Ch%2010%20Selected%20Problem%20Solutions

Ch%2010%20Selected%20Problem%20Solutions - CHAPTER 10...

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CHAPTER 10 DETERMINING HOW COSTS BEHAVE (Selected Problem Solutions) 10-16 (10 min.) Estimating a cost function. 1. Slope coefficient = = $5,400$4,000 10,000 6,000 - - = $1,400 4,000 =$0.35 per machine-hour Constant = Total cost – (Slope coefficient × Quantity of cost driver) = $5,400 – ($0.35 × 10,000) = $1,900 =$4,000 – ($0.35 × 6,000) =$1,900 The cost function based on the two observations is Maintenance costs = $1,900 +$0.35 × Machine-hours 2. The cost function in requirement 1 is an estimate of how costs behave within the relevant range, not at cost levels outside the relevant range. If there are no months with zero machine- hours represented in the maintenance account, data in that account cannot be used to estimate the fixed costs at the zero machine-hours level. Rather, the constant component of the cost function provides the best available starting point for a straight line that approximates how a cost behaves within the relevant range. 10-1

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10-22 (30 min.) Account analysis method. 1. Manufacturing cost classification for 2009: Account Total Costs (1) % of Total Costs That is Variable (2) Variable Costs (3) = (1) × (2) Fixed Costs (4) = (1) – (3) Variable Cost per Unit (5) = (3) ÷ 75,000 Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin $300,000 225,000 37,500 56,250 60,000 75,000 95,000 100,000 100% 100 100 20 50 40 0 0$300,000 225,000 37,500 11,250 30,000 30,000 0 0 $0 0 0 45,000 30,000 45,000 95,000 100,000$4.00 3.00 0.50 0.15 0.40 0.40 0 0 Total $948,750$633,750 $315,000$8 .45 Total manufacturing cost for 2009 = $948,750 Variable costs in 2010: Account Unit Variable Cost per Unit for 2009 (6) Percentage Increase (7) Increase in Variable Cost per Unit (8) = (6) × (7) Variable Cost per Unit for 2010 (9) = (6) + (8) Total Variable Costs for 2010 (10) = (9) × 80,000 Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin.$4.00 3.00 0.50 0.15 0.40 0.40 0 0 5% 10 0 0 0 0 0 0 $0.20 0.30 0 0 0 0 0 0$4.20 3.30 0.50 0.15 0.40 0.40 0 0 $336,000 264,000 40,000 12,000 32,000 32,000 0 0 Total$8 .45 $0 .50$8 .95 $716,000 10-2 Fixed and total costs in 2010: Account Fixed Costs for 2009 (11) Percentage Increase (12) Dollar Increase in Fixed Costs (13) = (11) × (12) Fixed Costs for 2010 (14) = (11) + (13) Variable Costs for 2010 (15) Total Costs (16) = (14) + (15) Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin.$ 0 0 0 45,000 30,000 45,000 95,000 100,000 0% 0 0 0 0 0 5 7 $0 0 0 0 0 0 4,750 7,000$ 0 0 0 45,000 30,000 45,000 99,750 107,000 $336,000 264,000 40,000 12,000 32,000 32,000 0 0$ 336,000 264,000 40,000 57,000 62,000 77,000 99,750 107,000 Total $315,000$11,750 $326,750$716,000 $1,042,750 Total manufacturing costs for 2010 =$1,042,750 2. Total cost per unit, 2009 = 75,000 $948,750 =$12.65 Total cost per unit, 2010

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This note was uploaded on 10/27/2011 for the course ECON 101 taught by Professor Womer during the Spring '08 term at NYU.

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Ch%2010%20Selected%20Problem%20Solutions - CHAPTER 10...

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