Assignment-1 Cost Concept-29-09-2014
Question 1: Cost drivers and functions: The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match.
Function
Representative Cost Driver
1.
2.
3.
4.
A. Number of invoices sent
B. Number of purchase orders
C. Number of Research scientists
D. Hours of computer processing unit (CPU)
E. Number of new hires
F. Number of transaction processed
Accounting
Personnel
Data processing
Research and Development
5. Purchasing
6. Billing
1. Match each function with its representative cost driver.
2. Give a second example of a cost driver for each function.
Question 2: Total costs and unit costs: Ms. Thomas
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Case 1
Case 2
Accounts receivable, 12/31
Rs. 6,000
Rs.2, 100
Cost of goods sold
A
20,000
Accounts Payable, 1/1
3,000
1,700
Accounts payable, 12/31
1,800
1,700
Finished goods inventory, 12/31
Gross Margin
B
11,300
5,300
C
1
Work in progress, 1/1
Work in progress 12/31
Finished goods inventory, 1/1
Direct material used
Direct manufacturing labor
Indirect manufacturing costs
Purchase of Direct material
Revenues
Accounts Receivable, 1/1
0
0
4,000
8,000
3,000
7,000
9,000
32,000
2,000
800
3,000
4,000
12,000
5,000
D
7,000
31,800
1,400
Question 4: Fire loss, computing inventory costs. A distraught employee, Mr. Unsatisfied put a torch to manufacturing plant on a blustery February 26. The resulting blaze destroyed the plant and its content.
Fortunately, certain accounting records were kept in another building. They reveal the following for the period from January 1 to February 28, current year.
Direct material purchased
Work in process, 1st January
Direct materials, 1st January
Finished goods, 1st January
Indirect manufacturing costs
Revenues
Direct manufacturing labor
Prime costs
Gross margin percentage based on revenue
Cost of goods available for sale
Rs 1, 60,000
3, 40,000
1, 60,000
3, 00,000
40% of conversion costs
50, 00,000
18, 00,000
29, 40,000
20%
45, 00,000
The loss is fully covered by insurance. The insurance company wants to know the historical cost of the inventories as a basis for negotiating a settlement, although the settlement is
On January 15, 1919, one of the most tragic and strange disasters occurred in Boston, Massachusetts. It was around forty degrees that day, when two days previously it had been only two degrees. At 12:30 PM 2,300,000 gallons of molasses spilled into the streets near Keany Square after the tank holding it exploded, most think due to a combination of poor design and the drastic temperature flux. The aftermath was tragic, with twenty one deaths and one hundred and fifty injured. The company who owned the tank was quick to blame others, but soon it was found that the tank was poorly constructed, and if more time had been taken, the Boston Molasses Disaster would never have happened.
Identify several possible drivers of salary costs for use in estimating a salary cost function. Using one of these cost drivers, apply the High-Low technique to estimate the salary cost function for the Delta Airlines. What driver did you select and why? How would Delta use this function to forecast costs? What are the advantages of this technique? The disadvantages?
Each of them can be drilled down to the cost drivers in the categories above using the “bottoms-up” cost model (Exhibit 1).
List four different cost objects for Dell. For each cost object, mention one example of a direct and indirect cost.
"What is necessary to change a person is to change his awareness of himself. --
that was twice the amount of their auditing fee in order to have magazines and toilets
On October 15, 1910 the factory has a mandatory fire inspection and they pass. A month later, a fire in Newark kills twenty-five workers. This stimulates fire prevention efforts in buildings but again, this warning is ignored. January 15, 1911 is the last time prior to the fire that garbage is taken from the factory. On March 16, another report warning of improper safety standards in New York buildings is published. However, like previous warnings, it is again ignored. Nine days later, at 4:45 PM, just before workers would be released, a fire breaks out on the eighth floor. This fire will take the lives of a 146 unfortunate victims. Most of these victims are those of young woman. Six minutes later, the New York Fire Department (NYFD) arrives on site. By this time, the fire is spreading up to the ninth and tenth floors, which also belong to the Triangle Shirtwaist Company. Those on the eighth floor quickly head down and those on the tenth floor flee to the roof. However, most workers who were on the ninth floor are stranded, unable to move up or down. By 4:47 PM, the last of the bodies from the ninth floor land on the sidewalk, falling from the ninth floor ledge. It is not until 5:05 PM, that the fire is finally taken under control and ten minutes later is described as “all over.” (Stein. Triangle Fire) NYFD fighters head to all the top floors of the building finding many severely burned bodies. Mobs of
I managed to figure out accrual accounting and how revenue was recognized. Accrual accounting is done by recognizing revenue and then earned, according to our textbook. The revenue was recorded and determined that the cash was then received, which was not received as cash, but as accounts receivable. This was hard to figure with all the assumptions the company had. Were all contracts determined to be received as cash, how is this known, was the balance sheet prepare properly, what appropriate steps did the company take? We assume they either did or did not. We do know that the company sold services; 1.8 million was obtained and applied to future years. These tasks performed would be overwhelming to those who had to perform them. At some point the services would have to be performed by someone working for the
The Triangle shirtwaist factory fire on March 25, 1911, was one of the worst tragedies ever back then, causing the death of 146 workers. This company was owned by Max Blank and Isaac Harris. They had a little shop by 1900 and it grew quickly, they moved their business to the ninth floor of the new ten-story Asch building. There were approximately 500 workers, mostly immigrant women, worked at the Triangle shirtwaist company. Bessie Cohen, who survived was inside the building and wrote a short story of what had happened. Most women either died from the fire or jumped from a high height. They jumped because the fire trucks' ladders could only reach up to seventh floor. The doors were locked to prevent workers from stealing or leaving, thus, they had no escape. According to fire marshal, cigarettes were the cause of the fire. Cotton is even more flammable than paper, more like explosively. Plus, the factory had woods and there were oxygen. After the fire, they had an investigation.
Note Exhibit 3, Year 2 cash flows, the “add total change in cash” is an incorrect number. It should be $1,371,350.
unit, two types of costs are distinguished. Firstly the direct costs, consisting of the direct
1. Identify several possible drivers of salary costs for use in estimating a salary cost function. Using one of these cost drivers, apply the high-low technique to estimate the salary cost function for Delta Airlines. What driver did you select and why? How would Delta use this function to forecast costs? What are the advantages of this technique? The disadvantages?
1994 Liabilities and Equity Short-term borrowings Accounts payable Progress collections and price adjustments accrued Dividends payable Taxes accrued Other costs and expenses accrued Current liabilities Long-term borrowings Other liabilities Total liabilities Minority interest in equity of consolidated affiliates Preferred stock Common stock Amounts received for stock in excess of par value Retained earnings Deduct common stock held in treasury Total shareowners’ equity Total liabilities and equity $644.9 696.0 1,000.5 72.8 337.2 1,128.1 $3,879.5 1,195.2 518.9 5,593.6 $ 71.2 $ — $465.2 414.5 3,000.5 $3,880.2 (175.9 ) $3,704.3 $9,369.1 $665.2 673.5 718.4 72.7 310.0 1,052.6 $3,492.4 917.2 492.1 4,901.7 50.1 — $463.8 409.5 2,683.6 $3,556.9 (184.5 ) $3,372.4 $8,324.2 $ $120.6 376.2 300.5 58.7 318.3 392.6 $1,566.9 364.1 221.0 2,152.0 41.4 — $455.8 266.9 1,384.5 $2,107.2 — $2,107.0 $4,300.6 1993 1985