亨格瑞管理会计英文第15版练习答案05解析.

CHAPTER 11Capital Budgeting11-A1 (15-25 min.) Answers are printed in the text at the end of the assignment material.11-29 (10-15 min.)1. The present value is $480,000 and the annual payments are an annuity, requiringuse of Table 2:(a)$480,000 = annual payment × 11.2578annual payment = $480,000 ÷ 11.2578 = $42,637(b)$480,000 = annual payment × 9.4269annual payment = $480,000 ÷ 9.4269 = $50,918(c)$480,000 = annual payment × 8.0552annual payment = $480,000 ÷ 8.0552 =$59,5892. (a)$480,000 = annual payment × 8.5595annual payment = $480,000 ÷ 8.5595 = $56,078(b)$480,000 = annual payment × 7.6061annual payment = $480,000 ÷ 7.6061 = $63,107(c)$480,000 = annual payment × 6.8109annual payment = $480,000 ÷ 6.8109 =$70,4753. (a) Total payments= 30 × $50,918 = $1,527,540Total interest paid= $1,527,540- $480,000 = $1,047,540(b) Total payments= 15 × $63,107= $946,605Total interest paid = $946,605 - $480,000 = $466,60511-36 (10 min.)Buy. The net present value is positive.Initial outlay * $(21,000)Present value of cash operating savings, from12-year, 12% column of Table 2, 6.1944 × $5,000 30,972Net present value $ 9,972* The trade-in allowance really consists of a $5,000 adjustment of the sellingprice and a bona fide $10,000 cash allowance for the old equipment. Therelevant amount is the incremental cash outlay, $21,000. The book value isirrelevant.11-39 (10-15 min.)Copyright ©2011 Pearson Education 1Copyright ©2011 Pearson Education21. NPV @ 10% = 10,000 × 3.7908 = $37,908 - $36,048 = $1,860 NPV @ 12% = 10,000 × 3.6048 = $36,048 - $36,048 = $0NPV @ 14% = 10,000 × 3.4331 = $34,331 - $36,048 = $(1,717)2.The IRR is the interest rate at which NPV = $0; therefore, from requirement 1 we know that IRR = 12%.3.The NPV at the company’s cost of capital, 10%, is positive, so the project should be accepted.4.The IRR (12%) is greater than the company’s cost of capital (10%), so the project should be accepted. Note that the IRR and NPV models give the same decision.11-46 (10-15 min.)Annual addition to profit = 40% × $25,000 = $10,000.1.Payback period is $36,000 ÷ $10,000 = 3.6 years. It is not a good measure of profitability because it ignores returns beyond the payback period and it does not account for the time value of money.2. NPV = $5,114. Accept the proposal because NPV is positive. Computation: NPV = ($10,000 × 4.1114) - $36,000= $41,114 - $36,000 = $ 5,1143. ARR = (Increase in average cash flow – Increase in depreciation) ÷ Initialinvestment= ($10,000 - $6,000) ÷ $36,000 = 11.1%11-51 (30-35 min.)1.Annual Operating Cash FlowsXeroxCannon Difference Salaries $49,920(a) $41,600(b) $ 8,320 Overtime 1,728(c) -- 1,728 Repairs and maintenance 1,800 1,050 750Toner, supplies, etc. 3,6003,300 300 Total annual cash outflows $57,048 $45,950 $11,098(a) ($ 8 × 40 hrs.) × 52 weeks × 3 employees = $320 × 52 × 3 = $49,920 (b) ($10 × 40 hrs.) × 52 weeks × 2 employees = $400 × 52 × 2 = $41,600 (c) ($12 × 4 hrs.) × 12 months × 3 machines = $ 48 × 12 × 3 = $ 1,728Initial Cash FlowsXeroxCannon Difference Purchase of Cannon machines $ -- $50,000 $50,000Sale of Xerox machines -- -3,000 -3,000 Training and remodeling -- 4,000 4,000 Total $ -- $51,000 $51,000Copyright ©2011 Pearson Education 3EXHIBIT 11-50All numbers are expressed in Mexican pesos.2. 18% Total Sketch of Relevant Cash Flows(inthousands)PresentPVFactor Value 0 1 2 3 4 5Cash operating savings:* .8475 83,902 99,000108,90078,212.718272,904119,790.608667,966 131,769 .5158.4371 63,356 144,946Total366,340Income tax savings fromdepreciation not changedby inflation, see 1 3.1272 105,074 33,600 33,600 33,600 33,600 33,600471,414TotalRequired outlay at time zero 1.0000 (420,000) (420,000)Net present value 51,414*Amounts are computed by multiplying (150,000 × .6) = 90,000 by 1.10, 1.10 2, 1.10 3, etc.Copyright ©2011 Pearson Education 461PV PresentofValue$1.00ofCashFlows Annual Cash FlowsDiscountedat 12% 0 1 2 3 4 5T OTAL P ROJECT A PPROACH:Cannon:Init. cash outflow 1.0000 $ (51,000)Oper. cash flows 3.6048 (165,641) (45,950) (45,950) (45,950) (45,950) (45,950)Total $(216,641)Xerox:Oper. cash flows 3.6048 $(205,647) (57,048) (57,048) (57,048) (57,048) (57,048)Difference in favor ofretaining Xerox $ (10,994)I NCREMENTAL A PPROACH:Initial investment 1.0000 $(51,000)Annual operatingcash savings 3.6048 40,006 11,098 11,098 11,098 11,098 11,098Net present valueof purchase $(10,994)2. The Xerox machines should not be replaced by the Cannon equipment.Net savings = (Present value of expenditures to retain Xerox machines) less (Present value of expenditures toconvert to Cannon machines)= $205,647 - $216,641 = $(10,994)3. a. How flexible is the new machinery? Will it be useful only for the presently intended functions, or can it be easilyadapted for other tasks that may arise over the next 5 years?b. What psychological effects will it have on various interested parties?Copyright ©2011 Pearson Education 46211-71 (60-90 min.)This is a complex problem because it requires comparing three alternatives. It reviews Chapter 6 as well as covering several of the topics of Chapter 11. The following answer uses the total project approach. The total net future cash outflows are shown for each alternative.1. Alternative A: Continue to manufacture the parts with the current tools.Annual cash outlaysVariable cost, $92 × 8,000 $(736,000)Fixed cost, 1/3 × $45 × 8,000 × .6 (72,000)Tax savings, .4 × ($736,000 + $72,000) 323,200After-tax annual cost $(484,800)Present value, 3.6048 × $484,800 $(1,747,607)PV of remaining tax savings on MACRS:11.52% × $2,000,000 × .4 × .8929 82,2905.76% × $2,000,000 × .4 × .7972 36,735Total present value of costs, Alternative A $(1,628,582)Alternative B: Purchase from outside supplierAnnual cash outlaysPurchase cost, $110 × 8,000 $(880,000)Tax savings, $880,000 × .4 352,000After-tax annual cost $(528,000)Copyright ©2011 Pearson Education 463Present value, $528,000 × 3.6048 $(1,903,334)Sale of old equipment:Sales price $ 400,000Book value [(11.52% + 5.76%) × $2,000,000] 345,600Gain $ 54,400Taxes @ 40% (21,760)Total after-tax effect ($400,000 - $21,760) 378,240Total present value of costs, Alternative B $(1,525,094)Copyright ©2011 Pearson Education 464Alternative C: Purchase new toolsInvestment $(1,800,000) Annual cash outlaysVariable cost, $73 × 8,000 $(584,000)Fixed cost (same as A) (72,000)Tax savings, .4 × ($584,000 + $72,000) 262,400After-tax annual cost $(393,600)Present value, $393,600 × 3.6048 (1,418,849)Tax savings on new equipment* 579,217Effect of disposal of new equipmentSales price $ 500,000Book value 0Gain $500,000Taxes @ 40% 200,000Total after-tax effect $ 300,000Present value, $300,000 × .5674 170,220Effect of disposal of old equipment (see Alternative B) 378,240Total present value of costs, Alternative C $(2,091,172)* Using the MACRS schedule for tax depreciation, the depreciation rate for each year of a 3-year asset's life is shown inExhibit 11-6:Depreciation Tax PV PresentYear Rate Savings Factor Value1 33.33% .3333 × $1,800,000 × .40 = $239,976 .8929 $214,2752 44.45% .4445 × 1,800,000 × .40 = 320,040 .7972 255,1363 14.81% .1481 × 1,800,000 × .40 = 106,632 .7118 75,9014 7.41% .0741 × 1,800,000 × .40 = 53,352 .6355 33,905Total present value of tax savings $579,217Using Exhibit 11-7, we get .8044 × $1,800,000 × .4 = $579,168, which differs from $579,217 by a $49 rounding error.The alternative with the lowest present value of cost is Alternative B, purchasing from the outside supplier.Copyright ©2011 Pearson Education 4652. Among the major factors are (1) the range of expected volume (both large increases and decreases in volume make thepurchase of the parts relatively less desirable), (2) the reliability of the outside supplier, (3) possible changes inmaterial, labor, and overhead prices, (4) the possibility that the outside supplier can raise prices before the end of five years, (5) obsolescence of the products and equipment, and (6) alternate uses of available capacity (alternative uses make Alternative B relatively more desirable).Copyright ©2011 Pearson Education 466Copyright ©2011 Pearson Education467CHAPTER 12 Cost Allocation12-30 (10-15 min.) 1. Rate = [$2,500 + ($.05 × 100,000)] ÷ 100,000 = $.075 per copy Cost allocated to City Planning in August = $.075 × 42,000 = $3,150. 2. Fixed cost pool allocated as a lump sum depending on predicted usage:To City Planning: (36,000 ÷ 100,000) × $2,500 = $900 per monthVariable cost pool allocated on the basis of actual usage: $.05 × number of copies Cost allocated to City Planning in August: $900 + ($.05 × 42,000) = $3,000. 3. The second method, the one that allocated fixed- and variable-cost pools separately, is preferable. It better recognizesthe causes of the costs. The fixed cost depends on the size of the photocopy machine, which is based on predicted usage and is independent of actual usage. Variable costs, in contrast are caused by actual usage.Exhibit 12-34Customer Type 1Customer Type 2 Customer Type 3 Sales Gross price profit per margin Gross Gross Gross Product unit per unit Units Revenue profit Units Revenue profit Units Revenue profitA $11.031$ 4.14 200 $ 2,206 $ 828 2,200 $ 24,266 $ 9,108 500 $ 5,515 $ 2,070 B 20.47 4.09 100 2,047 409 1,200 24,564 4,908 3,000 61,410 12,270 C 51.38 10.28 50 2,569 514 400 20,552 4,112 5,000 256,900 51,400D 90.00 39.38 400 36,000 15,752 800 72,000 31,504 400 36,000 15,752Total 750 $42,822 17,5034,600 $141,382 49,632 8,900 $359,825 81,492 Cost to serve 7,36845,193 87,439 Operating income $10,135 $4,439 ($5,947) Customer gross margin percentage 40.9% 35.1% 22.6% Cost to serve percentage 17.2% 32.0% 24.3%Customer operating income percentage 23.7%3.1% (1.7%)1$32,000 ÷ 2,900 units; etc. The rounded numbers from the first two columns are used in subsequent calculations.5. The chart below shows customer profitability for the three customer types and suggested strategies for profit improvement.Grow business with this customer type byfocused sales efforts and quantity discounts.Work with customers to lowerthe cost to serve. Seek internalprocess improvements to lowerthose elements of the cost toserve controllable by thecompany.Copyright ©2011 Pearson Education 46912-35 (15-20 min.)of1. AllocationCostsGallons Weighting Joint$300,000 $180,000×A 9,000 9/15SolventSolvent B 6,000 6/15 × $300,000 120,00015,000 $300,0002. Relative Sales Allocation ofCostsValue at Split-off* Weighting JointSolvent A $270,000 27/54 × $300,000 $150,000Solvent B 270,000 27/54 × $300,000 150,000$540,000 $300,000 * $30 × 9,000 and $45 × 6,00012-42 (25-30 min.)There a several ways to organize an analysis that provides product costs. We like to focus first on determining total activity-cost pools and activity cost per driver unit. Then, an analysis similar to the one shown in Exhibit 12-8 can be used.Schedule a: Activity center cost poolsResources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 2% $ 1,800 Assembly machines $247,000 × (400 ÷ 1,900) 52,000 Facilities management $95,000 × (400 ÷ 1,900) 20,000 Power $54,000 × (10 ÷ 90) 6,000Total assigned cost $79,800Cost per driver unit (setup) $79,800 ÷ 40 $ 1,995 Resources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 98% $ 88,200 Assembly machines $247,000 × (1,500 ÷ 1,900) 195,000 Facilities management $95,000 × (1,500 ÷ 1,900) 75,000 Power $54,000 × (80 ÷ 90) 48,000Total assigned cost $406,200Cost per driver unit (machine hour) $406,200 ÷ 1,500 $ 270.80Copyright ©2011 Pearson Education 470Exhibit 12-42 Contribution to cover other value-chain costs by productStandardDeluxe Custom Cost per Driver unit Driver Driver Driver Activity/Resource (Schedule a) Units Cost Units Cost Units Cost Setup/Maintenance $1,995 20 $ 39,900 12 $ 23,940 8 $ 15,960 Assembly $270.80 1,000 270,800 400 108,320 100 27,080 Parts 1,003,800 115,080 15,980Direct labor 298,00072,000 68,000 Total $1,612,500$319,340 $127,020 Units 100,000 10,000 1,000 Cost per display $16.125 $31.934 $127.02Selling price 20.00050.000 250.00 Unit gross profit $ 3.875$18.066 $122.98 Total gross profit $387,500$180,660 $122,980The total contribution of these products is $387,500 + $180,660 + $122,980 = $691,140.12-43 (25-30 min.) See solution to problem 12-42.12-55 (100 – 200 min.)1. Exhibits 12-55A and 12-55B show the calculation of customer gross margin percentage and customer cost-to-serve percentage for the 4 customer types. Exhibit 12-55C shows a plot of customer gross margin percentage versus customer cost-to-serve percentage for the 4 customer types.2. Suggested strategies for profit improvement for the 4 customer types follow.•Customer type 1 - Mega stores. These stores have the lowest cost-to-serve.Profitability can be improved by focusing on a better product mix. A quarter ofthe sales (cases) to these stores are from bulk and singles products – both ofwhich have a negative gross margin. A shift in mix towards more regular andfragile product types would improve profitability.•Customer type 2 – Local small stores. These stores have a product mix that contains a substantial amount (32%) of the negative gross margin products. Thesame change in sales focus that applies to mega stores can be applied to localsmall stores.But unlike mega stores, small stores are very costly to serve. From Exhibit 12-55 B, the largest single cost to serve local small stores is truck deliveries. Theaverage number of cases per order (the same as per truck delivery) is 6,000,000 ÷ 80,000 = 75. Compare this to mega stores that average 7,680,000 ÷ 32,000 = 240 cases per order (delivery). This is a significant factor causing the high cost-to-serve.For example, suppose that the average order size could be increased from 75,000 to 150,000 cases. If the total annual cases sold is unchanged (6,000,000), a totalof 40 orders, a 50% reduction, would be made. An estimate of the cost savingsand the impact on the cost-to-serve percentage can be made as follows:Cost per Driver Unit Reduction in Driver Cost Savings(Exhibit 12-55B) Units of 50% (000) Truck delivery $167.55 34,000 $5,696.70 Order processing 27.49 40,000 1,099.60 Regular scheduling 5.83 36,000 209.88 Expedited scheduling 19.44 4,000 77.76 Total cost savings (000) $7,083.94 Cost savings as a percent of revenue 24.9%New cost-to-serve as a percent of revenue 60.1%In addition to the above savings, other activities would also be impacted by thereduction in orders such as customer service. So while the total impact ofCopyright ©2011 Pearson Education 472focusing on increasing order size can only be estimated, it is reasonable to expect dramatic cost savings from the current 85% of revenue.Other factors that should be investigated include the high level of corporatesupport and customer service.•Customer type 3 – Local large stores. Local large stores generate $68,400 ÷ $136,230 = 50% of DSI’s total revenue and with a net margin of 58% - 47% = 11%. The key to local large store profitability is sales of a large percentage (80%) of regular product. The cost-to-serve percentage is 47%. This could be reduced as for customer type 2 by increasing the order size from the current level of14,400,000 ÷ 120,000 = 120 cases per order. But a dramatic improvementshould not be expected. In general, local large stores are sustaining DSI’sbusiness and their loyalty should be cultivated.•Customer type 4 – Specialty stores. Specialty stores have a low gross margin of 22% coupled with a very large cost-to-serve percent of 106%! Although thesestores do not account for a significant portion of DSI’s revenue the companyshould rationalize their business. Several actions could be suggested. One is to charge a premium for all high-security products. The vast majority of theseproducts are sold to specialty stores with only marginal sales to mega and local small stores. Another action is to adopt a customer loyalty program based onvolume of sales. The list price of $7.25 per case would apply to customers with sales volumes less than a specified level. Most of DSI’s customers would qualify for discounts (similar to those currently existing) so prices would not besignificantly different. For specialty stores, prices would increase dramatically.This may result in losing specialty-store business so DSI needs to decide is this isa direction they wish to consider.Copyright ©2011 Pearson Education 473Exhibit 12-55A (Units and dollars are in thousands.)C u s t o m e r T y p eProductRegular Short Fragile Bulk HighSecurity Singles Total Gross Profit PercentageProduct mix percentage 60% 5% 5% 20% 5% 5% 100% Cases sold 4,608 384 384 1,536 384 3847,680Total Revenue$ 21,888 $ 1,824$ 1,824$7,296$ 1,824 $ 1,824 $36,480Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $(1.44)$ 0.54 $ (5.30)1Total Gross Profit$ 15,114 $ 607 $ 1,052 $(2,212)$ 207 $(2,035)$12,733 35%Product mix percentage 50% 5% 5% 30% 8% 2% 100% Cases sold3,000 300 300 1,800 480 120 6,000 Total Revenue @ 4.75/case $ 14,250 $ 1,425 $ 1,425 $ 8,550 $ 2,280 $ 570 $28,500 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)2Total Gross Profit$ 9,840 $ 474 $ 822 $(2,592) $ 259 $ (636)$ 8,167 29%Product mix percentage 80% 0% 10% 10% 0% 0% 100%Cases sold 11,520 -1,4401,440--14,400Total Revenue @ 4.75/case $ 54,720 $ - $ 6,840 $ 6,840 $ - $ - $68,400Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)3Total Gross Profit$ 37,786 $ - $ 3,946 $(2,074) $ - $ - $39,658 58%Product mix percentage 10% 20% 0% 0% 70% 0% 100% Cases sold 60 120 - - 420-600Total Revenue @ 4.75/case $ 285 $ 570 $ - $ - $ 1,995 $ - $ 2,850 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44)$ 0.54 $ (5.30)4Total Gross Profit $ 197$ 190$ -$ -$ 227$ - $ 61322%Exhibit 12-55B (Units and dollars are in thousands.)ActivityO r d e r P r o c e s s i n gC u s t o m e r S e r v i c eO r d e r C h a n g e sC o r p o r a t e S u p p o r tR e g u l a r S c h e d u l i n gE x p e d i t e d S c h e d u l i n gS h i p p i n gT r u c k D e l i v e r yP a r c e l D e l i v e r y Cost DriverO r d e r sL a b o r H o u r sN u m b e r o f C h a n g e sL a b o r H o u r sO r d e r sO r d e r sP a l l e t sD e l i v e r i e sD e l i v e r i e sC u s t o m e r T y p eCost/DriverUnit $27.49 $43.34$32.63$51.66$5.83 $19.44 $6.60 $167.55 $23.89Total Driver Units3218.73.2 - 29 3 41625.6 1.6 Cost to Serve $879.68 $810.46$104.42-$169.07$58.32$2,745.6$4,289.28$38.22$9,095.05Revenue (See Exhibit 12-55A) $36,480.001 Cost-to-Serve Percentage24.9%Driver Units 80 100 8 20 72 8 640 68 8Cost to Serve $2,199.2 $4,334$261.04$1,033.2 $419.76$155.52$4,224$11,393.4$191.12$24,211.24Revenue (See Exhibit 12-55A) $28,500.02Cost-to-Serve Percentage85.0%Exhibit 12-55B (continued)ActivityO r d e r P r o c e s s i n gC u s t o m e r S e r v i c eO r d e r C h a n g e sC o r p o r a t e S u p p o r tR e g u l a r S c h e d u l i n gE x p e d i t e d S c h e d u l i n gS h i p p i n gT r u c k D e l i v e r y P a r c e l D e l i v e r y Cost DriverO r d e r sL a b o r H o u r sN u m b e r o f C h a n g e sL a b o r H o u r sO r d e r sO r d e r sP a l l e t sD e l i v e r i e sD e l i v e r i e sC u s t o m e r T y p eCost/DriverUnit $27.49 $43.34$32.63$51.66$5.83 $19.44 $6.60 $167.55 $23.89TotalDriver Units 120 70 2.4 80 108 12 840 90 6Cost to Serve$3,298.8 $3,033.8 $78.31$4,132.8 $629.64 $233.28 $5,544$15,079.5$143.34$32,173.47Revenue (See Exhibit 12-55A) $68,400.03 Cost-to-Serve Percentage47.0%Driver Units 12 30 1.2 0 10 2 60 4.8 2.4Cost to Serve $329.88$1,300.2 $39.16- $58.3 $38.88 $396 $804.24 $57.34$3,023.99Revenue (See Exhibit 12-55A) $2,850.004 Cost-to-Serve Percentage106.1%CUSTOMER PROFITABILITYCT3, 47%, 58%0%10%20%30%40%50%60%70%80%90%100%0%10%20%30%40%50%60%70%80%90%100%110%120%COST-TO-SERVE PERCENTAGEG R O S S P R O F I T P E R C E N T A G EExhibit 12-55CCopyright ©2011 Pearson Education 478。

亨格瑞管理会计英文第15版练习答案01CHAPTER 1COVERAGE OF LEARNING OBJECTIVESLEARNING OBJECTIVE LO1: Describe the major users and uses of accounting information. LO2: Describe the cost-benefit and behavioral issues involved in designing an accounting system. LO3: Explain the role of budgets and performance reports in planning and control. LO4: Discuss the role accountants play in the company’s value chain functions. LO5: Explain why accounting is important in a variety of career paths. LO6: Identify current trends in management accounting. LO7: Explain why ethics and standards of ethical conduct are important to accountants. FUNDA- CRITICAL CASES, MENTAL THINKING EXCEL, ASSIGN-EXERCISES COLLAB., & MENT AND INTERNET MATERIAL EXERCISES PROBLEMS EXERCISES A1, B1 28, 29, 33 39, 40, 42 55 41, 43 A2, B2 32 45 53A1, B1 30, 31, 34, 35, 39, 42, 44 36 30, 31 52, 55 A3, B3 37, 38 47, 48, 49 54 51, 52, 55 1 Copyright ?2021 Pearson Education, Inc., Publishing as Prentice Hall.CHAPTER 1Managerial Accounting, the Business Organization, and Professional Ethics1-A1 (10-15 min.)Information is often useful for more than one function, so the following classifications for each activity are not definitive but serve as a starting point for discussion: 1. Scorekeeping. A depreciation schedule is used in preparing financial statementsto report the results of activities. 2. Problem solving. Helps a manager assess the impact of a purchase decision. 3. Scorekeeping. Reports on the results of an operation. Could also be attentiondirecting if scrap is an area that might require management attention. 4. Attention directing. Focuses attention on areas that need attention. 5. Attention directing. Helps managers learn about the information contained in aperformance report. 6. Scorekeeping. The statement reports what has happened. Could also be attentiondirecting if the report highlights a problem or issue. 7. Problem solving. Assuming the cost comparison is to help the manager decidebetween two alternatives, this is problem solving. 8. Attention directing. Variances point out areas where results differ fromexpectations. Interpreting them directs attention to possible causes of the differences. 9. Problem solving. Aids a decision about where to make parts. 10. Attention directing and problem solving. Budgeting involves making decisionsabout planned activities -- hence, aiding problem solving. Budgets also direct attention to areas of opportunity or concern --hence, directing attention. Reporting against the budget also has a scorekeeping dimension.2 Copyright ?2021 Pearson Education, Inc., Publishing as Prentice Hall.1-A2 1. 2.(15-20 min.)Room rental FoodEntertainment Decorations TotalBudgeted Amounts $ 140 700 600 220 $1,660 Actual Amounts $ 140865 600 260 $1,865 Deviations or Variances $ 0 165U 0 40U $205U Because of the management by exception rule, room rental and entertainment require no explanation. The actual expenditure for food exceeded the budgetby $165. Of this $165, $150 is explained by attendance of 15 persons morethan budgeted (at a budget of $10 per person for food) and $15 is explained by expenditures above $10 per person.Actual expenditures for decorations were $40 more than the budget. The decorations committee should be asked for an explanation of the excess expenditures.1-A3 (10 min.)All of the situations raise possibilities for violation of the integrity standard. In addition, the manager in each situation must address an additional ethical standard: 1. The General Mills manager must respect the confidentiality standard. He or sheshould not disclose any information about the new cereal. 2. Felix must address his level of competence for the assignment. If his supervisorknows his level of expertise and wants an analysis from a “layperson” point of view, he should do it. However, if the supervisor expects an expert analysis, Felix must disclose his lack of competence. 