Ch 05 Solutions 3

# Ch 05 Solutions 3 - 5 Cost Behavior SOLUTIONS TO APPLY WHAT...

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Unformatted text preview: 5 Cost Behavior SOLUTIONS TO APPLY WHAT YOU HAVE LEARNED 5-16. 1. V Direct material 2. V Direct labor 3. F Cost of plant security guard 4. F Straight-line depreciation on production equipment 5. M Maintenance on production equipment 6. M Maintenance on factory building 7. V Cost of cleaning supplies used in the factory 8. F Rent on the factory building 9. F Salary for the two factory supervisors 10. F Vice president of manufacturings salary 11. M/V Cost of electricity used in the factory 12. M Cost of production machine lubricants 5-17. 1. F Cost of the car 2. F/M Insurance cost 3. M/V Maintenance cost 4. V Cost of gasoline 5. F The cost of a college parking permit 6. F AAA membership 5-18. 1. F Rent for the party hall 2. F Cost of the band 3. V Cost of cold drinks 4. V Cost of food 5. F Cost of party decorations 6. F/M Cost of renting tables and chairs 102 Chapter 5 Cost Behavior 5-19. 1. F Cost of the new office building 2. V/M Basic telephone service 3. V Cost of attorney salaries 4. F Cost of the receptionists wages 5-20. 1. F/M Cost of store rent 2. F Basic telephone service 3. F Cost of salaries for the two salespeople 4. F/M Cost of advertising 5. F Cost of store displays 6. M/V Cost of electricity 7. V Cost of merchandise sold 5-21. The accounting department finds it difficult to use the scatter diagram because this diagram does not present a very linear pattern. Without a clear linear pattern, the cost estimates used might bear little correlation to the actual cost behavior of the truck maintenance. The accounting department could derive precise calculations by using regression analysis or Microsoft Excel, but the results would be meaningless because of the lack of correlation. Results using the high- low method would also be meaningless, again, due to the lack of correlation. 5-22. Diagram (a) is preferred because the relationship between the x and y is more linear and therefore easier to predict outcomes at various levels of production. 103 Chapter 5 Cost Behavior 5-23. a. Sales Selling Expense High \$2,860,000 \$369,400 Low 2,300,000 347,000 Difference \$ 560,000 \$ 22,400 Variable rate = \$22,400 / \$560,000 = \$0.04 of selling expense for each \$1 of sales b. TC = FC + (Unit variable cost x Activity) \$347,000 = FC + (0.04 x \$2,300,000) FC = \$347,000 \$92,000 FC = \$255,000 OR TC = FC + (Unit variable cost x Activity) \$369,400 = FC + (0.04 x \$2,860,000) FC = \$369,400 \$114,400 FC = \$255,000 c. TC = FC + (Unit variable cost x Activity) TC = \$255,000 + (.04 x \$2,500,000) TC = \$255,000 + \$100,000 TC = \$355,000 5-24. a. Units Packaging Cost High 15,300 \$33,191 Low 14,500 32,567 Difference 800 \$ 624 Variable rate = \$624 / 800 units = \$0.78 packaging cost for each unit packaged Chapter 5 Cost Behavior 104 5-24. (Continued) b. TC = FC + (Unit variable cost x Activity) \$32,567 = FC + (\$0.78 x 14,500) FC = \$32,567 \$11,310 FC = \$21,257 OR TC = FC + (Unit variable cost x Activity) \$33,191 = FC + (\$0.78 x 15,300) FC = \$33,191 \$11,934...
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## This note was uploaded on 01/19/2012 for the course ACC 212 taught by Professor Quintanna during the Spring '08 term at University of Miami.

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Ch 05 Solutions 3 - 5 Cost Behavior SOLUTIONS TO APPLY WHAT...

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