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chapter 6 solutions

chapter 6 solutions - CHAPTER 6 Activity Analysis Cost...

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CHAPTER 6 Activity Analysis, Cost Behaviour, and Cost Estimation 6 36 (25 MINUTES) 1. Machine supplies: $153,000 ÷ 34,000 direct labour hours = $4.50 per hour So for April we have: 23,000 direct labour hours x $4.50 = $103,500 Depreciation: Fixed at $22,500 2. Plant maintenance cost: April (23,000 hours) June (34,000 hours) Total cost*……………………. . $ 681,000 $ 879,000 Less: Machine supplies……. (103,500) (153,000) Depreciation…………. . (22,500) (22,500) Plant maintenance…………. .. $ 555,000 $ 703,500 * Excludes supervisory labour cost Variable maintenance cost = difference in cost ÷ difference in direct labour hours = ($703,500 – $555,000) ÷ (34,000 – 23,000) = $148,500 ÷ 11,000 hours = $13.50 per hour Fixed maintenance cost: April (23,000 hours) June (34,000 hours) Total maintenance cost. ................................... $555,000 $703,500 Less: Variable cost at $13.50 per hour. ............ 310,500 459,000 Fixed maintenance cost. ................................... $244,500 $244,500
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6 36 (CONTINUED) 3. Manufacturing overhead at 29,500 labour hours: Machine supplies at $4.50 per hour . ...................... $132,750 Depreciation. ........................................................... 22,500 Plant maintenance cost: Variable at $13.50 per hour. ............................. 398,250 Fixed. ................................................................. 244,500 Supervisory labour. ................................................. 135,000 Total. ........................................................... $933,000 4. A fixed cost remains constant when a change occurs in the cost driver (or activity base). A step fixed cost, on the other hand, remains constant within a range but will change (rise or fall) when activity falls outside that range. In other words, a fixed cost is constant over a wider range of activity than a step fixed cost. 5.
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chapter 6 solutions - CHAPTER 6 Activity Analysis Cost...

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