3. The credibility standard should cause Mary Sue to decline to omit the informationfrom the budget. It is relevant information, and its omission may mislead readers of the budget.3 Copyright ?2021 Pearson Education, Inc., Publishing as Prentice Hall.1-B1 (15-20 min.)Information is often useful for more than one function, so the following classifications for each activity are not definitive but serve as a starting point for discussion: 1. Problem solving. Provides information for deciding between two alternativecourses of action. 2. Scorekeeping. Recording what has happened. If amounts are compared withexpectations, this could also serve an attention-directing function. 3. Problem solving. Helps a manager decide among alternatives. 4. Attention directing. Directs attention to the use of overtime labor. Alsoscorekeeping. 5. Problem solving. Provides information to managers for deciding whether to movecorporate headquarters. 6. Attention directing. Directs attention to why nursing costs increased. 7. Attention directing. Directs attention to areas where actual results differed fromthe budget. 8. Problem solving. Helps the vice-president decide which course of action is best. 9. Problem solving. Produces information to help the marketing department make adecision about a marketing campaign. 10. Scorekeeping. Records actual overtime costs. If results are compared withexpectations, also attention directing. 11. Attention directing. Directs attention to stores with either high or low ratios ofadvertising expenses to sales. 12. Attention directing. Directs attentionto causes of returns of the drug. 13. Attention directing or problem solving, depending on the use of the schedule. If itis to identify areas of high fuel usage it is attention directing. If itis to plan for purchases of fuel, it is problem solving. 14. Scorekeeping. Records items needed for financial statements.4 Copyright ?2021 Pearson Education, Inc., Publishing as Prentice Hall.1-B2 (10-15 min.)1 & 2. Budget Actual Variance Sales $75,000 $74,600 $ 400U Costs: Fireworks $36,000 $35,500 $500F Labor 15,000 18,000 3,000U Other 8,000 7,910 90F Total cost 59,000 61,410 2,410U Profit $16,000 $13,190 $2,810U 3. The cost of fireworks was $500 ÷ $36,000 = 1.4%under budget while sales wasjust 400 ÷ $75,000 = .5% under budget. Did fireworks suppliers lowertheir prices? Were selling prices set higher than expected? There should be some explanation for the lower cost of fireworks. The labor cost was $3,000÷ $15,000 =20% over budget. Sales and other costswere close to budget in percentage terms. Why was labor cost much higherthan expected?1-B3 (15 - 20 min.) 1. A code of conduct is a document specifying theethical standards of anorganization. 2. Different companies include different elements intheir codes of conduct. Some ofthe items included in companies’ codes of condu ct include maintaining adress code, avoiding illegal drugs, following instructions of superiors, being reliable and prompt, maintaining confidentiality, not accepting personal gifts fromstakeholders as a result of company role, avoiding racial or sexual discrimination, avoiding conflict of interest, complying with laws and regulations, not using organization’s property for personal use, andreporting illegal or questionable activity. Some companies have a simple code with little detail, and others have long lists of rules and regulations regarding appropriate conduct. The key is that the code of conduct must fit with the corporate culture. 3. Simply having a code of conduct does not guarantee ethical behavior byemployees. Most important is top management’s ethical example and its support of the code of conduct. A company’s performance evaluation and reward system must be consistent with its code of conduct. If unethical actions are rewarded, they will be encouraged even if they violate the code of conduct.5 Copyright ?2021 Pearson Education, Inc., Publishing as Prentice Hall.感谢您的阅读，祝您生活愉快。

第二章产品成本计算Exercises2–1（指教材上的第2章练习第1题，下同）1. Part #72A Part #172CSteel* $ 12.00 $ 18.00Setup cost** 6.00 6.00Total $ 18.00 $ 24.00*($1.00 ? 12; $1.00 ? 18)**($60,000/10,000)Steel cost is assigned by calculating a cost per ounce and then multiplying this by the ounces used by each part:Cost per ounce= $3,000,000/3,000,000 ounces= $1.00 per ounceSetup cost is assigned by calculating the cost per setup and then dividing this by the number of units in each batch (there are 20 setups per year):Cost per setup = $1,200,000/20= $60,0002. The cost of steel is assigned through the driver tracing using the number of ounces of steel, and the cost of the setups is assigned through driver tracing also using number of setups as the driver.3. The assumption underlying number of setups as the driver is that each part uses an equal amount of setup time. Since Part #72A uses double the setup time of Part #172C, it makes sense to assign setup costs based on setup time instead of number of setups. This illustrates the importance of identifying drivers that reflect the true underlying consumption pattern. Using setup hours [(40 ?10) + (20 ? 10)], we get the following rate per hour:Cost per setup hour = $1,200,000/600= $2,000 per hourThe cost per unit is obtained by dividing each part’s total setup costs by the number of units:Part #72A = ($2,000 ? 400)/100,000 = $8.00Part #172C = ($2,000 ? 200)/100,000 = $4.00Thus, Part #72A has its unit cost increased by $2.00, while Part #172C has its unit cost decreased by $2.00.problems2–51. Nursing hours required per year: 4 ? 24 hours ? 364 days* = 34,944*Note: 364 days = 7 days ? 52 weeksNumber of nurses = 34,944 hrs./2,000 hrs. per nurse = 17.472Annual nursing cost = (17 ? $45,000) + $22,500= $787,500Cost per patient day = $787,500/10,000 days= $78.75 per day (for either type of patient)2. Nursing hours act as the driver. If intensive care uses half of the hours and normal care the other half, then 50 percent of the cost is assigned to each patient category. Thus, the cost per patient day by patient category is as follows:Intensive care = $393,750*/2,000 days= $196.88 per dayNormal care = $393,750/8,000 days= $49.22 per day*$525,000/2 = $262,500The cost assignment reflects the actual usage of the nursing resource and, thus, should be more accurate. Patient days would be accurate only if intensive care patients used the same nursing hours per day as normal care patients.3. The salary of the nurse assigned only to intensive care is a directly traceable cost. To assign the other nursing costs, the hours of additional usage would need to be measured. Thus, both direct tracing and driver tracing would be used to assign nursing costs for this new setting.2–61. Bella Obra CompanyStatement of Cost of Services SoldFor the Year Ended June 30, 2006Direct materials:Beginning inventory $ 300,000Add: Purchases 600,000Materials available $ 900,000Less: Ending inventory 450,000*Direct materials used $ 450,000Direct labor 12,000,000Overhead 1,500,000Total service costs added $ 13,950,000Add: Beginning work in process 900,000Total production costs $ 14,850,000Less: Ending work in process 1,500,000Cost of services sold $ 13,350,000*Materials available less materials used2. The dominant cost is direct labor (presumably the salaries of the 100 professionals). Although labor is the major cost of providing many services, it is not always the case. For example, the dominant cost for some medical services may be overhead (e.g., CAT scans). In some services, the dominant cost may be materials (e.g., funeral services).3. Bella Obra CompanyIncome StatementFor the Year Ended June 30, 2006Sales $ 21,000,000Cost of services sold 13,350,000Gross margin $ 7,650,000Less operating expenses:Selling expenses $ 900,000Administrative expenses 750,000 1,650,000Income before income taxes $ 6,000,0004. Services have four attributes that are not possessed by tangible products: (1) intangibility, (2) perishability, (3) inseparability, and (4) heterogeneity. Intangibility means that the buyers of services cannot see, feel, hear, or taste a service before it is bought. Perishability means that services cannot be stored. This property affects the computation in Requirement 1. Inability to store services means that there will never be any finished goods inventories, thus making the cost of services produced equivalent to cost of services sold. Inseparability simply means that providers and buyers of services must be in direct contact for an exchange to take place. Heterogeneity refers to the greater chance for variation in the performance of services than in the production of tangible products.2–71. Direct materials:Magazine (5,000 ? $0.40) $ 2,000Brochure (10,000 ? $0.08) 800 $ 2,800Direct labor:Magazine [(5,000/20) ? $10] $ 2,500Brochure [(10,000/100) ? $10] 1,000 3,500Manufacturing overhead:Rent $ 1,400Depreciation [($40,000/20,000) ? 350*] 700Setups 600Insurance 140Power 350 3,190Cost of goods manufactured $ 9,490*Production is 20 units per printing hour for magazines and 100 units per printing hour for brochures, yielding monthly machine hours of 350 [(5,000/20) + (10,000/100)]. This is also monthly labor hours, as machine labor only operates the presses.2. Direct materials $ 2,800Direct labor 3,500Total prime costs $ 6,300Magazine:Direct materials $ 2,000Direct labor 2,500Total prime costs $ 4,500Brochure:Direct materials $ 800Direct labor 1,000Total prime costs $ 1,800Direct tracing was used to assign prime costs to the two products.3. Total monthly conversion cost:Direct labor $ 3,500Overhead 3,190Total $ 6,690Magazine:Direct labor $ 2,500Overhead:Power ($1 ? 250) $ 250Depreciation ($2 ? 250) 500Setups (2/3 ? $600) 400Rent and insurance ($4.40 ? 250 DLH)* 1,100 2,250Total $ 4,750Brochure:Direct labor $ 1,000Overhead:Power ($1 ? 100) $ 100Depreciation ($2 ? 100) 200Setups (1/3 ? $600) 200Rent and insurance ($4.40 ? 100 DLH)* 440 940Total $ 1,940*Rent and insurance cannot be traced to each product so the costs are assigned using direct labor hours: $1,540/350 DLH = $4.40 per direct labor hour. The other overhead costs are traced according to their usage. Depreciation and power are assigned by using machine hours (250 for magazines and 100 for brochures): $350/350 = $1.00 per machine hour for power and $40,000/20,000 = $2.00 per machine hour for depreciation. Setups are assigned according to the time required. Since magazines use twice as much time, they receive twice the cost: Letting X = the pro?portion of setup time used for brochures, 2X + X = 1 implies a cost assignment ratio of 2/3 for magazines and 1/3 for brochures.Exercises3–11. Resource Total Cost Unit CostPlastic1 $ 10,800 $0.027Direct labor andvariable overhead2 8,000 0.020Mold sets3 20,000 0.050Other facility costs4 10,000 0.025Total $ 48,800 $0.12210.90 ? $0.03 ? 400,000 = $10,800; $10,800/400,000 = $0.0272$0.02 ? 400,000 = $8,000; $8,000/400,000 = $0.023$5,000 ? 4 quarters = $20,000; $20,000/400,000 = $0.054$10,000; $10,000/400,000 = $0.0252. Plastic, direct labor, and variable overhead are flexible resources; molds and other facility costs are committed resources. The cost of plastic, direct labor, and variable overhead are strictly variable. The cost of the molds is fixed for the particular action figure being produced; it is a step cost for the production of action figures in general. Other facility costs are strictly fixed.3–3High (1,400, $7,950); Low (700, $5,150)V = ($7,950 – $5,150)/(1,400 – 700)= $2,800/700 = $4 per oil changeF = $5,150 – $4(700)= $5,150 – $2,800 = $2,350Cost = $2,350 + $4 (oil changes)Predicted cost for January = $2,350 + $4(1,000) = $6,350problems3–61. High (1,700, $21,000); Low (700, $15,000)V = (Y2 – Y1)/(X2 – X1)= ($21,000 – $15,000)/(1,700 – 700) = $6 per receiving orderF = Y2 – VX2= $21,000 – ($6)(1,700) = $10,800Y = $10,800 + $6X2. Output of spreadsheet regression routine with number of receiving orders as the independent variable:Constant 4512.98701298698Std. Err. of Y Est. 3456.24317476605R Squared 0.633710482694768No. of Observations 10Degrees of Freedom 8X Coefficient(s) 13.3766233766234Std. Err. of Coef. 3.59557461331427V = $13.38 per receiving order (rounded)F = $4,513 (rounded)Y = $4,513 + $13.38XR2 = 0.634, or 63.4%Receiving orders explain about 63.4 percent of the variability in receiving cost, providing evidence that Tracy’s choice o f a cost driver is reasonable. However, other drivers may need to be considered because 63.4 percent may not be strong enough to justify the use of only receiving orders.3. Regression with pounds of material as the independent variable:Constant 5632.28109733183Std. Err. of Y Est. 2390.10628259277R Squared 0.824833789433823No. of Observations 10Degrees of Freedom 8X Coefficient(s) 0.0449642991356633Std. Err. of Coef. 0.0073259640055344V = $0.045 per pound of material delivered (rounded)F = $5,632 (rounded)Y = $5,632 + $0.045XR2 = 0.825, or 82.5%Pounds of material delivered explains about 82.5 percent of the variability in receiving cost. This is a better result than that of the receiving orders and should convince Tracy to try multiple regression.4. Regression routine with pounds of material and number of receiving orders as the independent variables:Constant 752.104072925631Std. Err. of Y Est. 1350.46286973443R Squared 0.951068418023306No. of Observations 10Degrees of Freedom 7X Coefficient(s) 0.0333883151096915 7.14702865269395Std. Err. of Coef. 0.00495524841198368 1.68182916088492V1 = $0.033 per pound of material delivered (rounded)V2 = $7.147 per receiving order (rounded)F = $752 (rounded)Y = $752 + $0.033a + $7.147bR2 = 0.95, or 95%Multiple regression with both variables explains 95 percent of the variability in receiving cost. This is the best result.5–21. Job #57 Job #58 Job #59Balance, 7/1 $ 22,450 $ 0 $ 0Direct materials 12,900 9,900 35,350Direct labor 20,000 6,500 13,000Applied overhead:Power 750 600 3,600Material handling 1,500 300 6,000Purchasing 250 1,000 250Total cost $ 57,850 $ 18,300 $ 58,2002. Ending balance in Work in Process = Job #58 = $18,3003. Ending balance in Finished Goods = Job #59 = $58,2004. Cost of Goods Sold = Job #57 = $57,850problems5–31. Overhead rate = $180/$900 = 0.20 or 20% of direct labor dollars.(This rate was calculated using information from the Ladan job; however, the Myron and Coe jobs would give the same answer.)2. Ladan Myron Coe Walker WillisBeginning WIP $ 1,730 $1,180 $2,500 $ 0 $ 0Direct materials 400 150 260 800 760Direct labor 800 900 650 350 900Applied overhead 160 180 130 70 180Total $ 3,090 $2,410 $3,540 $ 1,220 $ 1,840Note: This is just one way of setting up the job-order cost sheets. You might prefer to keep the detail on the materials, labor, and overhead in beginning inventory costs.3. Since the Ladan and Myron jobs were completed, the others must still be in process. Therefore, the ending balance in Work in Process is the sum of the costs of the Coe, Walker, and Willis jobs.Coe $3,540Walker 1,220Willis 1,840Ending Work in Process $6,600Cost of Goods Sold = Ladan job + Myron job = $3,090 + $2,410 = $5,5004. Naman CompanyIncome StatementFor the Month Ended June 30, 20XXSales (1.5 ? $5,500) $8,250Cost of goods sold 5,500Gross margin $2,750Marketing and administrative expenses 1,200Operating income $1,5505–201. Overhead rate = $470,000/50,000 = $9.40 per MHr2. Department A: $250,000/40,000 = $6.25 per MHrDepartment B: $220,000/10,000 = $22.00 per MHr3. Job #73 Job #74Plantwide:70 ? $9.40 = $658 70 ? $9.40 = $658Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $22 1,100.00 20 ? $22 440.00$ 1,225.00 $ 752.50Department B appears to be more overhead intensive, so jobs spending more time in Department B ought to receive more overhead. Thus, departmental rates provide more accuracy.4. Plantwide rate: $250,000/40,000 = $6.25Department B: $62,500/10,000 = $6.25Job #73 Job #74Plantwide:70 ? $6.25 = $437.50 70 ? $6.25 = $437.50Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $6.25 312.50 20 ? $6.25 125.00$ 437.50 $ 437.50Assuming that machine hours is a good cost driver, the departmental rates reveal that overhead consumption is the same in each department. In this case, there is no need for departmental rates, and a plantwide rate is sufficient.5–41. Overhead rate = $470,000/50,000 = $9.40 per MHr2. Department A: $250,000/40,000 = $6.25 per MHrDepartment B: $220,000/10,000 = $22.00 per MHr3. Job #73 Job #74Plantwide:70 ? $9.40 = $658 70 ? $9.40 = $658Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $22 1,100.00 20 ? $22 440.00$ 1,225.00 $ 752.50Department B appears to be more overhead intensive, so jobs spending more time in Department B ought to receive more overhead. Thus, departmental rates provide more accuracy.4. Plantwide rate: $250,000/40,000 = $6.25Department B: $62,500/10,000 = $6.25Job #73 Job #74Plantwide:70 ? $6.25 = $437.50 70 ? $6.25 = $437.50Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $6.25 312.50 20 ? $6.25 125.00$ 437.50 $ 437.50Assuming that machine hours is a good cost driver, the departmental rates reveal that overhead consumption is the same in each department. In this case, there is no need for departmental rates, and a plantwide rate is sufficient.5–51. Last year’s unit-based overhead rate = $50,000/10,000 = $5This year’s unit-based overhead rate = $100,000/10,000 = $10Last Year This YearBike cost:2 ? $20 $ 40 $ 403 ? $12 36 36Overhead:5 ? $5 255 ? $10 50Total $101 $126Price last year = $101 ? 1.40 = $141.40/dayPrice this year = $126 ? 1.40 = $176.40/dayThis is a $35 increase over last year, nearly a 25 percent increase. No doubt the Carsons arenot pleased and would consider looking around for other recreational possibilities.2. Purchasing rate = $30,000/10,000 = $3 per purchase orderPower rate = $20,000/50,000 = $0.40 per kilowatt hourMaintenance rate = $6,000/600 = $10 per maintenance hourOther rate = $44,000/22,000 = $2 per DLHBike Rental Picnic CateringPurchasing$3 ? 7,000 $21,000$3 ? 3,000 $ 9,000Power$0.40 ? 5,000 2,000$0.40 ? 45,000 18,000Maintenance$10 ? 500 5,000$10 ? 100 1,000Other$2 ? 11,000 22,000 22,000Total overhead $50,000 $50,0003. This year’s bike rental overhead rate = $50,000/10,000 = $5Carson rental cost = (2 ? $20) + (3 ? $12) + (5 ? $5) = $101Price = 1.4 ? $101 = $141.40/day4. Catering rate = $50,000/11,000 = $4.55* per DLHCost of Estes job:Bike rental rate (2 ? $7.50) $15.00Bike conversion cost (2 ? $5.00) 10.00Catering materials 12.00Catering conversion (1 ? $4.55) 4.55Total cost $41.55*Rounded5. The use of ABC gives Mountain View Rentals a better idea of the types and costs of activities that are used in their business. Adding Level 4 bikes will increase the use of the most expensive activities, meaning that the rental rate will no longer be an average of $5 per rental day. Mountain View Rentals might need to set a Level 4 price based on the increased cost of both the bike and conversion cost.分步成本法6–11. Cutting Sewing PackagingDepartment Department DepartmentDirect materials $5,400 $ 900 $ 225Direct labor 150 1,800 900Applied overhead 750 3,600 900Transferred-in cost:From cutting 6,300From sewing 12,600Total manufacturing cost $6,300 $12,600 $14,6252. a. Work in Process—Sewing 6,300Work in Process—Cutting 6,300b. Work in Process—Packaging 12,600Work in Process—Sewing 12,600c. Finished Goods 14,625Work in Process—Packaging 14,625 3. Unit cost = $14,625/600 = $24.38* per pair6–21. Units transferred out: 27,000 + 33,000 – 16,200 = 43,8002. Units started and completed: 43,800 – 27,000 = 16,8003. Physical flow schedule:Units in beginning work in process 27,000Units started during the period 33,000Total units to account for 60,000Units started and completed 16,800Units completed from beginning work in process 27,000Units in ending work in process 16,200Total units accounted for 60,0004. Equivalent units of production:Materials ConversionUnits completed 43,800 43,800Add: Units in ending work in process:(16,200 ? 100%) 16,200(16,200 ? 25%) 4,050 Equivalent units of output 60,000 47,8506–31. Physical flow schedule:Units to account for:Units in beginning work in process 80,000Units started during the period 160,000Total units to account for 240,000Units accounted for:Units completed and transferred out:Started and completed 120,000From beginning work in process 80,000 200,000 Units in ending work in process 40,000Total units accounted for 240,0002. Units completed 200,000Add: Units in ending WIP ? Fraction complete(40,000 ? 20%) 8,000Equivalent units of output 208,0003. Unit cost = ($374,400 + $1,258,400)/208,000 = $7.854. Cost transferred out = 200,000 ? $7.85 = $1,570,000Cost of ending WIP = 8,000 ? $7.85 = $62,8005. Costs to account for:Beginning work in process $ 374,400Incurred during June 1,258,400Total costs to account for $ 1,632,800Costs accounted for:Goods transferred out $ 1,570,000Goods in ending work in process 62,800Total costs accounted for $ 1,632,8006–31、Units t0 account for:Units in beginning work in process(25% completed) 10000Units started during the period 70000 Total units to account for 80000 Units accounted forUnits completed and transferred outStarted and completed 50000From beginning work in process 10000 60000 Units in ending work in process(60% completed) 20000 Total units accounted for 80000 2、60000+20000×60%=72000（units）3、Unit cost for materials:（$/unit）Unit cost for convension:（$/unit）Total unit cost:5+1.13=6.13（$/unit）4、The cost of units of transferred out:60000×6.13=367800($)The cost of units of ending work in process:20000×5+20000×20%×1.13=113560($)作业成本法4–21. Predetermined rates:Drilling Department: Rate = $600,000/280,000 = $2.14* per MHrAssembly Department: Rate = $392,000/200,000= $1.96 per DLH*Rounded2. Applied overhead:Drilling Department: $2.14 ? 288,000 = $616,320Assembly Department: $1.96 ? 196,000 = $384,160Overhead variances:Drilling Assembly TotalActual overhead $602,000 $ 412,000 $ 1,014,000Applied overhead 616,320 384,160 1,000,480Overhead variance $ (14,320) over $ 27,840 under $ 13,5203. Unit overhead cost = [($2.14 ? 4,000) + ($1.96 ? 1,600)]/8,000= $11,696/8,000= $1.46**Rounded4–31. Yes. Since direct materials and direct labor are directly traceable to each product, their cost assignment should be accurate.2. Elegant: (1.75 ? $9,000)/3,000 = $5.25 per briefcaseFina: (1.75 ? $3,000)/3,000 = $1.75 per briefcaseNote: Overhead rate = $21,000/$12,000 = $1.75 per direct labor dollar (or 175 percent of direct labor cost).There are more machine and setup costs assigned to Elegant than Fina. This is clearly a distortion because the production of Fina is automated and uses the machine resources much more than the handcrafted Elegant. In fact, the consumption ratio for machining is 0.10 and 0.90 (using machine hours as the measure of usage). Thus, Fina uses nine times the machining resources as Elegant. Setup costs are similarly distorted. The products use an equal number of setups hours. Yet, if direct labor dollars are used, then the Elegant briefcase receives three times more machining costs than the Fina briefcase.3. Overhead rate = $21,000/5,000= $4.20 per MHrElegant: ($4.20 ? 500)/3,000 = $0.70 per briefcaseFina: ($4.20 ? 