ACC337 Review Questions 2 3

The price increase must be enough to cover the additional fixed cost, so we just need to know what that fixed cost is per copy sold. This equals the additional fixed costs / number of copies sold.

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

2.) What is the ‘relevant range’ for the cost structure? In other words, at what volume might you expect the fixed and variable costs to change appreciably?

14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

2. What is the total cost? How much of the total cost are labor costs? Capital costs?

One of the major benefits of expansion is the reduction of fixed cost (fixed and selling). The cost is absorbed by 85,000 units instead of 80,000 units resulting in saving of $0.42 per unit.

c) It increases. This increase is the same at all values of capital per worker.

Consolidated Company makes cardboard boxes. During the most recent accounting period Consolidated paid $60,000 for raw materials, $48,000 for labor, and $52,000 for overhead costs that were incurred to make boxes. Consolidated started and completed 400,000 boxes. Based on this information, what is the average manufacturing cost per box?

Cost measurement is the process of determining the dollar amount of direct materials, direct labor, and overhead that should be assigned to production. Cost accumulation is the process of associating costs with the units produced. Cost measurement is more about whether actual or estimated costs should be used, and cost assignment is about whether costs should be assigned to jobs or processes.

Unit Break-even Volume = Total Fixed Costs/Contribution per unit = $525,000 - $6.40 = 82,031.25units

Into which of the three elements of manufacturing cost would each of the following be classified? (Direct Labor, Direct Materials, and Manufactured Overhead)

The case study also seems to take an assumption that every event is under the same scale hence the variable cost per event for similar expense category (such as table arrangement, floral, soft drinks and snacks costs, temporary staff wage, etc.) are having the same amount.

A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those

In determining the fixed costs per unit for the period for absorption costing (not needed for variable costing since the entire fixed cost is expensed as a cost of the month, not a cost of units), you spread the fixed costs across all the units made. Since production was increased substantially, the fixed cost per unit was reduced:

In other words, variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of units produced).