Variable costs: These are the costs that proportionately change with the changes in the activity base such as units of production Common examples of variable costs are direct materials and direct labor costs.
Fixed Costs: These are the costs that remain constant in total dollar amount irrespective to the changes in the activity base such as units of production. Common examples of fixed
To complete: the cost schedule by identifying each cost by the appropriate letter (A) through (O).
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Chapter 19 Solutions
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- Step Costs, Relevant Range Bellati Inc. produces large industrial machinery. Bellati has a machining department and a group of direct laborers called machinists. Each machinist can machine up to 500 units per year. Bellati also hires supervisors to develop machine specification plans and oversee production within the machining department. Given the planning and supervisory work, a supervisor can oversee, at most, three machinists. Bellatis accounting and production history shows the following relationships between number of units produced and the annual costs of supervision and materials handling (by machinists): Required: 1. Prepare a graph that illustrates the relationship between direct labor cost and number of units produced in the machining department. (Let cost of direct labor be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 2. Prepare a graph that illustrates the relationship between the cost of supervision and the number of units produced. (Let cost of supervision be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 3. Suppose that the normal range of production is between 1,400 and 1,500 units and that the exact number of machinists is currently hired to support this level of activity. Further suppose that production for the next year is expected to increase by an additional 500 units. What is the increase in the cost of direct labor? Cost of supervision?arrow_forwardHatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.arrow_forwardRemarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?arrow_forward
- Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?arrow_forwardRelevant Range and Fixed and Variable Costs Vogel Inc. manufactures memory chips for electronic toys within a relevant range of 76,800 to 128,000 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar. Memory chips produced 76,800 96,000 128,000 Total costs: Total variable costs $27,648 d. $fill in the blank 1 j. $fill in the blank 2 Total fixed costs 30,720 e. fill in the blank 3 k. fill in the blank 4 Total costs $58,368 f. $fill in the blank 5 l. $fill in the blank 6 Cost per unit Variable cost per unit a. $fill in the blank 7 g. $fill in the blank 8 m. $fill in the blank 9 Fixed cost per unit b. fill in the blank 10 h. fill in the blank 11 n. fill in the blank 12 Total cost per unit c. $fill in the blank 13 i. $fill in the blank 14 o.…arrow_forwardRelevant range and fixed and variable costsVogel Inc. manufactures memory chips for electronic toys within a relevant range of 45,000 to 75,000 memory chips per year. Within this range, the following partially completed Manufacturing cost schedule has been preparedarrow_forward
- Relevant Range and Fixed and Variable Costs Vogel Inc. manufactures memory chips for electronic toys within a relevant range of 100,800 to 158,400 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Components produced 100,800 123,200 158,400 Total costs: Total variable costs . . . . . . . . . $40,320 (d) (j) Total fixed costs . . . . . . . . . . . . 44,352 (e) (k) Total costs . . . . . . . . . . . . . . . . . $84,672 (f) (l) Cost per unit: Variable cost per unit . . . . . . . (a) (g) (m) Fixed cost per unit . . . . . . . . . . (b) (h) (n) Total cost per unit . . . . . . . . . . (c) (i) (o) Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar. Cost Report Components produced 100,800 123,200 158,400 Total costs: Total variable costs $40,320 (d)…arrow_forwardVogel Inc. manufactures memory chips for electronic toys within a relevant range of 61,600 to 100,800 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Components produced 61,600 79,200 100,800 Total costs: Total variable costs . . . . . . . . . $19,712 (d) (j) Total fixed costs . . . . . . . . . . . . 22,176 (e) (k) Total costs . . . . . . . . . . . . . . . . . $41,888 (f) (l) Cost per unit: Variable cost per unit . . . . . . . (a) (g) (m) Fixed cost per unit . . . . . . . . . . (b) (h) (n) Total cost per unit . . . . . . . . . . (c) (i) (o) Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar.arrow_forwardRelevant Range and Fixed and Variable Costs Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule. When computing the cost per unit, round to two decimal places. Toys produced 40,000 80,000 120,000 Total costs: Total variable costs $720,000 d. $ j. $ Total fixed costs 600,000 k. е. Total costs $1,320,000 f. $ I. $ Cost per Unit Variable cost per unit а. $ g. $ m. $ Fixed cost per unit b. h. n. Total cost per unit с. $ i. $ o. $arrow_forward
- Relevant Range and Fixed and Variable Costs Child Play Inc. manufactures electronic toys within a relevant range of 128,000 to 200,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar. Toys produced 128,000 160,000 200,000 Total costs: Total variable costs $57,600 d. $ j. $ Total fixed costs 64,000 e. k. Total costs $121,600 f. $ l. $ Cost per unit: Variable cost per unit a. $ g. $ m. $ Fixed cost per unit b. h. n. Total cost per unit c. $ i. $ o. $arrow_forwardRelevant range and fixed and variable costsVogel Inc. manufactures memory chips for electronic toys within arelevant range of 45,000 to 75,000 memory chips per year. Within this range, the following partially completedManufacturing cost schedule has been prepared Complete the cost schedule, identifying each cost by the appropriateletter (a) through (o).arrow_forwardAdams 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 $5,900 6,200 3,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.60 each. Required X Answer is complete but not entirely correct. $ 19,300 Yes $ 24,180 X No 11,100 26,900 a. Calculate the total relevant cost. Should Adams continue to make the containers? b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,800 per month, calculate the total avoidable costs. Should Adams continue to make the containers? a. Total relevant cost a. Should Adams continue to make the containers? b. Total avoidable cost b. Should Adams continue to make the containers?arrow_forward
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