4,500)/3,000 = $6.30 per briefcaseThis cost assignment appears more reasonable given the relative demands each product places on machine resources. However, once a firm moves to a multiproduct setting, using only one activity driver to assign costs will likely produce product cost distortions. Products tend to make different demands on overhead activities, and this should be reflected in overhead cost assignments. Usually, this means the use of both unit- and nonunit-level activity drivers. In this example, there is a unit-level activity (machining) and a nonunit-level activity (setting up equipment). The consumption ratios for each (using machine hours and setup hours as the activity drivers) are as follows:Elegant FinaMachining 0.10 0.90 (500/5,000 and 4,500/5,000)Setups 0.50 0.50 (100/200 and 100/200)Setup costs are not assigned accurately. Two activity rates are needed—one based on machine hours and the other on setup hours:Machine rate: $18,000/5,000 = $3.60 per MHrSetup rate: $3,000/200 = $15 per setup hourCosts assigned to each product:Machining: Elegant Fina$3.60 ? 500 $ 1,800$3.60 ? 4,500 $ 16,200Setups:$15 ? 100 1,500 1,500Total $ 3,300 $ 17,700Units ÷3,000 ÷3,000Unit overhead cost $ 1.10 $ 5.904：Elegant Unit overhead cost：[9000+3000+18000*500/5000+3000/2]/3000=$5.1 Fina Unit overhead cost：[3000+3000+18000*4500/5000+3000/2]/3000=$7.94–51. Deluxe Percent Regular PercentPrice $900 100% $750 100%Cost 576 64 600 80Unit gross profit $324 36% $150 20%Total gross profit:($324 ? 100,000) $32,400,000($150 ? 800,000) $120,000,0002. Calculation of unit overhead costs:Deluxe gularUnit-level:Machining:$200 ? 100,000 $20,000,000$200 ? 300,000 $60,000,000Batch-level:Setups:$3,000 ? 300 900,000$3,000 ? 200 600,000Packing:$20 ? 100,000 2,000,000$20 ? 400,000 8,000,000Product-level:Engineering:$40 ? 50,000 2,000,000$40 ? 100,000 4,000,000Facility-level:Providing space:$1 ? 200,000 200,000$1 ? 800,000 800,000Total overhead $25,100,000 $73,400,000Units ÷100,000 ÷800,000Overhead per unit $251 $91.75Deluxe Percent Regular PercentPrice $900 100% $750.00 100%Cost 780* 87*** 574.50** 77***Unit gross profit $120 13%*** $175.50 23%***Total gross profit:($120 ? 100,000) $12,000,000($175.50 ? 800,000) $140,400,000*$529 + $251**$482.75 + $91.753. Using activity-based costing, a much different picture of the deluxe and regular products emerges. The regular model appears to be more profitable. Perhaps it should be emphasized.4–61. JIT Non-JITSalesa $12,500,000 $12,500,000Allocationb 750,000 750,000a$125 ? 100,000, where $125 = $100 + ($100 ? 0.25), and 100,000 is the average order size times the number of ordersb0.50 ? $1,500,0002. Activity rates:Ordering rate = $880,000/220 = $4,000 per sales orderSelling rate = $320,000/40 = $8,000 per sales callService rate = $300,000/150 = $2,000 per service callJIT Non-JITOrdering costs:$4,000 ? 200 $ 800,000$4,000 ? 20 $ 80,000Selling costs:$8,000 ? 20 160,000$8,000 ? 20 160,000Service costs:$2,000 ? 100 200,000$2,000 ? 50 100,000Total $1,160,000 $340,0 0For the non-JIT customers, the customer costs amount to $750,000/20 = $37,500 per order under the original allocation. Using activity assign?ments, this drops to $340,000/20 = $17,000 per order, a difference of $20,500 per order. For an order of 5,000 units, the order price can be decreased by $4.10 per unit without affecting customer profitability. Overall profitability will decrease, however, unless the price for orders is increased to JIT customers.3. It sounds like the JIT buyers are switching their inventory carrying costs to Emery without any significant benefit to Emery. Emery needs to increase prices to reflect the additional demands on customer-support activities. Furthermore, additional price increases may be needed to reflectthe increased number of setups, purchases, and so on, that are likely occurring inside the plant. Emery should also immediately initiate discussions with its JIT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have, such as long-term contracts. The benefits of long-term contracting may offset most or all of the increased costs from the additional demands made on other activities.4–71. Supplier cost:First, calculate the activity rates for assigning costs to suppliers:Inspecting components: $240,000/2,000 = $120 per sampling hourReworking products: $760,500/1,500 = $507 per rework hourWarranty work: $4,800/8,000 = $600 per warranty hourNext, calculate the cost per component by supplier:Supplier cost:Vance FoyPurchase cost:$23.50 ? 400,000 $ 9,400,000$21.50 ? 1,600,000 $ 34,400,000Inspecting components:$120 ? 40 4,800$120 ? 1,960 235,200Reworking products:$507 ? 90 45,630$507 ? 1,410 714,870Warranty work:$600 ? 400 240,000$600 ? 7,600 4,560,000Total supplier cost $ 9,690,430 $ 39,910,070Units supplied ÷400,000 ÷1,600,000Unit cost $ 24.23* $ 24.94**RoundedThe difference is in favor of Vance; however, when the price concession is considered, the cost of Vance is $23.23, which is less than Foy’s component. Lumus should accept the contractual offer made by Vance.4–7 Concluded2. Warranty hours would act as the best driver of the three choices. Using this driver, the rate is $1,000,000/8,000 = $125 per warranty hour. The cost assigned to each component would be:Vance FoyLost sales:$125 ? 400 $ 50,000$125 ? 7,600 $ 950,000$ 50,000 $ 950,000Units supplied ÷400,000 ÷1,600,000Increase in unit cost $ 0.13* $ 0.59**Rounded$0.075 per unitCategory II: $45/1,000 = $0.045 per unitCategory III: $45/1,500 = $0.03 per unitCategory I, which has the smallest batches, is the most undercosted of the three categories. Furthermore, the unit ordering cost is quite high relative to Category I’s selling price (9 to 15 percent of the selling price). This suggests that something should be done to reduce the order-filling costs.3. With the pricing incentive feature, the average order size has been increased to 2,000 units for all three product families. The number of orders now processed can be calculated as follows:Orders = [(600 ? 50,000) + (1,000 ? 30,000) + (1,500 ? 20,000)]/2,000= 45,000Reduction in orders = 100,000 – 45,000 = 55,000Steps that can be reduced = 55,000/2,000 = 27 (rounding down to nearest whole number)There were initially 50 steps: 100,000/2,000Reduction in resource spending:Step-fixed costs: $50,000 ? 27 = $1,350,000Variable activity costs: $20 ? 55,000 = 1,100,000$2,450,000预算9-4Norton, Inc.Sales Budget For the Coming YearModel Units Price Total SalesLB-1 50,400 $29.00 $1,461,600LB-2 19,800 15.00 297,000WE-6 25,200 10.40 262,080 WE-7 17,820 10.00 178,200 WE-8 9,600 22.00 211,200 WE-9 4,000 26.00 104,000 Total $2,514,080二、1. Raylene’s Flowers and GiftsProduction Budget for Gift BasketsFor September, October, November, and DecemberSept. Oct. Nov. D ec.Sales 200 150 180 250Desired ending inventory 15 18 25 10Total needs 215 168 205 260Less: Beginning inventory 20 15 18 25 Units produced 195 153 187 2352. Raylene’s Flowers and GiftsDirect Materials Purchases BudgetFor September, October, and NovemberFruit: Sept. Oct. Nov.Production 195 153 187? Amount/basket (lbs.) ? 1 ? 1 ?1Needed for production 195 153 187Desired ending inventory 8 9 12Needed 203 162 200Less: Beginning inventory 10 8 9Purchases193 154 190Small gifts: Sept. Oct. Nov.Production 195 153 187 ? Amount/basket (items) ? 5 ? 5 ? 5Needed for production 975 765 935Desired ending inventory 383 468 588Needed 1,358 1,233 1,523Less: Beginning inventory 488 383 468Purchases 870 850 1,055Cellophane: Sept. Oct. Nov.Production 195 153 187。

CHAPTER 6 COVERAGE OF LEARNING OBJECTIVESwhether a jointproduct should beprocessed beyondthe split-off point.A4,B5 40 57,59LO6: Decidewhether to keep orreplace equipment.26,39,41 52,58,64 71LO7: Identifyirrelevant andmisspecified costs.LO8: Discuss howB6 43 60 performancemeasures canaffect decisionmaking.CHAPTER 6Relevant Information and Decision Making With a Focus on OperationalDecisions6-A1 (20 min)1. The key to this question is what will happen to the fixed overheadcosts if production of the boxes is discontinued. Assume that all$60,000 of fixed costs will continue. Then, Sunshine State willlose $20,000 by purchasing the boxes from Weyerhaeuser:Payment to Weyerhaeuser, 80,000 × $2.10 $168,000Costs saved, variable costs 148,000Additional costs $ 20,0002. Some subjective factors are:Might Weyerhaeuser raise prices if Sunshine State closed downits box-making facility?Will sub-contracting the box production affect the quality ofthe boxes?Is a timely supply of boxes assured, even if the number neededchanges?Does Sunshine State sacrifice proprietary information whendisclosing the box specifications to Weyerhaeuser?3. In this case the fixed costs are relevant. However, it is not thedepreciation on the old equipment that is relevant. It is the costof the new equipment. Annual cost savings by not producing theboxes now will be:Variable costs $148,000Investment avoided (annualized) 80,000Total saved $228,000 The payment to Weyerhaeuser is $228,000 - $168,000 = $60,000less than the savings, so Sunshine State would be $60,000 better off subcontracting the production of the boxes.6-A2 (10 min.)1. Contribution margins:Plain = $70 - $55 = $15Professional = $100 - $75 = $25Contribution margin ratios:Plain = $15 ÷ $70 = 21.4%Professional = $25 ÷ $100 = 25%2. PlainProfessionala. Units per hour 2 1b. Contribution margin per unit $15 $25Contribution margin per hour $30 $25 Total contribution for 20,000 hours $600,000 $500,000 3. The plain circular saws are the best use of the scarce machinehours. For a given capacity, the criterion for maximizing profits isto obtain the greatest possible contribution to profit for each unitof the limiting or scarce factor. Moreover, fixed costs areirrelevant unless their total is affected by the choice of products.6-A3 (15 min.) Table is in thousands of dollars.1,2. (a) (b) (a)-(b) (c) (a)-(b)-(c)SeparableSales Sales Costs IncrementalBeyond at Incremental Beyond Gain orSplit-Off Split-Off Sales Split-Off (Loss)A 230 54 176 190 (14)B 330 32 298 300 (2)C 175 54 121 100 21 Increase in overall operating income from further processing of A, B, andC 5The incremental analysis indicates that Product C should be processed further, but Products A and B should be sold at split-off. The overall operating income would be $44,000, as follows:Sales: $54,000 + $32,000 + $175,000 $261,000 Joint cost of goods sold $117,000Separable cost of goods sold 100,000 217,000 Operating income $ 44,000 Compare this with the present operating income of $28,000. That is, $230,000 + $330,000 + $175,000 - ($190,000 + $300,000 + $100,000 + $117,000) = $28,000. The extra $16,000 of operating income comes from eliminating the $16,000 loss resulting from processing Products A and B beyond the split-off point.6-A4 (30-40 min.)Problem 6-60 is an extension of this problem. The two problems make a good combination.1. Operating inflows for each year, old machine:$910,000 - ($810,000 + $60,000) $40,000Operating inflows for each year, new machine:$910,000 - ($810,000 + $22,000*) $78,000* $60,000 - $38,000Cash flow statements (in thousands of dollars):Keep ReplaceThree ThreeYear Years Years Year Years Years1 2 & 3 Together 1 2 & 3 Together Receipts, inflows from operations40 40 120 78 78 234 Disbursements:Purchase of "old" equipment (90)* -- (90) (90) -- (90) Purchase of "new" equipment:Total costs less proceedsfrom disposal of "old"equipment ($99,000-$15,000) -- -- -- (84)-- (84)Net cash inflow (outflow) (50) 40 30 (96) 78 60* A ssumes that the outlay of $90,000 took place on January 2, 2010, or sometime during 2010. Some students will ignore this item, assuming correctly that it is irrelevant to the decision. However, note that a statement for the entire year was requested.The difference for three years taken together is $60,000 - $30,000 = $30,000. Note particularly that the $90,000 book value can be omitted from the comparison. Merely cross out the entire line; although the column totals will be affected, the net difference will still be $30,000.2. Income statements (in thousands of dollars):Keep ReplaceThree ThreeYears Years Year Years Years1, 2 & 3 Together 1 2 & 3TogetherSales 910 2,730 910 910 2,730 Expenses:Other expenses 810 2,430 810 810 2,430 Operating of machine 60 180 22 22 66 Depreciation 30 90* 33 33 99 Total expenses 900 2,700 865 865 2,595 Loss on disposal:Proceeds ("revenue") -- -- (15) -- (15) Book value ("expense") -- -- 90 -- 90* Loss -- -- 75 -- 75 Total charges 900 2,700 940 865 2,670 Net income 10 30 (30) 45 60* As in part (1), the $90,000 book value can be omitted from the comparison without changing the $30,000 difference. This would mean dropping the depreciation item of $30,000 per year (a cumulative effect of $90,000) under the "keep" alternative, and dropping the book value item of $90,000 in the loss on disposal computation under the "buy" alternative.Difference for three years together, $60,000 - $30,000 = $30,000.Note the motivational factors here. A manager may be reluctantto replace simply because the large loss on disposal will severelyharm the profit performance in Year 1.3. The net difference for the three years taken together would beunaffected because the item is a past cost. You can substituteany number for the original $90,000 figure without changing this answer.For example, examine how the results would change in part (1) by inserting $1 million where the $90,000 now appears (inthousands of dollars):Keep: Replace:Three Years Three YearsTogether TogetherDifferenceReceipts, inflows from operations 120 234 114 Disbursements:Purchase of old equipment (1,000) (1,000) 0 Purchase of new equipment:Gross price (99)Disposal proceeds of "old" 15 -- ( 84) (84) Net cash outflow ( 880) ( 850) 30 In sum, this may be a horrible situation. The manager reallyblundered. But keeping the old equipment will compound theblunder to the cumulative tune of $30,000 over the next threeyears.4. Diplomatically, Lee should try to convey the following. All of ustend to indulge in the erroneous idea that we can soothe thewounded pride of a bad purchase decision by using the iteminstead of replacing it. The fallacy is believing that a current orfuture action can influence the long-run impact of a past outlay.All past costs are down the drain. Nothing can change what hasalready happened. The $90,000 has been spent. Subsequentaccounting for the item is irrelevant. The schedules in parts (1)and (2) clearly show that we may completely ignore the $90,000original outlay and still have a correct analysis. The importantpoint is that the $90,000 is not an element of difference betweenalternatives and, therefore, may be safely ignored. The onlyrelevant items are those expected future items that will differbetween alternatives.5. The $90,000 purchase of the original equipment, the sales, andthe other expenses are irrelevant because they are common toboth alternatives. The relevant items are the following (inthousands of dollars):Three YearsTogetherKeep Replace Operating of machine(3 × $60; 3 × $22) $180 $ 66 Incremental cost of new machine:Total cost $99Less proceeds of old machine 15Incremental cost -- 84 Total relevant costs $180 $150 Difference in favor of buying $ 306-B1 (15-20 min.)1. Make BuyTotal Per Unit Total Per Unit Purchase cost €10,000,000€50 Direct material €5,500,000€27.50Direct labor 1,900,000 9.50Factory overhead, variable 1,100,000 5.50Factory overhead, fixedavoided 900,000 4.50Total relevant costs €9,400,000 €47.00 €10,000,000€50 Difference in favor of making €600,000 € 3.00The numerical difference in favor of making is €600,000 or €3.00per unit. The relevant fixed costs are €900,000, not €3,000,000.2. Buy and LeaveMake Capacity Idle Buy andRentRent revenue -- -- € 1,150,000 Obtaining of components €(9,400,000) €(10,000,000)€(10,000,000)Net relevant costs €(9,400,000) €(10,000,000) € (8,850,000) The final column indicates that buying the components andrenting the vacated capacity will yield the best results in this case.The favorable difference is €9,400,000 - €8,850,000 = €550,000.6-B2 (15 min.)1. If fixed manufacturing cost is applied to products at $1.00 permachine hour, it takes $.75 ÷ $1.00, or 3/4 of an hour toproduce one unit of XY-7. Similarly, it takes $.25 ÷ $1.00 or 1/4of an hour to produce BD-4.2. If there are 100,000 hours of capacity:XY-7: 100,000 hours ÷ 3/4 = 133,333 units.BD-4: 100,000 hours ÷ 1/4 = 400,000 units.Total contribution margins show that BD-4 should be produced, generating $200,000 of contribution margin, which is $66,667 more than would be earned by XY-7.Per Unit Units Total XY-7 $6.00 - ($3.00 + $2.00) = $1.00 133,333 $133,333 BD-4 $4.00 - ($1.50 + $2.00) = $ .50 400,000 $200,0006-B3 (15-20 min.)All amounts are in thousands of British pounds.The major lesson is that a product that shows an operating loss based on fully allocated costs may nevertheless be worth keeping. Why? Because it may produce a sufficiently high contribution to profit so that the firm would be better off with it than any other alternative.The emphasis should be on totals:Replace Magic Department WithExisting GeneralOperations Merchandise Electronic ProductsSales 6,000 -600 + 250 = 5,650 -600 + 200 = 5,600 Variable expenses 4,090 -390 + 175a= 3,875 -390 + 100 b= 3,800 Contribution margin 1,910 -210 + 75 = 1,775 -210 + 100 = 1,800 Fixed expenses 1,100 -120 + 0 = 980 -120 + 30 = 1,010 Operating income 810 - 90 + 75 = 795 - 90 + 70 = 790 a(100% - 30%) × 250b(100% - 50%) × 200The facts as stated indicate that the magic department should not be closed. First, the total operating income would drop. Second, fewer customers would come to the store, so sales in other departments maybe affected adversely.6-B4 (15 min.)1. Sales ($400 + $600 + $100) $1,100Costs:Raw materials $700Processing 100Total 800Profit $ 3002. Sales ($840 + $850 + $170) $1,860Costs:Joint costs $800Frozen dinner costs 440Salisbury steak costs 200Tanning costs 80Total costs 1,520Profit $ 340Although it is more profitable to process all three products furtherthan it is to sell them all at the split-off point, it is important tolook at the economic benefit from further processing of eachindividual product.3. Steaks to frozen dinners:Additional revenue from processing further ($840 - $400)$440Additional cost for processing further 440Increase (decrease) in profit from processing further $ 0Hamburger to Salisbury steaks:Additional revenue from processing further ($850 - $600)$250Additional cost for processing further 200Increase (decrease) in profit from processing further $ 50Untanned hide to tanned hide:Additional revenue from processing further ($170 - $100)$ 70Additional cost for processing further 80Increase (decrease) in profit from processing further $ (10)Only the hamburger dictates that it should be processed further,because it is the only product whose additional revenue forprocessing further exceeds the additional cost. You are indifferent about processing further steak to frozen dinners, as theincremental profit is 0.4. The resulting profit would be $350:Sales ($400 + $850 + $100) $1,350Costs:Joint costs $800Further processing of hamburger 200Total cost 1,000Profit $ 3506-B5 (15-20 min.)1. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Old equipment, book value:Periodic write-off asdepreciation 15,000 -or lump-sum write-off - 15,000 * Disposal value -6,000 *6,000 New equipment, acquisition cost 15,000 ** - 15,000 Total costs $57,000 $51,000 $ 6,000 *In a formal income statement, these two items would be combined as "loss on disposal" of $15,000 - $6,000 = $9,000.**In a formal income statement, written off as straight-linedeprec iation of $15,000 ÷ 3 = $5,000 for each of three years.2. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Disposal value of old equipment - -6,000 6,000 New equipment, acquisition cost - 15,000 - 15,000 Total relevant costs $42,000 $36,000 $ 6,000This tabulation is clearer because it focuses on only those items that affect the decision.3. Benefits of the replacement alternative* $15,000Deduct initial net cash outlay required* 9,000 Difference in favor of replacement $ 6,000 * 3 × ($14,000 - $9,000)** $15,000 - $6,000Also, the new equipment is likely to be faster, thus saving operator time. The latter is important, but it is not quantified in this problem.6-B6 (10 min.)1. The replacement alternative would be chosen because the countywould have $6,000 more cash accumulated in three years.2. The keep alternative would be chosen because the higher overallcosts of photocopying for the first year would be shown for thereplacement alternative (under accrual accounting):First YearKeep Replace Cash operating costs $14,000 $ 9,000 Depreciation expense 5,000 5,000 Loss on disposal 9,000 Total costs $19,000 $23,000 Thus, the performance evaluation model might motivate themanager to make a decision that would be undesirable in the longrun.6-1 An opportunity cost does not entail a disbursement of cash at any future time, whereas an outlay cost does entail an additional disbursement sooner or later.6-2 The $800 represents an opportunity cost. It is the amount forgone by rejecting an opportunity. It signifies that the value to the owner of keeping those strangers out of the summer house for that two-week period is at least $800.6-3 Accountants do not ordinarily record opportunity costs in accounting records because those records are traditionally concernedwith real transactions rather than possible transactions. It is impossible to record data on all lost opportunities.6-4 A differential cost is any difference in total cost or revenue between two alternatives. A differential cost is an incremental cost when one of the alternatives contains all the costs of the other plus someadditional costs. The additional costs are the incremental costs – which are also differential.6-5 No. Incremental cost has a broader meaning. It is the addition to total costs by the adoption of some course of action. Another term, marginal cost, is used by economists to indicate the addition to costs from the manufacture of one additional unit. Of course, marginal cost is indeed the incremental cost of one unit.6-6 The decline in costs would be called differential or incremental savings.6-7 Not necessarily. Qualitative factors can favor either making or buying. Often factors such as product quality and assurance of delivery schedules favor making. However, sometimes establishing long-term relationships with suppliers is an important qualitative factor favoring the purchase of components.6-8 The choice in many cases is not really whether to make or buy. Instead, the choice is how best to use available capacity.6-9 Yes. The costs that make a difference when a product or department is being deleted are the avoidable costs.6-10 Four examples of scarce factors are: (a) labor hours, (b) money (investment capital), (c) supervisory hours, and (d) computer hours.6-11 Joint products are two or more manufactured products that (1) have relatively significant sales values and (2) are not separately identifiable as individual products until their split-off point. Examples of joint products include chemicals, lumber, flour, and meat.6-12 The split-off point is where the individual products produced in a joint process become separately identifiable. Costs before the split-off point are irrelevant for decisions about the individual products. They affect the decision about whether to undertake the entire productionprocess, but they do not influence decisions about what to do with the individual products.6-13 Yes. Techniques for assigning joint-product costs to individual products are useful only for product costing, not for deciding on further processing after the split-off point. The product must be considered separately at that point apart from its joint cost. The