EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475950
Author: Datar
Publisher: PEARSON CO
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Textbook Question
Chapter 2, Problem 2.27E
Variable and Fixed Costs. Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following
Plant management costs, $1,992,000 per year
Cost of leasing equipment, $1,932,000 per year
Workers’ wages, $800 per Surfer vehicle produced
Direct materials costs: Steel, $1,400 per Surfer; Tires, $150 per tire, each Surfer takes 5 tires (one spare).
City license, which is charged monthly based on the number of tires used in production:
| 0–500 tires | $ 40,040 |
| 501–1,000 tires | $ 65,000 |
| more than 1,000 tires | $249,870 |
Consolidated currently produces 170 vehicles per month.
- 1. What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
Required
- 2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your graphs? Explain.
- 3. What is the total manufacturing cost of each vehicle if 80 vehicles are produced each month? 205 vehicles? How do you explain the difference in the manufacturing cost per unit?
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Variable and Fixed Costs. Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following manufacturing costs: Plant management costs, $1,992,000 per year Cost of leasing equipment, $1,932,000 per year Workers’ wages, $800 per Surfer vehicle produced Direct materials costs: Steel, $1,400 per Surfer; Tires, $150 per tire, each Surfer takes 5 tires (one spare). City license, which is charged monthly based on the number of tires used in production:0–500 tires $ 40,040 501–1,000 tires $ 65,000 more than 1,000 tires $249,870
Consolidated currently produces 170 vehicles per month.
1. What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to…
Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit.
Required: a) Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain.b) An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations.c) How do your answers in parts (a) and (b) relate to the theory of constraints?…
Montour Manufacturing Corporation makes an electronic component in two departments, Machining and Assembly. The capacity per month is 80,000 units in the Machining Department and 100,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Montour can sell as many units of this electronic component as it produces at a selling price of $500 per unit.
Required:
Montour’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $500,000. Should the money be spent? Explain.
An outside contractor offers to do assembly for 15,000 units at a cost of $2,500,000. Should Montour accept the offer from the subcontractor? Show calculations.
How do your answers in parts (a) and (b) relate to the…
Chapter 2 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 2 - Define cost object and give three examples.Ch. 2 - Define direct costs and indirect costs.Ch. 2 - Prob. 2.3QCh. 2 - Name three factors that will affect the...Ch. 2 - Define variable cost and fixed cost. Give an...Ch. 2 - What is a cost driver? Give one example.Ch. 2 - What is the relevant range? What role does the...Ch. 2 - Explain why unit costs must often be interpreted...Ch. 2 - Prob. 2.9QCh. 2 - What are three different types of inventory that...
Ch. 2 - Distinguish between inventoriable costs and period...Ch. 2 - Define the following: direct material costs,...Ch. 2 - Describe the overtime-premium and idle-time...Ch. 2 - Define product cost. Describe three different...Ch. 2 - What are three common features of cost accounting...Ch. 2 - Prob. 2.16MCQCh. 2 - Comprehensive Care Nursing Home is required by...Ch. 2 - Frisco Corporation is analyzing its fixed and...Ch. 2 - Year 1 financial data for the ABC Company is as...Ch. 2 - The following information was extracted from the...Ch. 2 - Computing and interpreting manufacturing unit...Ch. 2 - Direct, indirect, fixed, and variable costs....Ch. 2 - Classification of costs, service sector. Market...Ch. 2 - Classification of costs, merchandising sector....Ch. 2 - Classification of costs, manufacturing sector. The...Ch. 2 - Variable costs, fixed costs, total costs. Bridget...Ch. 2 - Variable and Fixed Costs. Consolidated Motors...Ch. 2 - Variable costs, fixed costs, relevant range. Gummy...Ch. 2 - Prob. 2.29ECh. 2 - Cost drivers and functions. The representative...Ch. 2 - Total costs and unit costs, service setting....Ch. 2 - Total and unit cost, decision making. Gayles...Ch. 2 - Inventoriable costs versus period costs. Each of...Ch. 2 - Computing cost of goods purchased and cost of...Ch. 2 - Cost of goods purchased, cost of goods sold, and...Ch. 2 - Flow of Inventoriable Costs. Renkas Heaters...Ch. 2 - Cost of goods manufactured, income statement,...Ch. 2 - Cost of goods manufactured, income statement,...Ch. 2 - Income statement and schedule of cost of goods...Ch. 2 - Interpretation of statements (continuation of...Ch. 2 - Income statement and schedule of cost of goods...Ch. 2 - Terminology, interpretation of statements...Ch. 2 - Labor cost, overtime, and idle time. David...Ch. 2 - Missing records, computing inventory costs. Ron...Ch. 2 - Comprehensive problem on unit costs, product...Ch. 2 - Prob. 2.46PCh. 2 - Cost classification; ethics. Paul Howard, the new...Ch. 2 - Prob. 2.48P
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