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Accounting Assignment 1 Solutions

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

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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

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