @ $5000 flat 10,000 10,000 Cable m x( $17.50 + $2.50) 135,000 135,000 Amort (flat $2500) 2,500 2,500 Sales costs not a production cost 0 Logistics $7,800 + $7.50(6,750) 56,737.50 56,737.50 Total Project Cost 279,037.5 278,487.50 * Installers paid $1,100 per 100 meters therefore they would be paid for 6800 meters (like a batch, 100 meter increments). Students may have interpreted this to be $11 per meter,( $1,100/100) and used $11 x 6750 meters. While not completely correct, the answer was accepted....
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This note was uploaded on 01/03/2011 for the course COMM 290 taught by Professor Brian during the Winter '09 term at The University of British Columbia.

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Accounting Assignment 1 Solutions - ASSIGNMENT #1 SUGGESTED...

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