proper basis of the decision on further processing is a comparison of incremental revenue versus incremental expense between the alternatives of selling at the split-off point and processing further.6-14 No. Once inventory has been purchased, the price paid is a sunk cost. It is true that selling at a price less than $5,000 would produce a reported loss. However, a sale at any price above $0 is economically beneficial provided that the only alternative is to scrap the inventory.6-15 No. Sunk costs are irrelevant to the replacement decision.6-16 No. Past costs are not relevant because they cannot be affected by a decision. Although past costs are often indispensable for formulating predictions, past costs themselves are not the predictions that are the inputs to decision models. Clear thinking is enhanced by these distinctions.6-17 Only b and c are relevant.a. Book value of old equipment is irrelevant to a replacementdecision because it does not change under any alternative andcannot be realized.b. Disposal value of old equipment is relevant to a replacementdecision because it can either be realized (by replacement) orforgone (by continued use).c. Cost of new equipment is relevant to a replacement decisionbecause it can be incurred (by replacement) or avoided (bycontinued use).6-18 Yes. Some expected future costs may be irrelevant because they will be the same under all feasible alternatives.6-19 Yes. The statement is correct in terms of total variable costs.6-20 Two reasons why unit costs should be analyzed with care in decision making are:1. Most unit costs are stable only over a certain range of output, andcare must be taken to see that allowances are made whenalternatives are considered outside that range.2. Some unit costs are an allocation of fixed costs; thus when ahigher volume of output is being considered, unit cost willdecrease proportionately, and vice versa.Two other reasons are mentioned in the text:1. Some unit costs are based on both relevant and irrelevant factorsand should be broken down further before being considered.2. Unit costs must be reduced to the same base (denominator) beforecomparing or combining them.6-21 Sales personnel sometimes neglect to point out that the unit costs are based on outputs far in excess of the volume of their prospective customer.6-22 An inconsistency between a decision model and a performance evaluation model occurs when a decision about whether to replace a piece of equipment is based on the cash flow effects over the life of the equipment but a manager's performance evaluation is based on the first year's reported income. The loss on disposal of the equipment is irrelevant for decision purposes, but it affects the first year income, hence the performance evaluation.6-23 The wide use of income statements to evaluate performance may overly influence managers to maximize short-run performance that may hurt long-run performance. They may pass up profitable opportunities to replace equipment because of the large loss on disposal shown on the first year’s income statement.6-24 Yes, this statement is generally correct. Accountants record transactions. But opportunity cost is the cost of transactions that do not occur (or have not occurred yet). It is the cost of opportunities forgone. Managers usually have much better information about forgone opportunities than do accountants.6-25 Deciding whether to outsource payroll functions requires estimates of the cost of designing, maintaining, and using a payroll system internally compared to the cost of a contract with an outside supplier. To operate an internal payroll system requires hiring personnel with the needed expertise in both legal/governmental issues affecting payroll and information processing to implement a system. Small companies often find it less costly to outsource payroll to a company that has broad expertise in these areas.6-26 Whenever total costs are unitized by dividing by total units and the resulting unit costs are then used to predict new total costs based on a different level of production, errors are being made if any of the costs are fixed. If the new production level is higher, predicted total costs are overestimated. If the new production level is lower, predicted total costs are underestimated. Never unitize fixed costs if the resulting unit cost will be used for planning purposes!Consider the following simple example:Fixed Cost Variable Cost TotalTotal $100 $100 $200Units ÷10÷10÷10Unit Cost $10 $10 $20If a new planned number of units is 20, what will be the new, predicted total cost?The correct cost function and cost prediction isTotal Cost = $100 + $10 × Number of units= $100 + $10 × 20 =$300The correct cost function is based on the two amounts that are constant within the relevant range – the total fixed cost and the unit variable cost.The incorrect unitized cost function and incorrect and overestimated prediction isTotal Cost = $20 × Number of units= $20 × 20= $400It is easy to see that the error comes from treating fixed costs as if they were variable.6-27 The amount paid for inventory is a sunk cost. Once a company has the inventory, it cannot change what it paid for it. Thus the only relevant issue is what can be done with the inventory. If there is a choice of selling the inventory for less than what the company paid for it or not selling it at all, it is certainly better to get something rather than nothing for it.6-28 (10-15 min.)1. IndependentPractice Employee DifferenceOperating revenues $350,000 $110,000 $240,000 Operating expenses 220,000 -- 220,000 Income effects per year $130,000 $110,000 $ 20,000Choose Independent PracticeRevenues $350,000 Expenses:Outlay costs $220,000Opportunity cost of employee compensation 110,000 330,000 Income effects per year $ 20,000 Each tabulation produces the key difference of $20,000. As ageneral rule, we favor using the first tabulation when feasible. Itoffers a straightforward presentation of inflows and outflowsunder sharply stated alternatives.2. Choice as EmployeeRevenue $ 110,000Expenses:Outlay costs $ 0Opportunity cost of accounting practice 130,000 130,000Income effects per year $ (20,000)If the employee alternative is selected, the key difference in favor of becoming a sole practitioner is again $20,000. Bridgeman is sacrificing $20,000 to avoid the risks of an independent practice.6-29 (10-15 min.)Alternatives Under Consideration(1) (2) (1) - (2)Sell, Rent, and HoldInvest in Bonds Present Home DifferenceRevenue $10,000* $ - $10,000 Less: Outlay cost 12,000 6,000 6,000 Income effects per year $ (2,000) $(6,000) $ 4,000 *5% × $200,000Advantage of selling the home is $6,000 - $2,000 = $4,000. Obviously, if rent is higher, the advantage decreases.The above analysis does not contain explicit opportunity costs. If opportunity costs were a part of the analysis, the following presentation applies (whereby the interest on investment in bonds is not listed as a separate alternative but is regarded as a forgone alternative):Alternative Chosen:Hold Present HomeOpportunity cost $(10,000)Outlay cost 6,000Income effects per year $ (4,000)As before, the advantage of selling the home and renting is $4,000. The opportunity cost of home ownership is 5% × 200,000 = $10,000.6-30 (15-20 min.) Opportunity cost is the maximum available contribution to profit forgone by using limited resources for a particular purpose. In this case, the opportunity cost of the machine when analyzing the alternative to produce 12-oz. bottles of Juice Cocktails is $90,000, the larger of the $90,000 contribution margin from additional sales of the 100% Juices or the $75,000 proceeds from the sale of themachine. The $160,000 historical cost of the machine is a past cost and thus irrelevant.6-31 (15-20 min.) The first tabulation is probably easier to understand, but the choice of a tabulation is a matter of taste:(a) (b) (c)Expand Expand Rent toLaboratory Eye GiftTesting Clinic Shop Revenues $330,000 $500,000 $11,000Expenses 290,000 480,000 0Income effects per year $ 40,000 $ 20,000 $11,000Treating the gift shop as the forgone (rejected) alternative, the tabulation is:(a) (b)Expand ExpandLaboratory Testing Eye Clinic Revenue $330,000 $500,000 Expenses:Outlay costs $290,000 $480,000Opportunity cost,rent forgone 11,000 301,000 11,000 491,000 Income effects per year $ 29,000 $ 9,000 The numbers favor laboratory testing, which will generate a contribution to hospital income that is $20,000 greater than the eyeclinic's.The numbers have been analyzed correctly under both tabulations. Both answer the key query: What difference does it make? As a general rule, we prefer using the first tabulation. It is a straightforward presentation.6-32 (15 min.)1. It is easiest to analyze total costs, not unit costs.Make PurchaseDirect materials $400,000Avoidable overhead costs:Indirect labor 30,000Supplies 20,000Allocated occupancy cost 0Purchase cost $420,000Total relevant costs $450,000 $420,000The difference in favor of purchasing is $450,000 - $420,000 =$30,000.2. Because the quantitative difference is small, qualitative factorsmay dominate the decision. Companies using a just-in-timesystem need assurance of both quality and timeliness of suppliesof materials, parts, and components. A small, local company maynot be reliable enough for Bose. In essence, Bose may be willing to "invest" $30,000, the quantitative advantage of purchasing, inorder to have more control over the supply of the components.The division manager may have made the right decision for thewrong reason. He incorrectly ignored avoidable fixed costs, leading to a mistaken belief that making the components was less costly by $.20 per unit or $20,000 in total. The $50,000 of avoidable fixedcosts makes the purchase option less costly by $30,000. If themanager's decision is to make the component, it should bebecause forgoing profits of $30,000 has a long-run qualitativebenefit of more than $30,000, not because the bid is greater thanthe variable cost6-33 (20-25 min.)Nantucket Nectars should make the bottles.。

亨格瑞管理会计英文第15版答案11CHAPTERllCapitalBudgetin ； 1. ； Thepresentvalueis$480,00(a)$480,000=annualpaymen ； annualpayment=$480,0004- 1 annualpaymcnt=$480,000 4- 9 ； annualpayment=$480,000 4- 8 armualpaymcnt 二$480, 0004-8； anCHAPTER 11 Capital Budgeting1.The present value is $480, 000 and the annual payments are an annuity, requiring use of Table 2:(a)$480,000 = annual payment X 11.2578 annual payment 二 $480, 000 4- 11. 2578 二 $42, 637 (b) $480, 000 二 annual payment X 9.4269annual payment = $480, 000payment X 8.0552 annual payment二 $480,000payment X 8.5595 annual payment= $480, 000 payment X 7.6061 annual payment = $480, 000payment X 6.8109 annual payment= $480, 000 4- 6.8109 =$70,475 (a) Total payments=30 X $50,918 = $1,527,540Total interest paid= $1, 527, 540- $480, 000 = $1, 047, 540 2.3.(b) Total payments 二 15 X $63, 107= $946, 605 Total interest paid 二$946, 605 一 $480, 000 = $466, 6059. 4269 = $50,918 (c) $480, 000 = annual8. 0552 二$59, 589 (a)$480, 000 = annual 8. 5595 二 $56, 078 (b) $480, 000 = annual 7. 6061 = $63, 107 (c) $480, 000 二 annualmin.) Buy. The net present value is positive.Initial outlay *Present value of cash operating savings, from12-year, 12% column of Table 2, 6. 1944 X $5, 000 Net present value$ (21,000) * The trade-in allowance really consists of a $5,000 adjustme nt of the sei ling price and a bona fide $10,000 cash al Iowa neo for the old equipment ・ The relevant amo unt is the incremental cash outlay, $21,000. The book value is irrelevant・ min.)Copyright ?2011 Pearson Education11.NPV @ 10% = 10, 000 X 3. 7908 = $37, 908 - $36, 048 = $1, 860 NPV @ 12% =10, 000 X 3. 6048 = $36, 048 - $36, 048 = $0NPV @ 14% = 10, 000 X 3.4331 = $34, 331 - $36, 048 = $(1,717)The IRR is the interest rate at which NPV 二$0; therefore, from requirement 1 we know that IRR 二12%・The NPV at the company? s cost of capital, 10%, is positive, so the project should be accepted・The TRR (12%) is greater than the company' s cost of capital (10%), so the project should be accepted・ Note that the IRR and NPV models give the same decision.2.3.4.min.)Payback period is $36, 000 $10, 000 = 3.6 years・ It is not a good measure of profitabi1ity because it ignores returns beyond the payback period and it does not account for the time value of money.NPV = $5, 114. Accept the proposal because NPV is positive・ Computation: NPV 二($10, 000 X 4. 1114) - $36,000 =$41, 114 一$36, 000 = $ 5, 114 2.3. ARR 二(Increase in average cash f 1 ow - Increase in depreciation)4- Initial investmenl二($10, 000 - $6, 000) 一$36, 000 二11. 1%min.)Salaries $49, 920 (a) $41, 600(b) $ 8,320 Overtime 1, 728(c) — 1,728 Repairs and maintenanee 1,800 1,050 750Toner, supplies, etc. Total annual cash outflows(a) ($ 8 X 40 hrs.) X 52 weeks X 3 employees 二$320 X 52 X 3 =$49,920 (b) ($10 X 40 hrs.) X 52 weeks X 2 employees = $400 X 52 X 2 二$41, 600 (c) ($12 X 4 hrs.) X 12 months X 3 machines =$ 48 X 12 X 3 = $ 1,728Purchase of Cannon machines $ -- $50,000 $50,000Copyright ?2011 Pearson Education2 1.Sale of Xerox machines Training and remodeling Total 一一-3,000-3,000 Copyright ?2011 Pearson Education 3All numbers are expressed in Mexican pesos・ 2. 18% Total Sketch ofRelevant Cash Flows (in thousands) Cash operating savings:* ・847583,902 99,000 10& 900 119, 790 131,769 .4371 144,946 Income tax savings fromdepreciation not changed by inflation, see 1 3.1272 33,600 33, 600 33, 60033,600 33,600 Required outlay at time zero 1.0000 Net present value^Amounts are computed by multiplying (150,000 X .6) = 90, 000 by 1. 10, 1. 102, 1. 10 3, etc.Copyright ?2011 Pearson Education 461PV Present of $1.00 Value ofTOTAL PROJECT APPROACH: Cannon:Init. cash outflow 1.0000 $ (51,000) Oper. cash flows (45,950) (45, 950) (45,950) (45, 950) (45, 950) Total $(216, 641)Xerox:Oper. cash flows 3. 6048 (57, 048) (57, 048) (57, 048) (57, 048) (57, 048)Differenee in favor of retaining XeroxINCREMENTAL APPROACH: Initial investment 1.0000 $(51,000) Annual operatingcash savings 3. 6048 11, 098 11, 098 11, 098 11, 098 11, 098 Net present valueof purchase 2. The Xerox machines should not be replaced by the Cannonequipment. Net savings = (Present value of expenditures to retain Xeroxmachines) 1 ess (Present value of expenditures toconvert to Cannon machines)二$205, 647 - $216,641 二$ (10, 994) 3. a. How flexible is the new machinery? Will it be useful only for the presently intended functions, or can it beeasilyadapted for other tasks that may arise over the next 5 years?b. What psychological effects will it have on various interested parties? Copyright ?2011 Pearson Education。

CHAPTER 11Capital Budgeting11-A1 (15-25 min.) Answers are printed in the text at the end of the assignment material.11-29 (10-15 min.)1. The present value is $480,000 and the annual payments are an annuity, requiringuse of Table 2:(a)$480,000 = annual payment × 11.2578annual payment = $480,000 ÷ 11.2578 = $42,637(b)$480,000 = annual payment × 9.4269annual payment = $480,000 ÷ 9.4269 = $50,918(c)$480,000 = annual payment × 8.0552annual payment = $480,000 ÷ 8.0552 =$59,5892. (a)$480,000 = annual payment × 8.5595annual payment = $480,000 ÷ 8.5595 = $56,078(b)$480,000 = annual payment × 7.6061annual payment = $480,000 ÷ 7.6061 = $63,107(c)$480,000 = annual payment × 6.8109annual payment = $480,000 ÷ 6.8109 =$70,4753. (a) Total payments= 30 × $50,918 = $1,527,540Total interest paid= $1,527,540- $480,000 = $1,047,540(b) Total payments= 15 × $63,107= $946,605Total interest paid = $946,605 - $480,000 = $466,60511-36 (10 min.)Buy. The net present value is positive.Initial outlay * $(21,000)Present value of cash operating savings, from12-year, 12% column of Table 2, 6.1944 × $5,000 30,972Net present value $ 9,972* The trade-in allowance really consists of a $5,000 adjustment of the sellingprice and a bona fide $10,000 cash allowance for the old equipment. Therelevant amount is the incremental cash outlay, $21,000. The book value isirrelevant.11-39 (10-15 min.)Copyright ©2011 Pearson Education 1Copyright ©2011 Pearson Education21. NPV @ 10% = 10,000 × 3.7908 = $37,908 - $36,048 = $1,860 NPV @ 12% = 10,000 × 3.6048 = $36,048 - $36,048 = $0NPV @ 14% = 10,000 × 3.4331 = $34,331 - $36,048 = $(1,717)2.The IRR is the interest rate at which NPV = $0; therefore, from requirement 1 we know that IRR = 12%.3.The NPV at the company’s cost of capital, 10%, is positive, so the project should be accepted.4.The IRR (12%) is greater than the company’s cost of capital (10%), so the project should be accepted. Note that the IRR and NPV models give the same decision.11-46 (10-15 min.)Annual addition to profit = 40% × $25,000 = $10,000.1.Payback period is $36,000 ÷ $10,000 = 3.6 years. It is not a good measure of profitability because it ignores returns beyond the payback period and it does not account for the time value of money.2. NPV = $5,114. Accept the proposal because NPV is positive. Computation: NPV = ($10,000 × 4.1114) - $36,000= $41,114 - $36,000 = $ 5,1143. ARR = (Increase in average cash flow – Increase in depreciation) ÷ Initialinvestment= ($10,000 - $6,000) ÷ $36,000 = 11.1%11-51 (30-35 min.)1.Annual Operating Cash FlowsXeroxCannon Difference Salaries $49,920(a) $41,600(b) $ 8,320 Overtime 1,728(c) -- 1,728 Repairs and maintenance 1,800 1,050 750Toner, supplies, etc. 3,6003,300 300 Total annual cash outflows $57,048 $45,950 $11,098(a) ($ 8 × 40 hrs.) × 52 weeks × 3 employees = $320 × 52 × 3 = $49,920 (b) ($10 × 40 hrs.) × 52 weeks × 2 employees = $400 × 52 × 2 = $41,600 (c) ($12 × 4 hrs.) × 12 months × 3 machines = $ 48 × 12 × 3 = $ 1,728Initial Cash FlowsXeroxCannon Difference Purchase of Cannon machines $ -- $50,000 $50,000Sale of Xerox machines -- -3,000 -3,000 Training and remodeling -- 4,000 4,000 Total $ -- $51,000 $51,000Copyright ©2011 Pearson Education 3EXHIBIT 11-50All numbers are expressed in Mexican pesos.2. 18% Total Sketch of Relevant Cash Flows(inthousands)PresentPVFactor Value 0 1 2 3 4 5Cash operating savings:* .8475 83,902 99,000108,90078,212.718272,904119,790.608667,966 131,769 .5158.4371 63,356 144,946Total366,340Income tax savings fromdepreciation not changedby inflation, see 1 3.1272 105,074 33,600 33,600 33,600 33,600 33,600471,414TotalRequired outlay at time zero 1.0000 (420,000) (420,000)Net present value 51,414*Amounts are computed by multiplying (150,000 × .6) = 90,000 by 1.10, 1.10 2, 1.10 3, etc.Copyright ©2011 Pearson Education 461PV PresentofValue$1.00ofCashFlows Annual Cash FlowsDiscountedat 12% 0 1 2 3 4 5T OTAL P ROJECT A PPROACH:Cannon:Init. cash outflow 1.0000 $ (51,000)Oper. cash flows 3.6048 (165,641) (45,950) (45,950) (45,950) (45,950) (45,950)Total $(216,641)Xerox:Oper. cash flows 3.6048 $(205,647) (57,048) (57,048) (57,048) (57,048) (57,048)Difference in favor ofretaining Xerox $ (10,994)I NCREMENTAL A PPROACH:Initial investment 1.0000 $(51,000)Annual operatingcash savings 3.6048 40,006 11,098 11,098 11,098 11,098 11,098Net present valueof purchase $(10,994)2. The Xerox machines should not be replaced by the Cannon equipment.Net savings = (Present value of expenditures to retain Xerox machines) less (Present value of expenditures toconvert to Cannon machines)= $205,647 - $216,641 = $(10,994)3. a. How flexible is the new machinery? Will it be useful only for the presently intended functions, or can it be easilyadapted for other tasks that may arise over the next 5 years?b. What psychological effects will it have on various interested parties?Copyright ©2011 Pearson Education 46211-71 (60-90 min.)This is a complex problem because it requires comparing three alternatives. It reviews Chapter 6 as well as covering several of the topics of Chapter 11. The following answer uses the total project approach. The total net future cash outflows are shown for each alternative.1. Alternative A: Continue to manufacture the parts with the current tools.Annual cash outlaysVariable cost, $92 × 8,000 $(736,000)Fixed cost, 1/3 × $45 × 8,000 × .6 (72,000)Tax savings, .4 × ($736,000 + $72,000) 323,200After-tax annual cost $(484,800)Present value, 3.6048 × $484,800 $(1,747,607)PV of remaining tax savings on MACRS:11.52% × $2,000,000 × .4 × .8929 82,2905.76% × $2,000,000 × .4 × .7972 36,735Total present value of costs, Alternative A $(1,628,582)Alternative B: Purchase from outside supplierAnnual cash outlaysPurchase cost, $110 × 8,000 $(880,000)Tax savings, $880,000 × .4 352,000After-tax annual cost $(528,000)Copyright ©2011 Pearson Education 463Present value, $528,000 × 3.6048 $(1,903,334)Sale of old equipment:Sales price $ 400,000Book value [(11.52% + 5.76%) × $2,000,000] 345,600Gain $ 54,400Taxes @ 40% (21,760)Total after-tax effect ($400,000 - $21,760) 378,240Total present value of costs, Alternative B $(1,525,094)Copyright ©2011 Pearson Education 464Alternative C: Purchase new toolsInvestment $(1,800,000) Annual cash outlaysVariable cost, $73 × 8,000 $(584,000)Fixed cost (same as A) (72,000)Tax savings, .4 × ($584,000 + $72,000) 262,400After-tax annual cost $(393,600)Present value, $393,600 × 3.6048 (1,418,849)Tax savings on new equipment* 579,217Effect of disposal of new equipmentSales price $ 500,000Book value 0Gain $500,000Taxes @ 40% 200,000Total after-tax effect $ 300,000Present value, $300,000 × .5674 170,220Effect of disposal of old equipment (see Alternative B) 378,240Total present value of costs, Alternative C $(2,091,172)* Using the MACRS schedule for tax depreciation, the depreciation rate for each year of a 3-year asset's life is shown inExhibit 11-6:Depreciation Tax PV PresentYear Rate Savings Factor Value1 33.33% .3333 × $1,800,000 × .40 = $239,976 .8929 $214,2752 44.45% .4445 × 1,800,000 × .40 = 320,040 .7972 255,1363 14.81% .1481 × 1,800,000 × .40 = 106,632 .7118 75,9014 7.41% .0741 × 1,800,000 × .40 = 53,352 .6355 33,905Total present value of tax savings $579,217Using Exhibit 11-7, we get .8044 × $1,800,000 × .4 = $579,168, which differs from $579,217 by a $49 rounding error.The alternative with the lowest present value of cost is Alternative B, purchasing from the outside supplier.Copyright ©2011 Pearson Education 4652. Among the major factors are (1) the range of expected volume (both large increases and decreases in volume make thepurchase of the parts relatively less desirable), (2) the reliability of the outside supplier, (3) possible changes inmaterial, labor, and overhead prices, (4) the possibility that the outside supplier can raise prices before the end of five years, (5) obsolescence of the products and equipment, and (6) alternate uses of available capacity (alternative uses make Alternative B relatively more desirable).Copyright ©2011 Pearson Education 466Copyright ©2011 Pearson Education467CHAPTER 12 Cost Allocation12-30 (10-15 min.) 1. Rate = [$2,500 + ($.05 × 100,000)] ÷ 100,000 = $.075 per copy Cost allocated to City Planning in August = $.075 × 42,000 = $3,150. 2. Fixed cost pool allocated as a lump sum depending on predicted usage:To City Planning: (36,000 ÷ 100,000) × $2,500 = $900 per monthVariable cost pool allocated on the basis of actual usage: $.05 × number of copies Cost allocated to City Planning in August: $900 + ($.05 × 42,000) = $3,000. 