Classification of Cost Behavior: Variable or Fixed

Typically, net profit is measured on a quarterly or annual basis. When compared with a company net profit during other periods, it can provide a useful measure for how profitable a company is over time and the overall performance of the company & management team.

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?

Management should note that the level of activity was above what had been planned for the month. This led to an expected increase in profits of $1,100. However, the individual items on the report should not receive much management attention. The favorable variance for revenue and the unfavorable variances for expenses are entirely caused by the increase in activity.

B. 1. The impact of costs on the decision to move forward with the new Maui Sandal line is as follows: As the production continues, the hours needed for each batch, or individual pair, will begin to decrease. By continuing to produce this line the total labor costs will continue to decrease, but most likely, at a slower rate as more sandals are produced. This data can help the company decide employment levels, capacity, costs, and their pricing of this particular merchandise in the open market. The company predicts that it will take 1,000 labor hours for production to complete for the first batch, with 50 total batches between month 1 and month 4.

| Use this information for questions that refer to the World Tennis Ball (WTB) Company case.

Jack (45,000 – 500 – 2000 * 25%, yr1/ 134,500 – 1,000 – 2,500 * 25%, yr2)

1) In this exercise, you viewed the settlement of costs to finished goods and manufactured output settlement. As noted in the exercise, each should be for $42,000.

Refer to Table 7-8. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price per unit must have been

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

Department |Employee |Salary PA |Daily pay rate |No of Sick Days 2012 |Cost of sick to business 2012 |No of Sick Days 2011 |Cost of Sick to the business 2011 | |Inbound |Agent 1 |15000 |57.69 |1 |57.69 |3 |173.07 | |  |Agent 2 |15000 |57.69 |0 |0 |2 |115.38 | |  |Agent 3 |15000 |57.69 |4 |230.76 |2 |115.38 | |  |Agent 4 |15000 |57.69 |0 |0 |1 |57.69 | |

I would like to bring to your attention three types of costs when quality considerations are made here at Acme Catsup Company. The first costs would be our failure costs. The second would be our appraisal costs. The third is the cost of prevention.

All costs can be divided into two basic categories: fixed costs and variable costs. "Fixed costs are costs that are independent of output" and the company cannot alter these costs, no matter what the demand for the product (Variable cost and fixed costs, 2012, Economics Fundamental Finance). "These remain constant throughout the relevant range and are usually considered sunk for the relevant range (not relevant to output decisions). Fixed costs often include rent, buildings, machinery, etc." (Variable cost and fixed costs, 2012, Economics Fundamental Finance). In the case of Apple, such fixed costs might include the costs of subcontracting with manufacturers to make the iPhone 5 as well as the costs to keep Apple's own facilities running while engineers troubleshoot the new product. There is limit to how much a company can alter its fixed costs, although fixed costs usually do not increase dramatically in the short term, either. In the long term, of course, Apple can renegotiate its contract with the companies with whom it outsources; find cheaper places or methods to manufacture the iPhone, etcetera. But the key aspect of fixed costs is that regardless of how many iPhones it chooses to manufacture, Apple cannot alter those costs very much over the course of the initial phases of production.

MMHS is a successful home health service company which has expanded constantly over the intervening 20 years, with further patient growth forecasted in 2012. The home healthcare business is seasonal with 66% of the entire annual sales occurring in the late Fall and Winter months. The evolving expansion of the agency and seasonality of the business makes cash management challenging for Ms. Ringer and has landed her in the predicament of requiring a loan to pay salaries. Aligning operating expenses to revenue, improving management of operating costs and decreasing the amount of cash in accounts receivable will improve her immediate cash flow crisis. For details see prior question.

Using the sample data given in Table 2-20, make a recommendation for how many units of each style Wally should make during the initial phase of production. Assume that all of the 10 styles in the sample problem are made in Hong Kong and that Wally’s initial production commitment must be at least 10,000 units. Ignore price differences among styles in your initial analysis.

1. Correct the EOQ and ROP quantities for each of the five items mentioned in the case.