1.
Relevant Cost:
Relevant cost is the avoidable cost which incurred at the time of the decision making process of the management. It means that the cost related to the decision making process is called relevant cost.
Irrelevant Cost:
Irrelevant cost is that cost which is not affected of the decision making process of the management because this cost are those which already has been incurred
Variable Cost:
The Variable cost is that cost which varies with increase or decrease in the level of production. The Variable cost of per unit remains same. Here, it can be said that variable cost has the positive relationship with output of production.
Fixed Cost:
The Fixed cost is that cost which does not change with increase or decrease in the level of the production, but per unit fixed changes with change in the level production. Examples of the fixed cost are rent, wages and insurance.
To determine: Number of the unit produce of product A, B and C.
2.
Operating Income:
The outcome of deduction of operating expense and
Opportunity Cost:
Opportunity cost is total of potential income and other benefits that are lost due to rejection of alternatives. These costs are considered to evaluate the multiple project or options available.
To determine: The maximum amount that W is will to pay.
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COST ACCOUNTING
- Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.arrow_forwardThe Peace Department of Shalom Company uses 5,000 kilograms per month in its production of Peace products. It presently buys all the kilograms of materials it needs from outside supplier at a cost of P100. The Piss Division of Shalom Company manufactures the exact type of material that the Peace Department requires. The Piss Division is operating at its capacity of 15,000 units per month and sells all its output to a local manufacturer at P108 per unit. The following cost data are available for its 15,000 units: Variable production costs 70 All fixed costs 10 If Piss Division has excess capacity and can accommodate all Peace's requests, will Piss accept Peace's offer at P75? Yes or no? Use the underlined words as your choice. Input answers in capital letters.arrow_forwardThe Peace Department of Shalom Company uses 5,000 kilograms per month in its production of Peace products. It presently buys all the kilograms of materials it needs from outside supplier at a cost of P100. The Piss Division of Shalom Company manufactures the exact type of material that the Peace Department requires. The Piss Division is operating at its capacity of 15,000 units per month and sells all its output to a local manufacturer at P108 per unit. The following cost data are available for its 15,000 units: Variable production costs All fixed costs 70 10 If Piss Division sells all units to the local manufacturer, will it accept Peace's offer at P75? Yes or no? Use the underlined words as your choice. Input answers in capital letters.arrow_forward
- Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…arrow_forwardA company produces two products (product A &B) and is currently planning its production mix for the next operating period. the maximum demand of product A is 2,000 units whiles that of product B is also 2,000 units however, the total raw materials required for producing both products is only 60,000kg. the estimated cost, sales and production data of the two products are given below; product(A) Product(B) Direct material:@GH¢10per Kg 240.00 140.00 Direct labor:@GH¢30 per hour 60.00 90.00 fixed overhead 20.00 20.00 variable overhead:@GH¢40 per hour 80.00 120.00 total cost per unit 400.00 370.00 Add profit 50.00 30.00 selling price per unit…arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials. Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Units produced Alpha $ 40 38 25 33 30 33 $ 199 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dellars. Alpha Beta. $ 24 34 13. Assume that Cane's customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the raw material available for…arrow_forward
- [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 32 $ 16 24 19 10 20 22 16 12 19 14 $ 121 $ 92 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane normally produces and sells 44,000 Betas per year. What is the financial dvantage (disadvantage) of discontinuing the Beta product line?arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 35 Beta $ 15 48 23 27 25 35 38 32 28 35 30 $ 212 $ 159 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 8. Assume that Cane normally produces and sells 80,000 Betas and 100,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives…arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product. uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $24 23 22 23 19 22 $ 133 Beta $ 12 26 12 25 15 17 $ 107 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 6. Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?arrow_forward
- [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 38 25 33 30 33 $ 199 Total contribution margin Beta $ 24 34 23 36 26 28 $ 171 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 14. Assume that Cane's customers would buy a maximum of 98,000 units of Alpha and 78,000 units of Beta. Also assume that the raw material…arrow_forwardA company produces three components on the same machine. The components are used i the manufacture of a finished product. The budget for next year indicates a requirement for 3,000 units of each component, but only 60,000 hours of machine time will be available. Additional components can be purchased from an external supplier to meet any production shortfall. Purchase price from external supplier $ per unit 65 78 12 80 What is the minimum total variable cost at which the 3,000 units of all three components can be obtained? Component Machine hours Variable production per unit cost per unit $ per unit 45 A B C O $537,000 $543,000 $549,000 $553,000 O O 9 5 70 56arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 34 21 29 26 29 $ 179 Total contribution margin Beta $ 24 28 19 32 22 24 $ 149 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 14. Assume Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume the raw material available for production…arrow_forward
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