3. The second method, the one that allocated fixed- and variable-cost pools separately, is preferable. It better recognizesthe causes of the costs. The fixed cost depends on the size of the photocopy machine, which is based on predicted usage and is independent of actual usage. Variable costs, in contrast are caused by actual usage.Exhibit 12-34Customer Type 1Customer Type 2 Customer Type 3 Sales Gross price profit per margin Gross Gross Gross Product unit per unit Units Revenue profit Units Revenue profit Units Revenue profitA $11.031$ 4.14 200 $ 2,206 $ 828 2,200 $ 24,266 $ 9,108 500 $ 5,515 $ 2,070 B 20.47 4.09 100 2,047 409 1,200 24,564 4,908 3,000 61,410 12,270 C 51.38 10.28 50 2,569 514 400 20,552 4,112 5,000 256,900 51,400D 90.00 39.38 400 36,000 15,752 800 72,000 31,504 400 36,000 15,752Total 750 $42,822 17,5034,600 $141,382 49,632 8,900 $359,825 81,492 Cost to serve 7,36845,193 87,439 Operating income $10,135 $4,439 ($5,947) Customer gross margin percentage 40.9% 35.1% 22.6% Cost to serve percentage 17.2% 32.0% 24.3%Customer operating income percentage 23.7%3.1% (1.7%)1$32,000 ÷ 2,900 units; etc. The rounded numbers from the first two columns are used in subsequent calculations.5. The chart below shows customer profitability for the three customer types and suggested strategies for profit improvement.Grow business with this customer type byfocused sales efforts and quantity discounts.Work with customers to lowerthe cost to serve. Seek internalprocess improvements to lowerthose elements of the cost toserve controllable by thecompany.Copyright ©2011 Pearson Education 46912-35 (15-20 min.)of1. AllocationCostsGallons Weighting Joint$300,000 $180,000×A 9,000 9/15SolventSolvent B 6,000 6/15 × $300,000 120,00015,000 $300,0002. Relative Sales Allocation ofCostsValue at Split-off* Weighting JointSolvent A $270,000 27/54 × $300,000 $150,000Solvent B 270,000 27/54 × $300,000 150,000$540,000 $300,000 * $30 × 9,000 and $45 × 6,00012-42 (25-30 min.)There a several ways to organize an analysis that provides product costs. We like to focus first on determining total activity-cost pools and activity cost per driver unit. Then, an analysis similar to the one shown in Exhibit 12-8 can be used.Schedule a: Activity center cost poolsResources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 2% $ 1,800 Assembly machines $247,000 × (400 ÷ 1,900) 52,000 Facilities management $95,000 × (400 ÷ 1,900) 20,000 Power $54,000 × (10 ÷ 90) 6,000Total assigned cost $79,800Cost per driver unit (setup) $79,800 ÷ 40 $ 1,995 Resources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 98% $ 88,200 Assembly machines $247,000 × (1,500 ÷ 1,900) 195,000 Facilities management $95,000 × (1,500 ÷ 1,900) 75,000 Power $54,000 × (80 ÷ 90) 48,000Total assigned cost $406,200Cost per driver unit (machine hour) $406,200 ÷ 1,500 $ 270.80Copyright ©2011 Pearson Education 470Exhibit 12-42 Contribution to cover other value-chain costs by productStandardDeluxe Custom Cost per Driver unit Driver Driver Driver Activity/Resource (Schedule a) Units Cost Units Cost Units Cost Setup/Maintenance $1,995 20 $ 39,900 12 $ 23,940 8 $ 15,960 Assembly $270.80 1,000 270,800 400 108,320 100 27,080 Parts 1,003,800 115,080 15,980Direct labor 298,00072,000 68,000 Total $1,612,500$319,340 $127,020 Units 100,000 10,000 1,000 Cost per display $16.125 $31.934 $127.02Selling price 20.00050.000 250.00 Unit gross profit $ 3.875$18.066 $122.98 Total gross profit $387,500$180,660 $122,980The total contribution of these products is $387,500 + $180,660 + $122,980 = $691,140.12-43 (25-30 min.) See solution to problem 12-42.12-55 (100 – 200 min.)1. Exhibits 12-55A and 12-55B show the calculation of customer gross margin percentage and customer cost-to-serve percentage for the 4 customer types. Exhibit 12-55C shows a plot of customer gross margin percentage versus customer cost-to-serve percentage for the 4 customer types.2. Suggested strategies for profit improvement for the 4 customer types follow.•Customer type 1 - Mega stores. These stores have the lowest cost-to-serve.Profitability can be improved by focusing on a better product mix. A quarter ofthe sales (cases) to these stores are from bulk and singles products – both ofwhich have a negative gross margin. A shift in mix towards more regular andfragile product types would improve profitability.•Customer type 2 – Local small stores. These stores have a product mix that contains a substantial amount (32%) of the negative gross margin products. Thesame change in sales focus that applies to mega stores can be applied to localsmall stores.But unlike mega stores, small stores are very costly to serve. From Exhibit 12-55 B, the largest single cost to serve local small stores is truck deliveries. Theaverage number of cases per order (the same as per truck delivery) is 6,000,000 ÷ 80,000 = 75. Compare this to mega stores that average 7,680,000 ÷ 32,000 = 240 cases per order (delivery). This is a significant factor causing the high cost-to-serve.For example, suppose that the average order size could be increased from 75,000 to 150,000 cases. If the total annual cases sold is unchanged (6,000,000), a totalof 40 orders, a 50% reduction, would be made. An estimate of the cost savingsand the impact on the cost-to-serve percentage can be made as follows:Cost per Driver Unit Reduction in Driver Cost Savings(Exhibit 12-55B) Units of 50% (000) Truck delivery $167.55 34,000 $5,696.70 Order processing 27.49 40,000 1,099.60 Regular scheduling 5.83 36,000 209.88 Expedited scheduling 19.44 4,000 77.76 Total cost savings (000) $7,083.94 Cost savings as a percent of revenue 24.9%New cost-to-serve as a percent of revenue 60.1%In addition to the above savings, other activities would also be impacted by thereduction in orders such as customer service. So while the total impact ofCopyright ©2011 Pearson Education 472focusing on increasing order size can only be estimated, it is reasonable to expect dramatic cost savings from the current 85% of revenue.Other factors that should be investigated include the high level of corporatesupport and customer service.•Customer type 3 – Local large stores. Local large stores generate $68,400 ÷ $136,230 = 50% of DSI’s total revenue and with a net margin of 58% - 47% = 11%. The key to local large store profitability is sales of a large percentage (80%) of regular product. The cost-to-serve percentage is 47%. This could be reduced as for customer type 2 by increasing the order size from the current level of14,400,000 ÷ 120,000 = 120 cases per order. But a dramatic improvementshould not be expected. In general, local large stores are sustaining DSI’sbusiness and their loyalty should be cultivated.•Customer type 4 – Specialty stores. Specialty stores have a low gross margin of 22% coupled with a very large cost-to-serve percent of 106%! Although thesestores do not account for a significant portion of DSI’s revenue the companyshould rationalize their business. Several actions could be suggested. One is to charge a premium for all high-security products. The vast majority of theseproducts are sold to specialty stores with only marginal sales to mega and local small stores. Another action is to adopt a customer loyalty program based onvolume of sales. The list price of $7.25 per case would apply to customers with sales volumes less than a specified level. Most of DSI’s customers would qualify for discounts (similar to those currently existing) so prices would not besignificantly different. For specialty stores, prices would increase dramatically.This may result in losing specialty-store business so DSI needs to decide is this isa direction they wish to consider.Copyright ©2011 Pearson Education 473Exhibit 12-55A (Units and dollars are in thousands.)C u s t o m e r T y p eProductRegular Short Fragile Bulk HighSecurity Singles Total Gross Profit PercentageProduct mix percentage 60% 5% 5% 20% 5% 5% 100% Cases sold 4,608 384 384 1,536 384 3847,680Total Revenue$ 21,888 $ 1,824$ 1,824$7,296$ 1,824 $ 1,824 $36,480Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $(1.44)$ 0.54 $ (5.30)1Total Gross Profit$ 15,114 $ 607 $ 1,052 $(2,212)$ 207 $(2,035)$12,733 35%Product mix percentage 50% 5% 5% 30% 8% 2% 100% Cases sold3,000 300 300 1,800 480 120 6,000 Total Revenue @ 4.75/case $ 14,250 $ 1,425 $ 1,425 $ 8,550 $ 2,280 $ 570 $28,500 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)2Total Gross Profit$ 9,840 $ 474 $ 822 $(2,592) $ 259 $ (636)$ 8,167 29%Product mix percentage 80% 0% 10% 10% 0% 0% 100%Cases sold 11,520 -1,4401,440--14,400Total Revenue @ 4.75/case $ 54,720 $ - $ 6,840 $ 6,840 $ - $ - $68,400Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)3Total Gross Profit$ 37,786 $ - $ 3,946 $(2,074) $ - $ - $39,658 58%Product mix percentage 10% 20% 0% 0% 70% 0% 100% Cases sold 60 120 - - 420-600Total Revenue @ 4.75/case $ 285 $ 570 $ - $ - $ 1,995 $ - $ 2,850 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44)$ 0.54 $ (5.30)4Total Gross Profit $ 197$ 190$ -$ -$ 227$ - $ 61322%Exhibit 12-55B (Units and dollars are in thousands.)ActivityO r d e r P r o c e s s i n gC u s t o m e r S e r v i c eO r d e r C h a n g e sC o r p o r a t e S u p p o r tR e g u l a r S c h e d u l i n gE x p e d i t e d S c h e d u l i n gS h i p p i n gT r u c k D e l i v e r yP a r c e l D e l i v e r y Cost DriverO r d e r sL a b o r H o u r sN u m b e r o f C h a n g e sL a b o r H o u r sO r d e r sO r d e r sP a l l e t sD e l i v e r i e sD e l i v e r i e sC u s t o m e r T y p eCost/DriverUnit $27.49 $43.34$32.63$51.66$5.83 $19.44 $6.60 $167.55 $23.89Total Driver Units3218.73.2 - 29 3 41625.6 1.6 Cost to Serve $879.68 $810.46$104.42-$169.07$58.32$2,745.6$4,289.28$38.22$9,095.05Revenue (See Exhibit 12-55A) $36,480.001 Cost-to-Serve Percentage24.9%Driver Units 80 100 8 20 72 8 640 68 8Cost to Serve $2,199.2 $4,334$261.04$1,033.2 $419.76$155.52$4,224$11,393.4$191.12$24,211.24Revenue (See Exhibit 12-55A) $28,500.02Cost-to-Serve Percentage85.0%Exhibit 12-55B (continued)ActivityO r d e r P r o c e s s i n gC u s t o m e r S e r v i c eO r d e r C h a n g e sC o r p o r a t e S u p p o r tR e g u l a r S c h e d u l i n gE x p e d i t e d S c h e d u l i n gS h i p p i n gT r u c k D e l i v e r y P a r c e l D e l i v e r y Cost DriverO r d e r sL a b o r H o u r sN u m b e r o f C h a n g e sL a b o r H o u r sO r d e r sO r d e r sP a l l e t sD e l i v e r i e sD e l i v e r i e sC u s t o m e r T y p eCost/DriverUnit $27.49 $43.34$32.63$51.66$5.83 $19.44 $6.60 $167.55 $23.89TotalDriver Units 120 70 2.4 80 108 12 840 90 6Cost to Serve$3,298.8 $3,033.8 $78.31$4,132.8 $629.64 $233.28 $5,544$15,079.5$143.34$32,173.47Revenue (See Exhibit 12-55A) $68,400.03 Cost-to-Serve Percentage47.0%Driver Units 12 30 1.2 0 10 2 60 4.8 2.4Cost to Serve $329.88$1,300.2 $39.16- $58.3 $38.88 $396 $804.24 $57.34$3,023.99Revenue (See Exhibit 12-55A) $2,850.004 Cost-to-Serve Percentage106.1%CUSTOMER PROFITABILITYCT3, 47%, 58%0%10%20%30%40%50%60%70%80%90%100%0%10%20%30%40%50%60%70%80%90%100%110%120%COST-TO-SERVE PERCENTAGEG R O S S P R O F I T P E R C E N T A G EExhibit 12-55CCopyright ©2011 Pearson Education 478。

Snara Company accumulates the following data concerning a mixed cost, using miles as the activity level.Miles Driven Total Cost Miles Driven Total Cost January 10,000 $15,000 March 9,000 $12,500February 8,000 $14,500 April 7,500 $13,000 InstructionsCompute the variable and fixed cost elements using the high-low method.SOLUTION$15,000 − $13,000————————— = $0.80 = variable cost per mile10,000 − 7,500$0.80 (10,000) + FC = $15,000Fixed cost = $7,000Or$0.80 (7,500) + FC = $13,000Fixed cost = $7,000QUESTION 2Determine the missing amounts.Unit Selling Price Unit Variable CostsContributionMargin per UnitContributionMargin Ratio1. $300 $210 A. B.2. $600 C. $120 D.3. E. F. $400 40% SOLUTIONA. $300 – $210 = $90B. $90 ÷ $300 = 30%C. $600 – $120 = $480D. $120 ÷ $600 = 20%E. $400 ÷ 40% = $1,000F. If 40% = CM ratio, then 60% = variable cost percentage; $1,000 × 60% = $600Or $1,000 – $400 = $600Wellington Cabinets has fixed costs totaling $96,000. Its contribution margin per unit is $1.50, and the selling price is $5.50 per unit.InstructionsCompute the break-even point in units.SOLUTION$1.50X – $96,000 = 0X = 64,000 unitsQUESTION 4Diaz Donuts sells boxes of donuts each with a variable cost percentage of 37.5%. Its fixed costs are $46,875 per year.InstructionsDetermine the sales dollars Diaz needs to break even per year.SOLUTIONContribution margin ratio = 100% – 37.5% = 62.5%.625x – $46,875 = 0X = $75,000 of sales dollarsQUESTION 5Kettle Goods Company has a unit selling price of $500, variable cost per unit $300, and fixed costs of $170,000.InstructionsCompute the break-even point in units and in sales dollars.SOLUTION$500X − $300X − $170,000 = 0BEP in units = X = 850 unitsBEP in dollars = 850 units × $500 = $425,000The following monthly data are available for Marketplace, Inc. which produces only one product which it sells for $18 each. Its unit variable costs are $8, and its total fixed expenses are $15,000. Actual sales for the month of May totaled 2,000 units.InstructionsCompute the margin of safety in units and dollars for the company for May.SOLUTIONBEP in units: $18X - $8X – $15,000 = 0BEP in units = X = 1,500 unitsUnits at current sales level = 2,000Margin of safety = (2,000 – 1,500) × $18 = $9,000Sales can drop by $9,000 before the company incurs a lossQUESTION 7Manhattan Cookery reported actual sales of $2,000,000, and fixed costs of $400,000. The contribution margin ratio is 25%.InstructionsCompute the margin of safety in dollars and the margin of safety ratio.SOLUTIONBEP in dollars: $400,000 ÷ 25% = $1,600,000Margin of safety in dollars: $2,000,000 − $1,600,000 = $400,000Margin of safety ratio: $400,000 ÷ $2,000,000 = 20%QUESTION 8Mace Company accumulates the following data concerning a mixed cost, using miles as the activity level.Miles Driven Total CostJanuary 10,000 $15,000February 8,000 13,500March 9,000 14,400April 7,500 12,500InstructionsCompute the variable and fixed cost elements using the high-low method.$15,000 – $12,500————————— = $1.00 = variable cost per mile 10,000 – 7,500($1.00 x 10,000) + fixed cost = $15,000Fixed cost = $5,000。

CHAPTER 6 COVERAGE OF LEARNING OBJECTIVESLO6: DecideA4,B5 40 57,59whether to keep orreplace equipment.26,39,41 52,58,64 71LO7: Identifyirrelevant andmisspecifiedcosts.B6 43 60LO8: Discuss howperformancemeasures canaffect decisionmaking.CHAPTER 6Relevant Information and Decision Making With a Focus on OperationalDecisions6-A1 (20 min)1. The key to this question is what will happen to the fixedoverhead costs if production of the boxes is discontinued.Assume that all $60,000 of fixed costs will continue. Then,Sunshine State will lose $20,000 by purchasing the boxes fromWeyerhaeuser:Payment to Weyerhaeuser, 80,000 × $2.10$168,000Costs saved, variable costs 148,000Additional costs $ 20,0002. Some subjective factors are:Might Weyerhaeuser raise prices if Sunshine State closed downits box-making facility?Will sub-contracting the box production affect the quality ofthe boxes?Is a timely supply of boxes assured, even if the number neededchanges?Does Sunshine State sacrifice proprietary information whendisclosing the box specifications to Weyerhaeuser?3. In this case the fixed costs are relevant. However, it is notthe depreciation on the old equipment that is relevant. It isthe cost of the new equipment. Annual cost savings by not producing the boxes now will be:Variable costs $148,000Investment avoided (annualized) 80,000Total saved $228,000The payment to Weyerhaeuser is $228,000 - $168,000 = $60,000 less than the savings, so Sunshine State would be $60,000 better off subcontracting the production of the boxes.6-A2 (10 min.)1. Contribution margins:Plain = $70 - $55 = $15Professional = $100 - $75 = $25Contribution margin ratios:Plain = $15 ÷ $70 = 21.4%Profe ssional = $25 ÷ $100 = 25%2. PlainProfessionala. Units per hour 2 1b. Contribution margin per unit $15 $25Contribution margin per hour $30 $25 Total contribution for 20,000 hours $600,000 $500,0003. The plain circular saws are the best use of the scarce machinehours. For a given capacity, the criterion for maximizingprofits is to obtain the greatest possible contribution to profitfor each unit of the limiting or scarce factor. Moreover, fixedcosts are irrelevant unless their total is affected by the choiceof products.6-A3 (15 min.) Table is in thousands of dollars.1,2. (a) (b) (a)-(b) (c) (a)-(b)-(c)SeparableSales Sales Costs IncrementalBeyond at Incremental Beyond Gain orSplit-Off Split-Off Sales Split-Off (Loss)A 230 54 176 190 (14)B 330 32 298 300 (2)C 175 54 121 100 21 Increase in overall operating income from further processing of A, B,and C 5The incremental analysis indicates that Product C should be processed further, but Products A and B should be sold at split-off. The overall operating income would be $44,000, as follows:Sales: $54,000 + $32,000 + $175,000 $261,000Joint cost of goods sold $117,000Separable cost of goods sold 100,000 217,000 Operating income $ 44,000Compare this with the present operating income of $28,000. That is, $230,000 + $330,000 + $175,000 - ($190,000 + $300,000 + $100,000 + $117,000) = $28,000. The extra $16,000 of operating income comes from eliminating the $16,000 loss resulting from processing Products A and B beyond the split-off point.6-A4 (30-40 min.)Problem 6-60 is an extension of this problem. The two problems make a good combination.1. Operating inflows for each year, old machine:$910,000 - ($810,000 + $60,000) $40,000Operating inflows for each year, new machine:$910,000 - ($810,000 + $22,000*) $78,000* $60,000 - $38,000Cash flow statements (in thousands of dollars):Keep ReplaceThree ThreeYear Years Years Year Years Years1 2 & 3 Together 1 2 & 3 Together Receipts, inflows from operations 40 40 120 78 78234Disbursements:Purchase of "old" equipment (90)* -- (90) (90) -- (90) Purchase of "new" equipment:Total costs less proceedsfrom disposal of "old"equipment ($99,000-$15,000) -- -- -- (84)-- (84)Net cash inflow (outflow) (50) 40 30 (96) 78 60* Assumes that the outlay of $90,000 took place on January 2, 2010, or sometime during 2010. Some students will ignore this item, assuming correctly that it is irrelevant to the decision. However, note that a statement for the entire year was requested.The difference for three years taken together is $60,000 - $30,000 = $30,000. Note particularly that the $90,000 book value can be omitted from the comparison. Merely cross out the entire line; although the column totals will be affected, the net difference will still be$30,000.2. Income statements (in thousands of dollars):Keep ReplaceThree ThreeYears Years Year Years Years1, 2 & 3 Together 1 2 & 3TogetherSales 910 2,730 910 910 2,730 Expenses:Other expenses 810 2,430 810 810 2,430 Operating of machine 60 180 22 22 66 Depreciation 30 90* 33 33 99 Total expenses 900 2,700 865 865 2,595 Loss on disposal:Proceeds ("revenue") -- -- (15) -- (15) Book value ("expense") -- -- 90 -- 90* Loss -- -- 75 -- 75 Total charges 900 2,700 940 865 2,670 Net income 10 30 (30) 45 60* As in part (1), the $90,000 book value can be omitted from the comparison without changing the $30,000 difference. This would mean dropping the depreciation item of $30,000 per year (a cumulativeeffect of $90,000) under the "keep" alternative, and dropping the book value item of $90,000 in the loss on disposal computation under the "buy" alternative.Difference for three years together, $60,000 - $30,000 = $30,000.Note the motivational factors here. A manager may be reluctantto replace simply because the large loss on disposal willseverely harm the profit performance in Year 1.3. The net difference for the three years taken together would beunaffected because the item is a past cost. You can substituteany number for the original $90,000 figure without changing thisanswer.For example, examine how the results would change in part (1) by inserting $1 million where the $90,000 now appears (in thousandsof dollars):Keep: Replace:Three Years Three YearsTogether TogetherDifferenceReceipts, inflows from operations 120 234 114 Disbursements:Purchase of old equipment (1,000) (1,000) 0 Purchase of new equipment:Gross price (99)Disposal proceeds of "old" 15 -- ( 84) (84) Net cash outflow ( 880) ( 850) 30In sum, this may be a horrible situation. The manager reallyblundered. But keeping the old equipment will compound theblunder to the cumulative tune of $30,000 over the next threeyears.4. Diplomatically, Lee should try to convey the following. All ofus tend to indulge in the erroneous idea that we can soothe thewounded pride of a bad purchase decision by using the iteminstead of replacing it. The fallacy is believing that a current or future action can influence the long-run impact of a pastoutlay. All past costs are down the drain. Nothing can changewhat has already happened. The $90,000 has been spent.Subsequent accounting for the item is irrelevant. The schedulesin parts (1) and (2) clearly show that we may completely ignorethe $90,000 original outlay and still have a correct analysis.The important point is that the $90,000 is not an element ofdifference between alternatives and, therefore, may be safelyignored. The only relevant items are those expected future items that will differ between alternatives.5. The $90,000 purchase of the original equipment, the sales, andthe other expenses are irrelevant because they are common to both alternatives. The relevant items are the following (in thousands of dollars):Three YearsTogetherKeep Replace Operating of machine(3 × $60; 3 × $22)$180 $ 66 Incremental cost of new machine:Total cost $99Less proceeds of old machine 15Incremental cost -- 84 Total relevant costs $180 $150Difference in favor of buying $ 306-B1 (15-20 min.)1. Make BuyTotal Per UnitTotal Per UnitPurchase cost €10,000,000€50 Direct material €5,500,000€27.50Direct labor 1,900,000 9.50Factory overhead, variable 1,100,000 5.50Factory overhead, fixedavoided 900,000 4.50Total relevant costs €9,400,000€47.00€10,000,000€50 Difference in favor of making € 600,000€ 3.00The numerical difference in favor of making is €600,000 or€3.00 per unit. The relevant fixed costs are €900,000, not€3,000,000.2. Buy and LeaveMake Capacity Idle Buy andRentRent revenue -- -- € 1,150,000 Obtaining of components €(9,400,000)€(10,000,000)€(10,000,000)Net relevant costs €(9,400,000) €(10,000,000) € (8,850,000)The final column indicates that buying the components and rentingthe vacated capacity will yield the best results in this case.The favorable difference is €9,400,000 - €8,850,000 = €550,000.6-B2 (15 min.)1. If fixed manufacturing cost is applied to products at $1.00 permachine hou r, it takes $.75 ÷ $1.00, or 3/4 of an hour toproduce one unit of XY-7. Similarly, it takes $.25 ÷ $1.00 or1/4 of an hour to produce BD-4.2. If there are 100,000 hours of capacity:XY-7: 100,000 hours ÷ 3/4 = 133,333 units.BD-4: 100,000 hours ÷ 1/4 = 400,000 units.Total contribution margins show that BD-4 should be produced, generating $200,000 of contribution margin, which is $66,667 more than would be earned by XY-7.Per Unit UnitsTotalXY-7 $6.00 - ($3.00 + $2.00) = $1.00 133,333 $133,333 BD-4 $4.00 - ($1.50 + $2.00) = $ .50 400,000 $200,0006-B3 (15-20 min.)All amounts are in thousands of British pounds.The major lesson is that a product that shows an operating loss based on fully allocated costs may nevertheless be worth keeping. Why? Because it may produce a sufficiently high contribution to profit sothat the firm would be better off with it than any other alternative.The emphasis should be on totals:Replace Magic Department WithExisting GeneralOperations Merchandise ElectronicProductsSales 6,000 -600 + 250 = 5,650 -600 + 200 = 5,600 Variable expenses 4,090 -390 + 175a= 3,875 -390 + 100 b = 3,800 Contribution margin 1,910 -210 + 75 = 1,775 -210 + 100 = 1,800 Fixed expenses 1,100 -120 + 0= 980 -120 + 30 = 1, Operating income 810 - 90 + 75= 795 - 90 + 70= 790a(100% - 30%) × 250b(100% - 50%) × 200The facts as stated indicate that the magic department should notbe closed. First, the total operating income would drop. Second, fewer customers would come to the store, so sales in other departments may be affected adversely.6-B4 (15 min.)1. Sales ($400 + $600 + $100) $1,100Costs:Raw materials $700Processing 100Total 800Profit $ 3002. Sales ($840 + $850 + $170) $1,860Costs:Joint costs $800Frozen dinner costs 440Salisbury steak costs 200Tanning costs 80Total costs 1,520Profit $ 340Although it is more profitable to process all three productsfurther than it is to sell them all at the split-off point, it isimportant to look at the economic benefit from further processingof each individual product.3. Steaks to frozen dinners:Additional revenue from processing further ($840 - $400)$440Additional cost for processing further 440Increase (decrease) in profit from processing further$ 0Hamburger to Salisbury steaks:Additional revenue from processing further ($850 - $600)$250Additional cost for processing further 200Increase (decrease) in profit from processing further$ 50Untanned hide to tanned hide:Additional revenue from processing further ($170 - $100)$ 70Additional cost for processing further 80Increase (decrease) in profit from processing further$ (10)Only the hamburger dictates that it should be processed further,because it is the only product whose additional revenue forprocessing further exceeds the additional cost. You areindifferent about processing further steak to frozen dinners, asthe incremental profit is 0.4. The resulting profit would be $350:Sales ($400 + $850 + $100) $1,350Costs:Joint costs $800Further processing of hamburger 200Total cost 1,000 Profit $ 3506-B5 (15-20 min.)1. