Case 2-27 (60 minutes)
1. No distinction has been made between period expenses and product
costs on the income statement. Product costs (e.g., direct materials,
direct labour, and manufacturing overhead) should be assigned to
inventory accounts and flow t
Chapter 2: Cost Terms, Concepts and Classifications
What are the main purposes of cost classification?
For preparing external reports
To predict cost behaviour
For purposes of assigning costs to products or departments
My division had another great year last year. We all worked hard, and the results were there.
But again we got no reward for our hard work. Its very frustrating.
Division Manager, General Products Division
Case 9-27 (120+ minutes)
1. a Sales budget:
Budgeted sales in
Selling price per unit .
Total sales . $650,000
b Schedule of expected cash collections
Case 10-37 (60 minutes)
1. The number of units produced can be computed by using the total
standard cost applied for the period for any input (materials, labour, or
overhead), or it can be computed by using the total standard cost
applied for all inputs t
1. For direct materials, compute the price & quantity variance.
AQ x AP
AQ x SP
AQ x SP
SQ x SP
1) NORMAL COST SYSTEM
ALL OTHER ASSETS
Problem 10-20 (45 minutes)
1. Direct materials price and quantity variances:
Direct Materials Price Variance = AQ (AP SP)
78,000 metres ($3.75 per metre $3.50 per metre) = $19,500 U
Direct Materials Quantity Variance = SP (AQ SQ)
$3.50 per metre (78,000 m
Problem 11-34 (30 minutes)
1. a., b., and c.
Throughput time in days:
Process time .
Inspection time .
Move time .
Queue time .
Total throughput time .
Manufacturing cycle efficiency (MCE):
Process time Throughput time .
Delivery cycle time in days:
Problem 8-18 (75 minutes)
Sales . $1,000,000 $ 800,000 $1,000,000
Variable cost of goods sold @
$4 per unit.
Variable selling and
administrative @ $2 per unit .
Problem 8-17 (40 minutes)
For the months ended
Costs of goods sold:
Variable manufacturing Cost
Fixed manufacturing Cost
Cost of good manufactured
Goods available for sale
Is the budget process effective and efficient at achieving corporate goals?
Are the responsibility centers properly defined: sales & plant?
Quality: NOTE - all manufacturers have basically same qualit
This is just a rough outline with some of the points to consider. Not all points are included. For exam
purposes you would want to carefully develop your best thoughts in each section.
Pricing dispute between managers
Should Fettinger (mana
Chapter 2: Variable, Fixed & Other Costs
It is important to be able to classify costs as either variable or fixed so that you can predict future cost
behaviours (i.e. how costs will react to changes in activity levels).
Fill in the following chart and dis
Problem 2-26 (45 minutes)
Schedule of Cost of Goods Manufactured
For the year ended xxxx
Raw materials inventory, beginning . $ 20,000
Add: Purchases of raw materials . 160,000
Raw materials available for use . 180,
Problem 3-29 (60 minutes)
Predetermined = Estimated total manufacturing overhead cost
Estimated total amount of the allocation base
$900,000 direct labour cost
= 160% Direct labour cost
b. $21,200 160% = $33,920
Problem 3-23 (90 minutes)
1. a. Raw Materials . 820,000
Accounts Payable .
b. Work in Process . 817,000
Manufacturing Overhead . 13,000
Raw Materials .
c. Work in Process . 140,000
Manufacturing Overhead . 60,000
Salaries and Wages Payable
Problem 4-10 (45 minutes)
1. Equivalent Units of Production
Transferred to next department.
Ending work in process:
Materials: 80,000 units 75% complete .
Conversion: 80,000 units 25% complete .
Equivalent units of production .
Problem 6-14 (45 minutes)
1. High-low method:
High activity level .
Low activity level .
Variable cost per job:
Change in cost =
Change in activity
= $80 per job
1. For June, do the following:
Start by computing number of units sold in June
July is 10% higher than June, so divide July by 1.10
33,000 / 1.10 = 30,000. (NOTE: 30,000 x 10% increase = $33,000)
Next use margin of safety to compute June sales in dollars.
Problem 7-32 (20 minutes)
1. Break-even points:
= 30,000 units
= 41,667 units
2. A 10% profit-to-sales ratio requires a profit of $20 0.10 = $2 per unit
Therefore, the equation becomes:
Iman Hamou- 250743973
In question 1: the first error was using 30% as the rate for desired E/I and B/I when it was to be 20% as
stated in the question that the company desired a 20% desired ending finished goods inventory.
For the material sche
define business requirements
Design and build site
Analyse site traffic
Uniform Resource Locator
Uniform Resource Locator
Video Home System
Luma and Chroma
Variable Costing : A Tool for
Garrison, Ch 8
After this lesson, you will be able to:
Describe the differences between absorption and
Explain the advantages and disadvantages of each
Cost Behaviour: Analysis and
Garrison, Ch 3 including Appendix 3A
One of the classification methods for costs we
discussed in the last lesson was based on the
behaviour of the cost. This classification
method is very powerful, and
Chapter 3 Lecture Cost Behaviour
This chapter reviews cost behaviour, specifically variable and fixed
coststhis concept is important throughout the course. Remember your
definitions.VC varies directly and proportionally with volume while FC
remains the sa