Accounting Questions

Accounting Questions - E 5-1 Turgo Company manufactures a...

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E 5-1 Turgo Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production. PRODUCTION in UNITS COSTS INCURRED 5,000 10,000 PRODUCTION COSTS TOTAL COST/ TOTAL COST/ COST UNIT COST UNIT Direct materials $ 8,000 $1.60 $16,000 $1.60 Direct labor 9,500 1.90 19,000 1.90 Utilities 2,000 .40 3,500 .35 Rent 4,000 .80 4,000 .40 Maintenance 800 .16 1,100 .11 Supervisory salaries 1,000 .20 1,000 .10 Instructions (a) Define the term variable costs, fixed costs, and mixed costs Variable costs vary in direct proportion to changes in activity. Fixed costs remain the same regardless of changes in activity. Mixed costs have the components of both variable and fixed costs. (b) Classify each cost above as either variable, fixed, or mixed Direct Materials Variable Direct Labor Variable Utilities Mixed Rent Fixed Maintenance Mixed Supervisory Salaries Fixed E 5-2 Shingle Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below. OUTPUT in UNITS RENT EXPENSE DIRECT MATERIALS 1,000 $5,000 $4.000 2,000 5,000 7,200 3,000 8,000 9,000 4,000 8,000 12,000 5,000 8,000 15,000 6,000 8,000 18,000 7,000 8,000 21,000
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8,000 8,000 24,000 9,000 10,000 29,300 10,000 10,000 35,000 11,000 10,000 44,000 Instructions (a) Diagram the behavior of each cost for output ranging from 1,000 to . (b) Determine the relevant range of activity for this product
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This note was uploaded on 03/23/2012 for the course ACCT 306 taught by Professor Mikewoodard during the Spring '12 term at DeVry Houston.

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Accounting Questions - E 5-1 Turgo Company manufactures a...

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