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Old equipment, book value:Periodic write-off asdepreciation 15,000 -or lump-sum write-off - 15,000* Disposal value -6,000* 6,000 New equipment, acquisition cost 15,000** - 15,000 Total costs $57,000 $51,000 $ 6,000*In a formal income statement, these two items would be combined as "loss on disposal" of $15,000 - $6,000 = $9,000.**In a formal income statement, written off as straight-line depreciat ion of $15,000 ÷ 3 = $5,000 for each of three years.2. Three Years TogetherKeep Replace Difference Cash operating costs $42,000 $27,000 $15,000 Disposal value of old equipment - -6,000 6,000 New equipment, acquisition cost - 15,000 - 15,000 Total relevant costs $42,000 $36,000 $ 6,000This tabulation is clearer because it focuses on only those itemsthat affect the decision.3. Benefits of the replacement alternative* $15,000Deduct initial net cash outlay required* 9,000 Difference in favor of replacement $ 6,000 * 3 × ($14,000 - $9,000)** $15,000 - $6,000Also, the new equipment is likely to be faster, thus saving operator time. The latter is important, but it is not quantified in this problem.6-B6 (10 min.)1. The replacement alternative would be chosen because the countywould have $6,000 more cash accumulated in three years.2. The keep alternative would be chosen because the higher overallcosts of photocopying for the first year would be shown for thereplacement alternative (under accrual accounting):First YearKeep Replace Cash operating costs $14,000 $ 9,000 Depreciation expense 5,000 5,000 Loss on disposal 9,000 Total costs $19,000 $23,000Thus, the performance evaluation model might motivate the managerto make a decision that would be undesirable in the long run.6-1 An opportunity cost does not entail a disbursement of cash at any future time, whereas an outlay cost does entail an additional disbursement sooner or later.6-2 The $800 represents an opportunity cost. It is the amountforgone by rejecting an opportunity. It signifies that the value to the owner of keeping those strangers out of the summer house for that two-week period is at least $800.6-3 Accountants do not ordinarily record opportunity costs in accounting records because those records are traditionally concernedwith real transactions rather than possible transactions. It is impossible to record data on all lost opportunities.6-4 A differential cost is any difference in total cost or revenue between two alternatives. A differential cost is an incremental cost when one of the alternatives contains all the costs of the other plus some additional costs. The additional costs are the incremental costs– which are also differential.6-5 No. Incremental cost has a broader meaning. It is the addition to total costs by the adoption of some course of action. Another term, marginal cost, is used by economists to indicate the addition to costsfrom the manufacture of one additional unit. Of course, marginal cost is indeed the incremental cost of one unit.6-6 The decline in costs would be called differential or incremental savings.6-7 Not necessarily. Qualitative factors can favor either making or buying. Often factors such as product quality and assurance of delivery schedules favor making. However, sometimes establishing long-term relationships with suppliers is an important qualitative factor favoring the purchase of components.6-8 The choice in many cases is not really whether to make or buy. Instead, the choice is how best to use available capacity.6-9 Yes. The costs that make a difference when a product or department is being deleted are the avoidable costs.6-10 Four examples of scarce factors are: (a) labor hours, (b) money (investment capital), (c) supervisory hours, and (d) computer hours.6-11 Joint products are two or more manufactured products that (1) have relatively significant sales values and (2) are not separately identifiable as individual products until their split-off point. Examples of joint products include chemicals, lumber, flour, and meat.6-12 The split-off point is where the individual products produced in a joint process become separately identifiable. Costs before the split-off point are irrelevant for decisions about the individual products. They affect the decision about whether to undertake the entire production process, but they do not influence decisions about what to do with the individual products.6-13 Yes. Techniques for assigning joint-product costs to individual products are useful only for product costing, not for deciding onfurther processing after the split-off point. The product must be considered separately at that point apart from its joint cost. The proper basis of the decision on further processing is a comparison of incremental revenue versus incremental expense between the alternatives of selling at the split-off point and processing further.6-14 No. Once inventory has been purchased, the price paid is a sunk cost. It is true that selling at a price less than $5,000 would produce a reported loss. However, a sale at any price above $0 is economically beneficial provided that the only alternative is to scrap the inventory.6-15 No. Sunk costs are irrelevant to the replacement decision.6-16 No. Past costs are not relevant because they cannot be affected by a decision. Although past costs are often indispensable for formulating predictions, past costs themselves are not the predictions that are the inputs to decision models. Clear thinking is enhanced by these distinctions.6-17 Only b and c are relevant.a. Book value of old equipment is irrelevant to a replacementdecision because it does not change under any alternative andcannot be realized.b. Disposal value of old equipment is relevant to a replacementdecision because it can either be realized (by replacement) orforgone (by continued use).c. Cost of new equipment is relevant to a replacement decisionbecause it can be incurred (by replacement) or avoided (bycontinued use).6-18 Yes. Some expected future costs may be irrelevant because they will be the same under all feasible alternatives.6-19 Yes. The statement is correct in terms of total variable costs.6-20 Two reasons why unit costs should be analyzed with care in decision making are:1. Most unit costs are stable only over a certain range of output,and care must be taken to see that allowances are made whenalternatives are considered outside that range.2. Some unit costs are an allocation of fixed costs; thus when ahigher volume of output is being considered, unit cost willdecrease proportionately, and vice versa.Two other reasons are mentioned in the text:1. Some unit costs are based on both relevant and irrelevant factorsand should be broken down further before being considered.2. Unit costs must be reduced to the same base (denominator) beforecomparing or combining them.6-21 Sales personnel sometimes neglect to point out that the unit costs are based on outputs far in excess of the volume of their prospective customer.6-22 An inconsistency between a decision model and a performance evaluation model occurs when a decision about whether to replace a piece of equipment is based on the cash flow effects over the life of the equipment but a manager's performance evaluation is based on the first year's reported income. The loss on disposal of the equipment isirrelevant for decision purposes, but it affects the first year income, hence the performance evaluation.6-23 The wide use of income statements to evaluate performance may overly influence managers to maximize short-run performance that may hurt long-run performance. They may pass up profitable opportunities to replace equipment because of the large loss on disposal shown on thefirst year’s income statement.6-24 Yes, this statement is generally correct. Accountants record transactions. But opportunity cost is the cost of transactions that do not occur (or have not occurred yet). It is the cost of opportunities forgone. Managers usually have much better information about forgone opportunities than do accountants.6-25 Deciding whether to outsource payroll functions requires estimates of the cost of designing, maintaining, and using a payroll system internally compared to the cost of a contract with an outside supplier. To operate an internal payroll system requires hiring personnel with the needed expertise in both legal/governmental issues affecting payroll and information processing to implement a system. Small companies often find it less costly to outsource payroll to a company that has broad expertise in these areas.6-26 Whenever total costs are unitized by dividing by total units and the resulting unit costs are then used to predict new total costs based on a different level of production, errors are being made if any of the costs are fixed. If the new production level is higher, predicted total costs are overestimated. If the new production level is lower, predicted total costs are underestimated. Never unitize fixed costs if the resulting unit cost will be used for planning purposes!Consider the following simple example:Fixed Cost Variable Cost TotalTotal $100 $100 $200Units ÷10÷10÷10Unit Cost $10 $10 $20If a new planned number of units is 20, what will be the new, predicted total cost?The correct cost function and cost prediction isTotal Cost = $100 + $10 × Number of units= $100 + $10 × 20 =$300The correct cost function is based on the two amounts that are constant within the relevant range – the total fixed cost and the unit variable cost.The incorrect unitized cost function and incorrect and overestimated prediction isTotal Cost = $20 × Number of units= $20 × 20= $400It is easy to see that the error comes from treating fixed costs as if they were variable.6-27 The amount paid for inventory is a sunk cost. Once a company has the inventory, it cannot change what it paid for it. Thus the only relevant issue is what can be done with the inventory. If there is a choice of selling the inventory for less than what the company paid for it or not selling it at all, it is certainly better to get something rather than nothing for it.6-28 (10-15 min.)1. IndependentPractice Employee DifferenceOperating revenues $350,000 $110,000 $240,000 Operating expenses 220,000 -- 220,000 Income effects per year $130,000 $110,000 $ 20,000Choose Independent PracticeRevenues $350,000 Expenses:Outlay costs $220,000Opportunity cost of employee compensation 110,000 330,000 Income effects per year $ 20,000Each tabulation produces the key difference of $20,000. As ageneral rule, we favor using the first tabulation when feasible.It offers a straightforward presentation of inflows and outflowsunder sharply stated alternatives.2. Choice as EmployeeRevenue $ 110,000Expenses:Outlay costs $ 0Opportunity cost of accounting practice 130,000 130,000 Income effects per year $ (20,000)If the employee alternative is selected, the key difference infavor of becoming a sole practitioner is again $20,000.Bridgeman is sacrificing $20,000 to avoid the risks of anindependent practice.6-29 (10-15 min.)Alternatives Under Consideration(1) (2) (1) - (2)Sell, Rent, and HoldInvest in Bonds Present Home DifferenceRevenue $10,000* $ - $10,000 Less: Outlay cost 12,000 6,000 6,000 Income effects per year $ (2,000) $(6,000) $ 4,000 *5% × $200,000Advantage of selling the home is $6,000 - $2,000 = $4,000. Obviously, if rent is higher, the advantage decreases.The above analysis does not contain explicit opportunity costs. If opportunity costs were a part of the analysis, the following presentation applies (whereby the interest on investment in bonds is not listed as a separate alternative but is regarded as a forgone alternative):Alternative Chosen:Hold Present HomeOpportunity cost $(10,000)Outlay cost 6,000Income effects per year $ (4,000)As before, the advantage of selling the home and renting is$4,000. The opportunity cost of home ownership is 5% × 200,000 = $10,000.6-30 (15-20 min.) Opportunity cost is the maximum available contribution to profit forgone by using limited resources for a particular purpose. In this case, the opportunity cost of the machine when analyzing the alternative to produce 12-oz. bottles of Juice Cocktails is $90,000, the larger of the $90,000 contribution margin from additional sales of the 100% Juices or the $75,000 proceeds from the sale of the machine. The $160,000 historical cost of the machine is a past cost and thus irrelevant.6-31 (15-20 min.) The first tabulation is probably easier to understand, but the choice of a tabulation is a matter of taste:(a) (b) (c)Expand Expand Rent toLaboratory Eye GiftTesting Clinic Shop Revenues $330,000 $500,000 $11,000Expenses 290,000 480,000 0Income effects per year $ 40,000 $ 20,000 $11,000Treating the gift shop as the forgone (rejected) alternative, the tabulation is:(a) (b)Expand ExpandLaboratory Testing Eye Clinic Revenue $330,000 $500,000 Expenses:Outlay costs $290,000 $480,000Opportunity cost,rent forgone 11,000 301,000 11,000 491,000 Income effects per year $ 29,000 $ 9,000The numbers favor laboratory testing, which will generate a contribution to hospital income that is $20,000 greater than the eyeclinic's.The numbers have been analyzed correctly under both tabulations. Both answer the key query: What difference does it make? As a general rule, we prefer using the first tabulation. It is a straightforward presentation.6-32 (15 min.)1. It is easiest to analyze total costs, not unit costs.Make PurchaseDirect materials $400,000Avoidable overhead costs:Indirect labor 30,000Supplies 20,000Allocated occupancy cost 0Purchase cost $420,000Total relevant costs $450,000 $420,000The difference in favor of purchasing is $450,000 - $420,000 =$30,000.2. Because the quantitative difference is small, qualitative factorsmay dominate the decision. Companies using a just-in-time systemneed assurance of both quality and timeliness of supplies ofmaterials, parts, and components. A small, local company may notbe reliable enough for Bose. In essence, Bose may be willing to"invest" $30,000, the quantitative advantage of purchasing, inorder to have more control over the supply of the components.The division manager may have made the right decision for thewrong reason. He incorrectly ignored avoidable fixed costs,leading to a mistaken belief that making the components was lesscostly by $.20 per unit or $20,000 in total. The $50,000 ofavoidable fixed costs makes the purchase option less costly by$30,000. If the manager's decision is to make the component, itshould be because forgoing profits of $30,000 has a long-runqualitative benefit of more than $30,000, not because the bid isgreater than the variable cost6-33 (20-25 min.)Nantucket Nectars should make the bottles.Make BuyPer PerTotal Bottle Total Bottle Purchase cost $250,000 $.250 Direct materials $80,000 $.080Direct labor 30,000 .030Variable overhead 60,000 .060Avoidable fixedoverhead 60,000 .060 Total relevant costs $230,000 $.230 $250,000 $.250。

CHAPTER 4 COVERAGE OF LEARNING OBJECTIVESCHAPTER 4Cost Management Systems and Activity-Based Costing4-A1 (20-30 min.)See Table 4-A1 on the following page.4-A2 (25-30 min.)1. Merchandise Inventories, 1,000 devices @ $97 $97,0002. Direct materials inventory $ 40,000Work-in-process inventory 0 Finished goods inventory 97,000 Total inventories $137,000 3.NILE ELECTRONICS PRODUCTSStatement of Operating IncomeFor the Year Ended December 31, 20X9Sales (9,000 units at $170) $1,530,000 Cost of goods sold:Beginning inventory $ 0Purchases 970,000Cost of goods available for sale $ 970,000Less ending inventory 97,000Cost of goods sold (an expense) 873,000 Gross margin or gross profit $ 657,000 Less other expenses: selling & administrative costs 185,000 Operating income (also income before taxesin this example) $ 472,000TABLE 4-A1STATEMENT OF OPERATING INCOME OPERATING INCOME BY PRODUCT LINEEXTERNAL REPORTING PURPOSE INTERNAL STRATEGIC DECISION MAKING PURPOSECustom Large SmallDetailed Std. Std. Cost Type, Assignment Method Sales $155,000 $30,000 $45,000 $80,000Cost of goods sold:Direct material 40,000 5,000 15,000 20,000 Direct, Direct TraceIndirect manufacturing 41,000 28,0001 5,000 8,000 Indirect, Alloc. – Mach. Hours81,000 33,000 20,000 28,000Gross profit 74,000 (3,000) 25,000 52,000Selling and administrative expenses:Commissions 15,000 1,500 3,500 10,000 Direct, Direct Trace Distribution to warehouses 10,400 1,0002 3,000 6,400 Indirect, Allocation - Weight Total selling and admin. expenses 25,400 2,500 6,500 16,400Contribution to corporate expensesand profit 48,600 $(5,500) $18,500 $35,600Unallocated expenses:Administrative salaries 8,000Other administrative expenses 4,000Total unallocated expenses 12,000Operating income before tax $ 36,6001 Total machine hours is 1,400 + 250 + 400 = 2,050. Indirect manufacturing cost per machine hour is then $41,000 ÷ 2,050 = $20. The al location to custom detailed is $20 × 1,400 machine hours = $28,000.2 Total weight shipped is 25,000 kg + 75,000 kg + 160,000 kg = 260,000 kg. Indirect distribution costs per kilogram is then $10,400 ÷ 260,000 kg = $0.04. The allocation to custom detailed is $0.04 × 25,000 kg = $1,000.技术资料专业整理4. ORINOCO, INC.Statement of Operating IncomeFor the Year Ended December 31, 20X9Sales (9,000 units at $170)$1,530,000Cost of goods manufactured and sold:Beginning finished goods inventory $ 0Cost of goods manufactured:Beginning WIP inventory $ 0Direct materials used 530,000Direct labor 290,000Indirect manufacturing 150,000Total mfg. costs to account for $970,000Less ending work-in-process inventory 0 970,000Cost of goods available for sale $970,000Less ending finished goods inventory 97,000Cost of goods sold (an expense) 873,000Gross margin or gross profit $ 657,000 Less other expenses: selling and administrative costs 185,000Operating income (also income before taxesin this example) $ 472,0005. The balance sheet for the merchandiser (Nile) has just one line forinventories, the ending inventory of the items purchased for resale.The balance sheet for the manufacturer (Orinoco) has three items:direct materials inventory, work-in-process inventory, and finishedgoods inventory.The income statements are similar except for the computation of cost of goods available for sale. The merchandiser (Nile) simply showspurchases for the year plus beginning inventory. In contrast, themanufacturer (Orinoco) shows beginning work-in-process inventory plusthe three categories of cost that comprise manufacturing cost (directmaterials used, direct labor, and factory (or manufacturing) overhead)and then deducts the ending work-in-process inventory. The manufacturer then adds the beginning finished goods inventory to this cost of goodsmanufactured to get the cost of goods available for sale.6. The purpose is providing aggregate measures of inventory value and costof goods manufactured for external reporting to investors, creditors,and other external stakeholders.4-A3 (10-15 min.)There can be many justifiable answers for each item other than thelisted cost driver and behavior. The purpose of this exercise is togenerate an active discussion regarding those chosen by First Bank’smanagers. One point that should be emphasized is that many timesmanagers choose cost drivers that are not the most plausible or reliable because of lack of data availability. Cost drivers are also used as abasis to allocate activity and resource costs and so the availability of data is often an important consideration.ActivityOr CostResource Cost Driver Behaviora.* R Number of square feet Fb.** R Number of person hours Fc. R Number of computer transactions Vd. A Number of schedulese. R Number of person hours Ff. R Number of loan inquiries Vg.*** A Number of investmentsh. A Number of applicationsi. R Number of person hours Vj. R Number of minutes Vk. R Number of person hours Fl. A Number of loans* An argument can be made that maintenance of the building is an activity.If this was the case, resources such as supplies and labor would be resources consumed, and several resource cost drivers would be needed. In addition, a separate resource and associated cost driver would be needed for insurance costs. However, the company had a contract for maintenance (fixed price), so this was a fixed-cost resource that was added to other occupancy costs such as insurance. The cost driver chosen for all these occupancy costs was square feet occupied by the various departments.** Normally, the cost driver used for any labor resource is person hours.It is assumed that the staff person hours used are regular hours rather than overtime or temporary labor hours. Thus, the cost is fixed with respect to changes in hours used. As the hours used increases (decreases) theutilization of the resources increases (decreases) and eventually, management will need to make a decision whether to expand capacity (or whether to cutback on labor). This is an example of a step cost that is fixed over wideranges of cost-driver level.*** Students may try to determine the cost behavior of activities even thoughthe problem requirements do not ask for it. Point out that activities almostalways have mixed cost behavior because they consume various resources. Someof these are fixed-cost and others variable-cost resources. For example, theactivity “research to evaluate a loan application” consumes such fixed-costresources as manager labor time and computers (assumed owned by the bank).This activity also consumes variable-cost resources such as telecommunicationstime and external computing services.4-A4 (20-30 min.)1. The first step is to determine the cost per cost-driver unit for eachactivity:Monthly Cost- Cost perManufacturing Driver DriverActivity [Cost driver] Overhead Activity UnitMaterial Handling [Direct materials cost] $12,000 $200,000$ 0.06Engineering [Engineering change notices] 20,000 20 1,000.00Power [Kilowatt hours] 16,000 400,000 0.04Total Manufacturing Overhead $48,000Next, the costs of each activity can be allocated to each of the threeproducts:PHYSICAL FLOW / ALLOCATED COSTCost Senior Basic DeluxeMaterial Handling$.06 × 25,000 = $1,500$.06 × 50,000 = $ 3,000$.06 × 125,000 = $ 7,5 Engineering $1,000 × 13 = 13,000$1,000 × 5 = 5,000$1,000 × 2 = 2,000Power $.04 × 50,000 = 2,000$.04 × 200,000 = 8,000$.04 × 150,000 = 6,000 Total $16,500 $16,000 $15,5002. Overhead rate based on direct labor costs:Rate = Total manufacturing overhead ÷ Total direct labor cost= $48,000 ÷ $8,000 = $6.00/DL$Overhead allocated to each product is:Senior: $6.00 × 4,000 = $24,000Basic: $6.00 × 1,000 = 6,000Deluxe: $6.00 × 3,000 = 18,000Total $48,000Notice that much less manufacturing overhead cost is allocated to Basic using direct labor as a cost driver. Why? Because Basic uses only asmall amount of labor but large amounts of other resources, especially power.3. The product costs in requirement 1 are more accurate if the costdrivers are good indicators of the causes of the costs -- they are both plausible and reliable. For example, kilowatt hours is certainly abetter measure of the cost of power costs than is direct labor hours.Therefore, the allocation of power costs in requirement 1 is certainly better than in requirement 2. Materials handling and engineering arelikewise more plausible. A manager would be much more confident in the manufacturing overhead allocated to products in requirement 1.Remember, however, that there are incremental costs of data collection associated with the more accurate ABC system. The benefit/costcriteria must be applied in deciding which costing system is “best.”4-B1 (20-30 min.)See Table 4-B1 on the following page.4-B2 (25-30 min.)1. $1,080,000 ÷ 45,000 hours = $24 per direct-labor hour2. (a) $585,000 ÷ 15,000 hours = $39 per direct-labor hour(b) $495,000 ÷ 30,000 hours = $16.50 per direct-labor hour3. (a) $585,000 ÷ 97,500 hours = $6 per machine hour(b) $495,000 ÷ 30,000 hours = $16.50 per direct-labor hour4. (a) $24 × (1.0 + 14.0) = $360.00$24 × (1.5 + 3.0) = $108.00$24 × (1.3 + 8.0) = $223.20(b) ($39 × 1.0) + ($16.50 × 14.0) = $39.00 + $231.00 = $270.00($39 × 1.5) + ($16.50 × 3.0) = $58.50 + $ 49.50 = $108.00($39 × 1.3) + ($16.50 × 8.0) = $50.70 + $132.00 = $182.70(c) ($6 × 12.0) + ($16.50 × 14.0) = $ 72.00 + $231.00 = $303.00($6 × 17.0) + ($16.50 × 3.0) = $102.00 + $ 49.50 = $151.50($6 × 14.0) + ($16.50 × 8.0) = $ 84.00 + $132.00 = $216.00(d) First consider using departmental instead of firm-wide rates (partb vs. part a). Departmental rates that use direct-labor hours asthe base decrease the cost applied to units of A and C and leave B unaffected. Other products that use relatively less assembly time will increase in cost. Now examine changing to a base of machine hours in machining (part c vs. part a). Product B is the only one with an increase in cost in (c) compared to (a). Why? Because B's uses only 16% of the direct labor hours used for A, B, and C, so it is is allocated only 16% of the costs allocated on the basis ofdirect labor hours. But it uses 40% of the machine hours, andthere is allocated 40% of costs that are allocated on the basis on machine hours. Therefore, it receives relatively more costs with a base of machine hours than with a base of direct-labor hours.TABLE 4-B1STATEMENT OF OPERATING INCOME OPERATING INCOME BY PRODUCT LINEThousands of Dollars Lawn HandScooter Mower Tool Cost Type,Parts Parts Parts Assignment Method Sales $990 $350 $380 $260Cost of goods sold:Direct material 400 175 125 100 Direct, Direct Trace Indirect manufacturing 94 68 1 14 12 Indirect – Mach.Hrs494 243 139 112Gross profit 496 107 241 148Selling and administrative expenses:Commissions 55 25 20 10 Direct, Direct Trace Distribution to warehouses 150 20 2 80 50 Indirect - Weight Total selling and administrative expenses 205 45 100 60Contribution to corporate expenses and profit 291 $ 62 $141 $ 88Unallocated expenses:Corporate salaries 11Other general expenses 17Total unallocated expenses 28Operating income before tax $2631 Total machine hours is 8,500 + 1,750 + 1,500 = 11,750. Indirect manufacturing cost per machine hour isthen $94,000 ÷ 11,750 = $8. The allocation to scooter parts is $8 × 8,500 machine hours = $68,000.2 Total weight shipped is 100,000 kg + 400,000 kg + 250,000 kg = 750,000 kg. Indirect distribution costs perkilogram is then $150,000 ÷ 750,000 kg = $0.20. The allocation to scooter parts is $0.20 × 100,000 kg = $20,000.技术资料专业整理4-B3 (30-35 min.)1.The existing system allocates all costs based on direct labor cost. The rate for allocating indirect production costs is:Estimated indirect production cost ÷ Estimated direct labor cost= ¥24,500,000 ÷ ¥35,000,000 = 70%That is, each time ¥1 is spent on direct labor, Watanabe adds ¥0.7 of indirect production cost to the cost of the product.2. Under an ABC system, Watanabe would allocate indirect production costs separately for each activity. This would result in the following four allocation rates:Receiving: Receiving co sts ÷ Direct material cost=¥4,800,000 ÷ 60,000,000 = ¥0.08 per ¥1of dir. mat. Assembly: Assembly costs ÷ Number of control units=¥13,800,000 ÷ 92,000 = ¥150 per control unitQual. Control: Quality control cost ÷ QC hours=¥1,800,000 ÷ 600 = ¥3,000 per QC hourShipping: Shipping cost ÷ # of boxes shipped=¥4,100,000 ÷ 8,200 = ¥500 per box shipped3. (a) The cost will contain 3 components (in thousands of yen):Direct material ¥ 8,000Direct labor 2,000Indirect production cost (¥2,000 × .7 = 1,400) 1,400Total cost ¥11,400Price (¥11,400 × 1.3)¥14,820(b) The cost will have 7 components, 4 of them allocating indirect production costs (totals in thousands of yen):Direct materials ¥ 8,000Direct labor 2,000Receiving (¥0.08 × 8,000)¥640Assembly (¥150 × 5,000)750Quality control (¥3,000 × 50)150Shipping (¥500 × 600) 300Total indirect production cost 1,840Total cost ¥11,840 Price (11 ,840 × 1.3)¥15,3924. The order from Nissan requires a relatively large amount of receiving, quality control, and shipping resources compared to the relative amount of labor required. This makes its indirect production costs are relatively expensive relative to the labor required. The following illustrates why an allocation on the basis of labor cost results in less costs than allocations based on the four activities:Budgeted Cost- Nissan Cost- NissanActivity Allocation Base Allocation Base Percentage Direct materials 60,000,000 8,000,000 13.3%Direct labor 35,000,000 2,000,000 5.7 Receiving 60,000,000 8,000,000 13.3 Assembly 92,000 5,000 5.4 Quality control 600 50 8.3 Shipping 8,200 600 7.3Using the single direct-labor cost-allocation base, this order would receive 5.7% of all indirect production costs. The main reason that indirect production costs for this order under the ABC system are relatively high is the large relative cost of materials that drives a large allocation (13.3%) of receiving costs to this order. The allocations of both quality control and shipping costs are slightly larger that they would be using a direct-labor cost-allocation base, while the allocation of assembly costs is slightly smaller.4-B4 (50-60 min.)1. A summary of the analyses follows.Pen Cell-PhoneCasings Casings CompanyBase Gross Profit Percentage* 1.25% 38.75% 8.07% Plan Gross Profit Percentage** 10.80% 37.20% 17.40% Support of Product Manager? Strong NoneSupport of President? Moderate* See Exhibit 4-6 on p. 136 of the text.** See Panel B of Exhibit 4-B4 that follows.Exhibit 4-B4, Panels A and B on the following pages can be used to explain the impact of the controller’s idea using the process map of the traditional costing system and the related financial reports. Notice that the $80,000 annual decrease in the cost of engineers needs to be converted to a $20,000 quarterly savings. The controller’s idea will result in an increase of 9.55%in the gross profit of the pen-casings line but a decrease of 1.55% in thecell-phone line. The product manager of pen casings would probably give strong support to the idea but the cell-phone casings manager would most likely not support the idea.Although the company-level gross profit margin improves, the president’s support may not be strong. Why? There is not a strong consensus among product-line managers. Top management is normally hesitant to support actions that do not have the unanimous support among product-line managers unless there is solid evidence of material improvement in profitability. While the current loss would be reversed, the return on sales is still nominal at 3,500 ÷ $480,000 = .73%.Exhibit 4-B4: Panel AProcess Map of Traditional Cost System[Direct Labor Hours = 4,500 +Exhibit 4-B4: Panel BPRO-FORMA FINANCIAL REPORTS:TRADITIONAL COST ALLOCATION SYSTEMSTATEMENT OF OPERTING INCOME CONTRIBUTION TO CORPORATE COSTSAND PROFIT [EXTERNAL REPORTING PURPOSE] [INTERNAL STRATEGIC DECISION MAKINGAND OPERATIONAL-CONTROL PURPOSE]Pen Casings Cell Phone CasingsSales $480,000 $360,000 $120,000 1 Cost of goods sold:Direct material 46,500 22,500 24,000 2 Direct labor 150,000 135,000 15,000Indirect manufacturing 200,000 163,636 3 36,364 4 Cost of goods sold 396,500 321,136 75,364 Gross profit 83,500 $ 38,864 $ 44,636 Corporate expenses (unallocated) 80,000Operating income $ 3,500Gross profit margin 17.40% 10.80% 37.20%1. $80,000 × .75 × 22. $12,000 × 23. $200,000 × [4,500/(4,500 + 1,000)]4. $200,000 × [1,000/(4,500 + 1,000)]5. $83,500/$480,000技术资料专业整理Perhaps the most important factor bearing on the president’s support is lack of confidence in the accuracy of the cost and hence gross margin figures. She probably will inquire whether the shift in the consumption percentages by the two activities is captured by the traditional costing system. Does the change in allocation rates from 90:10 to 82:18 based on direct labor hour changes accurately capture the impact of the operational changes? An informal analysis of the controller’s idea might look like the following table.Based on the informal analysis, the President probably would expect the profitability of cell-phone casings to improve and the profitability of pen casings to be unaffected. This disagrees with the numerical analysis. Given the propensity of managers to embrace numerical results, less weight will likely be given this analysis compared to the “objective” numbers. As a result, she may question the validity of the numerical analysis as well as the value of the traditional costing system!Finally, the focus of improvement efforts should be directly on the pen-casing product line. This initiative deals mostly with the cell-phone line. What can be done to improve profitability of the pen casings? Can prices be raised without losing too much volume? Can operational improvements be made to lower the indirect manufacturing costs? The controller’s idea is worthy of some support but it does not address the profitability issue head on.2. Exhibit 4-B4, Panel C on the following page is a process map that can be used to explain the impact of the controller’s idea. Panel D at the end of the solution provides a detailed evaluation of the controller’s idea.Pen Cell-PhoneCasings Casings Company Base Gross Profit Percentage* 16.22% (28.63%) 8.07% Plan Gross Profit Percentage** 17.26% 17.81% 17.40% Support of Product Manager? Neutral StrongSupport of President? Strong* See the table on p. 139 of the text.** See panel D of Exhibit 4-B4 that follows.The controller’s idea will result in a slight increase in the gross profit of the pen-casings line but a dramatic turnaround in the profitability of thecell-phone line. The product manager of pen casings would probably be neutral or slightly positive about the idea because the idea does not focus on operational improvements that directly affect the pen-casings line. The cell-phone casings manager would give strong support to the idea – this may save his/her job! The president would strongly support this idea while encouraging all managers involved to keep up the good work. Also, note that the numbers agree with the informal analysis – generating confidence in the integrity of the cost accounting system.Exhibit 4-B4, Panel CProcess Map for ABC SystemExhibit 4-B4: Panel DPRO-FORMA FINANCIAL REPORTS FOR LOPEZ PLASTICS COMPANY:ACTIVITY-BASED COST ALLOCATION SYSTEMSTATEMENT OF OPERTING INCOME CONTRIBUTION TO CORPORATE COSTSAND PROFIT [EXTERNAL REPORTING PURPOSE] [INTERNAL STRATEGIC DECISION MAKINGAND OPERATIONAL-CONTROL PURPOSE]Pen Casings Cell Phone Casings Sales $480,000 $360,000 $120,000 Cost of goods sold:Direct material 46,500 22,500 24,000 Direct labor 150,000 135,000 15,000Processing activity 154,000 126,000 128,000 2Production support activity 46,000 14,375 3 31,625 4 Cost of goods sold 396,500 297,875 98,625 Gross profit 83,500 $ 62,125 $ 21,375 Corporate expenses (unallocated) 80,000Operating loss $ 3,500Gross profit margin 17.26% 17.81%1. $154,000 × [4,500 labor hours/(4,500 labor hours + 1,000 labor hours)]2. $154,000 × [1,000 labor hours/(4,500 labor hours + 1,000 labor hours)]3. $46,000 × [5 distinct parts/(5 distinct parts + 11 distinct parts)]4. $46,000 × [11 distinct parts/(5 distinct parts + 11 distinct parts)]技术资料专业整理3. As vice president, you probably are pleased with the new ABC system. The cost drivers that are used to allocate activity costs appear to be plausible and reliable and thus probably represent a sound cause-effect model of operations. This will improve both the accuracy of product costing and operating managers’ control over costs. Operating managers will be pleased with the ABC system because it helps them understand how their day-to-day work impacts costs and profits. From a behavioral perspective, this should behighly motivational.This problem emphasizes the importance of the cost-accounting system to managers. Different systems can result in significantly different management decisions. In this case, the product-line managers’ support for the controller’s idea changes when an ABC system is used to evaluate the idea. Although the company-level gross margins do not change, it is possible thatthe president would strongly support the idea based on ABC data. Why? Neither of the product-line managers is against the idea, and one strongly supports it. In addition, the president may have more confidence in the accuracy of the ABC analysis. The substantial losses of the current quarter have been completely eliminated and the serious profitability problem of the cell-phone casing product line has been reversed.4-1 A cost management system is a collection of tools and techniques that identifies how management’s decisions affect costs. The three purposesof a CMS are to provide1.cost information for operational control,2.cost information for strategic decisions, and3.measures of inventory value and cost of goods manufactured (orpurchased) for external reporting to investors, creditors, and otherexternal stakeholders.4-2 a. The production manager needs operational control information.b. Setting the product mix is a strategic decision.c. The cost of inventory that appears on the balance sheet is information that is used by external investors, creditors, and other stakeholders.4-3 Cost objects are any items for which decision makers desire a separate measurement of costs. They include departments, products, services, territories, and customers.4-4 No. Products are one of the main cost objects for most companies, but departments are also important cost objects because they represent a logical grouping of activities for which managers desire a separate determination of costs.4-5 The major purpose of a detailed cost-accounting system is to measure costs for decision making and financial reporting. Cost accounting systems become more detailed as management seeks more accurate data for decision making.4-6 The two major processes performed by a cost accounting system are cost accumulation and cost assignment. Cost accumulation is collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing. Cost assignment is attaching costs to one or more cost objects, such as activities, processes, departments, customers, or products.4-7 Managers make important decisions on a daily basis. They base these decisions in large part on financial data provided by the cost accounting system. So it is critically important that the cost accounting system provide accurate and reliable financial information.4-8 Managers can specifically and exclusively identify direct costs with a given cost object (that is, directly trace them) in an economically feasible way. Indirect costs cannot be so identified. However, managers can usually identify a plausible and reliable cost driver to use to allocate resourcecosts to cost objects that consume the resources. When direct tracing is not economically feasible and a plausible and reliable cost driver cannot be found, costs should remain unallocated.4-9 Yes, the same cost (for example, the department supervisor's salary)can be direct with respect to a department but indirect with respect to the variety of products flowing through a department (e.g., tables, chairs, and cabinets).4-10 Some costs can be physically linked with a department (or a product), but not in an economically feasible way. An example is the use of departmental meters for measuring power usage. Such devices could measure power costs as direct costs of a department. The alternative is to regard factory power costs as indirect costs of individual departments. Managers often decide whether the resulting increased accuracy provided by individual power meters is worth their additional cost; thus, the test of economic feasibility will decide whether a particular cost is regarded as direct or indirect.4-11 The four purposes of cost allocation are (1) to predict the economic effects of strategic and operational control decisions, (2) to obtain desired motivation, (3) to compute income and asset valuations, and (4) to justify costs or obtain reimbursement.4-12 Generally Accepted Accounting Principles (GAAP) require publically-held companies to allocate all production-related costs and only production-related costs to its products for financial reporting to the public.4-13 No. The costs in a cost pool are not physically traced to cost objects. Only direct costs are traced to cost objects. A cost pool contains indirect costs that are allocated to cost objects using a single cost-allocation base.4-14 Some possible terms are reallocate, assign, distribute, redistribute, load, apportion, reapportion, and burden.4-15 For financial statement purposes, the typical accounting system does not allocate costs associated with value-chain functions other than production to the physical units produced. However, for guiding decisions regarding product-pricing and product-mix decisions, many companies allocate all costs, including R&D, design, marketing, distribution, and customer service costs. However, the allocations of these costs may not be embedded in the system that generates financial statements.4-16 Yes. The two criteria that should be met before using any measure as a cost-allocation base are economic plausibility and reliability. A measure should be plausible – make common sense. If managers cannot easily understand the logical relationship between a cost allocation-base and the costs of an activity or resource, managers will perceive the resulting allocations as arbitrary.4-17 Production maintenance costs are normally indirect. Sales commissions normally can be directly traced to specific products. The costs associated with process design are normally unallocated because it is too difficult to identify plausible and reliable cost-allocation bases, although some companies elect to allocate them.4-18 Generally not. They are direct as far as the physical product is concerned, but in accounting for their cost it would usually be impractical (too costly) to keep records of the amount of glue or tacks used in each unit of product. A more feasible method would be to consider these as supplies (indirect materials).4-19 Depreciation related to production activities is a product cost, not a period cost. Hence, it will become an expense as a part of manufacturing cost of goods sold. Thus, depreciation is not always an immediate expense.。

第二章产品成本计算Exercises2–1（指教材上的第2章练习第1题，下同）1. Part #72A Part #172CSteel* $ 12.00 $ 18.00Setup cost** 6.00 6.00Total $ 18.00 $ 24.00*($1.00 ? 12; $1.00 ? 18)**($60,000/10,000)Steel cost is assigned by calculating a cost per ounce and then multiplying this by the ounces used by each part:Cost per ounce= $3,000,000/3,000,000 ounces= $1.00 per ounceSetup cost is assigned by calculating the cost per setup and then dividing this by the number of units in each batch (there are 20 setups per year):Cost per setup = $1,200,000/20= $60,0002. The cost of steel is assigned through the driver tracing using the number of ounces of steel, and the cost of the setups is assigned through driver tracing also using number of setups as the driver.3. The assumption underlying number of setups as the driver is that each part uses an equal amount of setup time. Since Part #72A uses double the setup time of Part #172C, it makes sense to assign setup costs based on setup time instead of number of setups. This illustrates the importance of identifying drivers that reflect the true underlying consumption pattern. Using setup hours [(40 ?10) + (20 ? 10)], we get the following rate per hour:Cost per setup hour = $1,200,000/600= $2,000 per hourThe cost per unit is obtained by dividing each part’s total setup costs by the number of units:Part #72A = ($2,000 ? 400)/100,000 = $8.00Part #172C = ($2,000 ? 200)/100,000 = $4.00Thus, Part #72A has its unit cost increased by $2.00, while Part #172C has its unit cost decreased by $2.00.problems2–51. Nursing hours required per year: 4 ? 24 hours ? 364 days* = 34,944*Note: 364 days = 7 days ? 52 weeksNumber of nurses = 34,944 hrs./2,000 hrs. per nurse = 17.472Annual nursing cost = (17 ? $45,000) + $22,500= $787,500Cost per patient day = $787,500/10,000 days= $78.75 per day (for either type of patient)2. Nursing hours act as the driver. If intensive care uses half of the hours and normal care the other half, then 50 percent of the cost is assigned to each patient category. Thus, the cost per patient day by patient category is as follows:Intensive care = $393,750*/2,000 days= $196.88 per dayNormal care = $393,750/8,000 days= $49.22 per day*$525,000/2 = $262,500The cost assignment reflects the actual usage of the nursing resource and, thus, should be more accurate. Patient days would be accurate only if intensive care patients used the same nursing hours per day as normal care patients.3. The salary of the nurse assigned only to intensive care is a directly traceable cost. To assign the other nursing costs, the hours of additional usage would need to be measured. Thus, both direct tracing and driver tracing would be used to assign nursing costs for this new setting.2–61. Bella Obra CompanyStatement of Cost of Services SoldFor the Year Ended June 30, 2006Direct materials:Beginning inventory $ 300,000Add: Purchases 600,000Materials available $ 900,000Less: Ending inventory 450,000*Direct materials used $ 450,000Direct labor 12,000,000Overhead 1,500,000Total service costs added $ 13,950,000Add: Beginning work in process 900,000Total production costs $ 14,850,000Less: Ending work in process 1,500,000Cost of services sold $ 13,350,000*Materials available less materials used2. The dominant cost is direct labor (presumably the salaries of the 100 professionals). Although labor is the major cost of providing many services, it is not always the case. For example, the dominant cost for some medical services may be overhead (e.g., CAT scans). In some services, the dominant cost may be materials (e.g., funeral services).3. Bella Obra CompanyIncome StatementFor the Year Ended June 30, 2006Sales $ 21,000,000Cost of services sold 13,350,000Gross margin $ 7,650,000Less operating expenses:Selling expenses $ 900,000Administrative expenses 750,000 1,650,000Income before income taxes $ 6,000,0004. Services have four attributes that are not possessed by tangible products: (1) intangibility, (2) perishability, (3) inseparability, and (4) heterogeneity. Intangibility means that the buyers of services cannot see, feel, hear, or taste a service before it is bought. Perishability means that services cannot be stored. This property affects the computation in Requirement 1. Inability to store services means that there will never be any finished goods inventories, thus making the cost of services produced equivalent to cost of services sold. Inseparability simply means that providers and buyers of services must be in direct contact for an exchange to take place. Heterogeneity refers to the greater chance for variation in the performance of services than in the production of tangible products.2–71. Direct materials:Magazine (5,000 ? $0.40) $ 2,000Brochure (10,000 ? $0.08) 800 $ 2,800Direct labor:Magazine [(5,000/20) ? $10] $ 2,500Brochure [(10,000/100) ? $10] 1,000 3,500Manufacturing overhead:Rent $ 1,400Depreciation [($40,000/20,000) ? 350*] 700Setups 600Insurance 140Power 350 3,190Cost of goods manufactured $ 9,490*Production is 20 units per printing hour for magazines and 100 units per printing hour for brochures, yielding monthly machine hours of 350 [(5,000/20) + (10,000/100)]. This is also monthly labor hours, as machine labor only operates the presses.2. Direct materials $ 2,800Direct labor 3,500Total prime costs $ 6,300Magazine:Direct materials $ 2,000Direct labor 2,500Total prime costs $ 4,500Brochure:Direct materials $ 800Direct labor 1,000Total prime costs $ 1,800Direct tracing was used to assign prime costs to the two products.3. Total monthly conversion cost:Direct labor $ 3,500Overhead 3,190Total $ 6,690Magazine:Direct labor $ 2,500Overhead:Power ($1 ? 250) $ 250Depreciation ($2 ? 250) 500Setups (2/3 ? $600) 400Rent and insurance ($4.40 ? 250 DLH)* 1,100 2,250Total $ 4,750Brochure:Direct labor $ 1,000Overhead:Power ($1 ? 100) $ 100Depreciation ($2 ? 100) 200Setups (1/3 ? $600) 200Rent and insurance ($4.40 ? 100 DLH)* 440 940Total $ 1,940*Rent and insurance cannot be traced to each product so the costs are assigned using direct labor hours: $1,540/350 DLH = $4.40 per direct labor hour. The other overhead costs are traced according to their usage. Depreciation and power are assigned by using machine hours (250 for magazines and 100 for brochures): $350/350 = $1.00 per machine hour for power and $40,000/20,000 = $2.00 per machine hour for depreciation. Setups are assigned according to the time required. Since magazines use twice as much time, they receive twice the cost: Letting X = the pro?portion of setup time used for brochures, 2X + X = 1 implies a cost assignment ratio of 2/3 for magazines and 1/3 for brochures.Exercises3–11. Resource Total Cost Unit CostPlastic1 $ 10,800 $0.027Direct labor andvariable overhead2 8,000 0.020Mold sets3 20,000 0.050Other facility costs4 10,000 0.025Total $ 48,800 $0.12210.90 ? $0.03 ? 400,000 = $10,800; $10,800/400,000 = $0.0272$0.02 ? 400,000 = $8,000; $8,000/400,000 = $0.023$5,000 ? 4 quarters = $20,000; $20,000/400,000 = $0.054$10,000; $10,000/400,000 = $0.0252. Plastic, direct labor, and variable overhead are flexible resources; molds and other facility costs are committed resources. The cost of plastic, direct labor, and variable overhead are strictly variable. The cost of the molds is fixed for the particular action figure being produced; it is a step cost for the production of action figures in general. Other facility costs are strictly fixed.3–3High (1,400, $7,950); Low (700, $5,150)V = ($7,950 – $5,150)/(1,400 – 700)= $2,800/700 = $4 per oil changeF = $5,150 – $4(700)= $5,150 – $2,800 = $2,350Cost = $2,350 + $4 (oil changes)Predicted cost for January = $2,350 + $4(1,000) = $6,350problems3–61. High (1,700, $21,000); Low (700, $15,000)V = (Y2 – Y1)/(X2 – X1)= ($21,000 – $15,000)/(1,700 – 700) = $6 per receiving orderF = Y2 – VX2= $21,000 – ($6)(1,700) = $10,800Y = $10,800 + $6X2. Output of spreadsheet regression routine with number of receiving orders as the independent variable:Constant 4512.98701298698Std. Err. of Y Est. 3456.24317476605R Squared 0.633710482694768No. of Observations 10Degrees of Freedom 8X Coefficient(s) 13.3766233766234Std. Err. of Coef. 3.59557461331427V = $13.38 per receiving order (rounded)F = $4,513 (rounded)Y = $4,513 + $13.38XR2 = 0.634, or 63.4%Receiving orders explain about 63.4 percent of the variability in receiving cost, providing evidence that Tracy’s choice o f a cost driver is reasonable. However, other drivers may need to be considered because 63.4 percent may not be strong enough to justify the use of only receiving orders.3. Regression with pounds of material as the independent variable:Constant 5632.28109733183Std. Err. of Y Est. 2390.10628259277R Squared 0.824833789433823No. of Observations 10Degrees of Freedom 8X Coefficient(s) 0.0449642991356633Std. Err. of Coef. 0.0073259640055344V = $0.045 per pound of material delivered (rounded)F = $5,632 (rounded)Y = $5,632 + $0.045XR2 = 0.825, or 82.5%Pounds of material delivered explains about 82.5 percent of the variability in receiving cost. This is a better result than that of the receiving orders and should convince Tracy to try multiple regression.4. Regression routine with pounds of material and number of receiving orders as the independent variables:Constant 752.104072925631Std. Err. of Y Est. 1350.46286973443R Squared 0.951068418023306No. of Observations 10Degrees of Freedom 7X Coefficient(s) 0.0333883151096915 7.14702865269395Std. Err. of Coef. 0.00495524841198368 1.68182916088492V1 = $0.033 per pound of material delivered (rounded)V2 = $7.147 per receiving order (rounded)F = $752 (rounded)Y = $752 + $0.033a + $7.147bR2 = 0.95, or 95%Multiple regression with both variables explains 95 percent of the variability in receiving cost. This is the best result.5–21. Job #57 Job #58 Job #59Balance, 7/1 $ 22,450 $ 0 $ 0Direct materials 12,900 9,900 35,350Direct labor 20,000 6,500 13,000Applied overhead:Power 750 600 3,600Material handling 1,500 300 6,000Purchasing 250 1,000 250Total cost $ 57,850 $ 18,300 $ 58,2002. Ending balance in Work in Process = Job #58 = $18,3003. Ending balance in Finished Goods = Job #59 = $58,2004. Cost of Goods Sold = Job #57 = $57,850problems5–31. Overhead rate = $180/$900 = 0.20 or 20% of direct labor dollars.(This rate was calculated using information from the Ladan job; however, the Myron and Coe jobs would give the same answer.)2. Ladan Myron Coe Walker WillisBeginning WIP $ 1,730 $1,180 $2,500 $ 0 $ 0Direct materials 400 150 260 800 760Direct labor 800 900 650 350 900Applied overhead 160 180 130 70 180Total $ 3,090 $2,410 $3,540 $ 1,220 $ 1,840Note: This is just one way of setting up the job-order cost sheets. You might prefer to keep the detail on the materials, labor, and overhead in beginning inventory costs.3. Since the Ladan and Myron jobs were completed, the others must still be in process. Therefore, the ending balance in Work in Process is the sum of the costs of the Coe, Walker, and Willis jobs.Coe $3,540Walker 1,220Willis 1,840Ending Work in Process $6,600Cost of Goods Sold = Ladan job + Myron job = $3,090 + $2,410 = $5,5004. Naman CompanyIncome StatementFor the Month Ended June 30, 20XXSales (1.5 ? $5,500) $8,250Cost of goods sold 5,500Gross margin $2,750Marketing and administrative expenses 1,200Operating income $1,5505–201. Overhead rate = $470,000/50,000 = $9.40 per MHr2. Department A: $250,000/40,000 = $6.25 per MHrDepartment B: $220,000/10,000 = $22.00 per MHr3. Job #73 Job #74Plantwide:70 ? $9.40 = $658 70 ? $9.40 = $658Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $22 1,100.00 20 ? $22 440.00$ 1,225.00 $ 752.50Department B appears to be more overhead intensive, so jobs spending more time in Department B ought to receive more overhead. Thus, departmental rates provide more accuracy.4. Plantwide rate: $250,000/40,000 = $6.25Department B: $62,500/10,000 = $6.25Job #73 Job #74Plantwide:70 ? $6.25 = $437.50 70 ? $6.25 = $437.50Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $6.25 312.50 20 ? $6.25 125.00$ 437.50 $ 437.50Assuming that machine hours is a good cost driver, the departmental rates reveal that overhead consumption is the same in each department. In this case, there is no need for departmental rates, and a plantwide rate is sufficient.5–41. Overhead rate = $470,000/50,000 = $9.40 per MHr2. Department A: $250,000/40,000 = $6.25 per MHrDepartment B: $220,000/10,000 = $22.00 per MHr3. Job #73 Job #74Plantwide:70 ? $9.40 = $658 70 ? $9.40 = $658Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $22 1,100.00 20 ? $22 440.00$ 1,225.00 $ 752.50Department B appears to be more overhead intensive, so jobs spending more time in Department B ought to receive more overhead. Thus, departmental rates provide more accuracy.4. Plantwide rate: $250,000/40,000 = $6.25Department B: $62,500/10,000 = $6.25Job #73 Job #74Plantwide:70 ? $6.25 = $437.50 70 ? $6.25 = $437.50Departmental:20 ? $6.25 $ 125.00 50 ? $6.25 $ 312.5050 ? $6.25 312.50 20 ? $6.25 125.00$ 437.50 $ 437.50Assuming that machine hours is a good cost driver, the departmental rates reveal that overhead consumption is the same in each department. In this case, there is no need for departmental rates, and a plantwide rate is sufficient.5–51. Last year’s unit-based overhead rate = $50,000/10,000 = $5This year’s unit-based overhead rate = $100,000/10,000 = $10Last Year This YearBike cost:2 ? $20 $ 40 $ 403 ? $12 36 36Overhead:5 ? $5 255 ? $10 50Total $101 $126Price last year = $101 ? 1.40 = $141.40/dayPrice this year = $126 ? 1.40 = $176.40/dayThis is a $35 increase over last year, nearly a 25 percent increase. No doubt the Carsons arenot pleased and would consider looking around for other recreational possibilities.2. Purchasing rate = $30,000/10,000 = $3 per purchase orderPower rate = $20,000/50,000 = $0.40 per kilowatt hourMaintenance rate = $6,000/600 = $10 per maintenance hourOther rate = $44,000/22,000 = $2 per DLHBike Rental Picnic CateringPurchasing$3 ? 7,000 $21,000$3 ? 3,000 $ 9,000Power$0.40 ? 5,000 2,000$0.40 ? 45,000 18,000Maintenance$10 ? 500 5,000$10 ? 100 1,000Other$2 ? 11,000 22,000 22,000Total overhead $50,000 $50,0003. This year’s bike rental overhead rate = $50,000/10,000 = $5Carson rental cost = (2 ? $20) + (3 ? $12) + (5 ? $5) = $101Price = 1.4 ? $101 = $141.40/day4. Catering rate = $50,000/11,000 = $4.55* per DLHCost of Estes job:Bike rental rate (2 ? $7.50) $15.00Bike conversion cost (2 ? $5.00) 10.00Catering materials 12.00Catering conversion (1 ? $4.55) 4.55Total cost $41.55*Rounded5. The use of ABC gives Mountain View Rentals a better idea of the types and costs of activities that are used in their business. Adding Level 4 bikes will increase the use of the most expensive activities, meaning that the rental rate will no longer be an average of $5 per rental day. Mountain View Rentals might need to set a Level 4 price based on the increased cost of both the bike and conversion cost.分步成本法6–11. Cutting Sewing PackagingDepartment Department DepartmentDirect materials $5,400 $ 900 $ 225Direct labor 150 1,800 900Applied overhead 750 3,600 900Transferred-in cost:From cutting 6,300From sewing 12,600Total manufacturing cost $6,300 $12,600 $14,6252. a. Work in Process—Sewing 6,300Work in Process—Cutting 6,300b. Work in Process—Packaging 12,600Work in Process—Sewing 12,600c. Finished Goods 14,625Work in Process—Packaging 14,625 3. Unit cost = $14,625/600 = $24.38* per pair6–21. Units transferred out: 27,000 + 33,000 – 16,200 = 43,8002. Units started and completed: 43,800 – 27,000 = 16,8003. Physical flow schedule:Units in beginning work in process 27,000Units started during the period 33,000Total units to account for 60,000Units started and completed 16,800Units completed from beginning work in process 27,000Units in ending work in process 16,200Total units accounted for 60,0004. Equivalent units of production:Materials ConversionUnits completed 43,800 43,800Add: Units in ending work in process:(16,200 ? 100%) 16,200(16,200 ? 25%) 4,050 Equivalent units of output 60,000 47,8506–31. Physical flow schedule:Units to account for:Units in beginning work in process 80,000Units started during the period 160,000Total units to account for 240,000Units accounted for:Units completed and transferred out:Started and completed 120,000From beginning work in process 80,000 200,000 Units in ending work in process 40,000Total units accounted for 240,0002. Units completed 200,000Add: Units in ending WIP ? Fraction complete(40,000 ? 20%) 8,000Equivalent units of output 208,0003. Unit cost = ($374,400 + $1,258,400)/208,000 = $7.854. Cost transferred out = 200,000 ? $7.85 = $1,570,000Cost of ending WIP = 8,000 ? $7.85 = $62,8005. Costs to account for:Beginning work in process $ 374,400Incurred during June 1,258,400Total costs to account for $ 1,632,800Costs accounted for:Goods transferred out $ 1,570,000Goods in ending work in process 62,800Total costs accounted for $ 1,632,8006–31、Units t0 account for:Units in beginning work in process(25% completed) 10000Units started during the period 70000 Total units to account for 80000 Units accounted forUnits completed and transferred outStarted and completed 50000From beginning work in process 10000 60000 Units in ending work in process(60% completed) 20000 Total units accounted for 80000 2、60000+20000×60%=72000（units）3、Unit cost for materials:（$/unit）Unit cost for convension:（$/unit）Total unit cost:5+1.13=6.13（$/unit）4、The cost of units of transferred out:60000×6.13=367800($)The cost of units of ending work in process:20000×5+20000×20%×1.13=113560($)作业成本法4–21. Predetermined rates:Drilling Department: Rate = $600,000/280,000 = $2.14* per MHrAssembly Department: Rate = $392,000/200,000= $1.96 per DLH*Rounded2. Applied overhead:Drilling Department: $2.14 ? 288,000 = $616,320Assembly Department: $1.96 ? 196,000 = $384,160Overhead variances:Drilling Assembly TotalActual overhead $602,000 $ 412,000 $ 1,014,000Applied overhead 616,320 384,160 1,000,480Overhead variance $ (14,320) over $ 27,840 under $ 13,5203. Unit overhead cost = [($2.14 ? 4,000) + ($1.96 ? 1,600)]/8,000= $11,696/8,000= $1.46**Rounded4–31. Yes. Since direct materials and direct labor are directly traceable to each product, their cost assignment should be accurate.2. Elegant: (1.75 ? $9,000)/3,000 = $5.25 per briefcaseFina: (1.75 ? $3,000)/3,000 = $1.75 per briefcaseNote: Overhead rate = $21,000/$12,000 = $1.75 per direct labor dollar (or 175 percent of direct labor cost).There are more machine and setup costs assigned to Elegant than Fina. This is clearly a distortion because the production of Fina is automated and uses the machine resources much more than the handcrafted Elegant. In fact, the consumption ratio for machining is 0.10 and 0.90 (using machine hours as the measure of usage). Thus, Fina uses nine times the machining resources as Elegant. Setup costs are similarly distorted. The products use an equal number of setups hours. Yet, if direct labor dollars are used, then the Elegant briefcase receives three times more machining costs than the Fina briefcase.3. Overhead rate = $21,000/5,000= $4.20 per MHrElegant: ($4.20 ? 500)/3,000 = $0.70 per briefcaseFina: ($4.20 ? 4,500)/3,000 = $6.30 per briefcaseThis cost assignment appears more reasonable given the relative demands each product places on machine resources. However, once a firm moves to a multiproduct setting, using only one activity driver to assign costs will likely produce product cost distortions. Products tend to make different demands on overhead activities, and this should be reflected in overhead cost assignments. Usually, this means the use of both unit- and nonunit-level activity drivers. In this example, there is a unit-level activity (machining) and a nonunit-level activity (setting up equipment). The consumption ratios for each (using machine hours and setup hours as the activity drivers) are as follows:Elegant FinaMachining 0.10 0.90 (500/5,000 and 4,500/5,000)Setups 0.50 0.50 (100/200 and 100/200)Setup costs are not assigned accurately. Two activity rates are needed—one based on machine hours and the other on setup hours:Machine rate: $18,000/5,000 = $3.60 per MHrSetup rate: $3,000/200 = $15 per setup hourCosts assigned to each product:Machining: Elegant Fina$3.60 ? 500 $ 1,800$3.60 ? 4,500 $ 16,200Setups:$15 ? 100 1,500 1,500Total $ 3,300 $ 17,700Units ÷3,000 ÷3,000Unit overhead cost $ 1.10 $ 5.904：Elegant Unit overhead cost：[9000+3000+18000*500/5000+3000/2]/3000=$5.1 Fina Unit overhead cost：[3000+3000+18000*4500/5000+3000/2]/3000=$7.94–51. Deluxe Percent Regular PercentPrice $900 100% $750 100%Cost 576 64 600 80Unit gross profit $324 36% $150 20%Total gross profit:($324 ? 100,000) $32,400,000($150 ? 800,000) $120,000,0002. Calculation of unit overhead costs:Deluxe gularUnit-level:Machining:$200 ? 100,000 $20,000,000$200 ? 300,000 $60,000,000Batch-level:Setups:$3,000 ? 300 900,000$3,000 ? 200 600,000Packing:$20 ? 100,000 2,000,000$20 ? 400,000 8,000,000Product-level:Engineering:$40 ? 50,000 2,000,000$40 ? 100,000 4,000,000Facility-level:Providing space:$1 ? 200,000 200,000$1 ? 800,000 800,000Total overhead $25,100,000 $73,400,000Units ÷100,000 ÷800,000Overhead per unit $251 $91.75Deluxe Percent Regular PercentPrice $900 100% $750.00 100%Cost 780* 87*** 574.50** 77***Unit gross profit $120 13%*** $175.50 23%***Total gross profit:($120 ? 100,000) $12,000,000($175.50 ? 800,000) $140,400,000*$529 + $251**$482.75 + $91.753. Using activity-based costing, a much different picture of the deluxe and regular products emerges. The regular model appears to be more profitable. Perhaps it should be emphasized.4–61. JIT Non-JITSalesa $12,500,000 $12,500,000Allocationb 750,000 750,000a$125 ? 100,000, where $125 = $100 + ($100 ? 0.25), and 100,000 is the average order size times the number of ordersb0.50 ? $1,500,0002. Activity rates:Ordering rate = $880,000/220 = $4,000 per sales orderSelling rate = $320,000/40 = $8,000 per sales callService rate = $300,000/150 = $2,000 per service callJIT Non-JITOrdering costs:$4,000 ? 200 $ 800,000$4,000 ? 20 $ 80,000Selling costs:$8,000 ? 20 160,000$8,000 ? 20 160,000Service costs:$2,000 ? 100 200,000$2,000 ? 50 100,000Total $1,160,000 $340,0 0For the non-JIT customers, the customer costs amount to $750,000/20 = $37,500 per order under the original allocation. Using activity assign?ments, this drops to $340,000/20 = $17,000 per order, a difference of $20,500 per order. For an order of 5,000 units, the order price can be decreased by $4.10 per unit without affecting customer profitability. Overall profitability will decrease, however, unless the price for orders is increased to JIT customers.3. It sounds like the JIT buyers are switching their inventory carrying costs to Emery without any significant benefit to Emery. Emery needs to increase prices to reflect the additional demands on customer-support activities. Furthermore, additional price increases may be needed to reflectthe increased number of setups, purchases, and so on, that are likely occurring inside the plant. Emery should also immediately initiate discussions with its JIT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have, such as long-term contracts. The benefits of long-term contracting may offset most or all of the increased costs from the additional demands made on other activities.4–71. Supplier cost:First, calculate the activity rates for assigning costs to suppliers:Inspecting components: $240,000/2,000 = $120 per sampling hourReworking products: $760,500/1,500 = $507 per rework hourWarranty work: $4,800/8,000 = $600 per warranty hourNext, calculate the cost per component by supplier:Supplier cost:Vance FoyPurchase cost:$23.50 ? 400,000 $ 9,400,000$21.50 ? 1,600,000 $ 34,400,000Inspecting components:$120 ? 40 4,800$120 ? 1,960 235,200Reworking products:$507 ? 90 45,630$507 ? 1,410 714,870Warranty work:$600 ? 400 240,000$600 ? 7,600 4,560,000Total supplier cost $ 9,690,430 $ 39,910,070Units supplied ÷400,000 ÷1,600,000Unit cost $ 24.23* $ 24.94**RoundedThe difference is in favor of Vance; however, when the price concession is considered, the cost of Vance is $23.23, which is less than Foy’s component. Lumus should accept the contractual offer made by Vance.4–7 Concluded2. Warranty hours would act as the best driver of the three choices. Using this driver, the rate is $1,000,000/8,000 = $125 per warranty hour. The cost assigned to each component would be:Vance FoyLost sales:$125 ? 400 $ 50,000$125 ? 7,600 $ 950,000$ 50,000 $ 950,000Units supplied ÷400,000 ÷1,600,000Increase in unit cost $ 0.13* $ 0.59**Rounded$0.075 per unitCategory II: $45/1,000 = $0.045 per unitCategory III: $45/1,500 = $0.03 per unitCategory I, which has the smallest batches, is the most undercosted of the three categories. Furthermore, the unit ordering cost is quite high relative to Category I’s selling price (9 to 15 percent of the selling price). This suggests that something should be done to reduce the order-filling costs.3. With the pricing incentive feature, the average order size has been increased to 2,000 units for all three product families. The number of orders now processed can be calculated as follows:Orders = [(600 ? 50,000) + (1,000 ? 30,000) + (1,500 ? 20,000)]/2,000= 45,000Reduction in orders = 100,000 – 45,000 = 55,000Steps that can be reduced = 55,000/2,000 = 27 (rounding down to nearest whole number)There were initially 50 steps: 100,000/2,000Reduction in resource spending:Step-fixed costs: $50,000 ? 27 = $1,350,000Variable activity costs: $20 ? 55,000 = 1,100,000$2,450,000预算9-4Norton, Inc.Sales Budget For the Coming YearModel Units Price Total SalesLB-1 50,400 $29.00 $1,461,600LB-2 19,800 15.00 297,000WE-6 25,200 10.40 262,080 WE-7 17,820 10.00 178,200 WE-8 9,600 22.00 211,200 WE-9 4,000 26.00 104,000 Total $2,514,080二、1. Raylene’s Flowers and GiftsProduction Budget for Gift BasketsFor September, October, November, and DecemberSept. Oct. Nov. D ec.Sales 200 150 180 250Desired ending inventory 15 18 25 10Total needs 215 168 205 260Less: Beginning inventory 20 15 18 25 Units produced 195 153 187 2352. Raylene’s Flowers and GiftsDirect Materials Purchases BudgetFor September, October, and NovemberFruit: Sept. Oct. Nov.Production 195 153 187? Amount/basket (lbs.) ? 1 ? 1 ?1Needed for production 195 153 187Desired ending inventory 8 9 12Needed 203 162 200Less: Beginning inventory 10 8 9Purchases193 154 190Small gifts: Sept. Oct. Nov.Production 195 153 187 ? Amount/basket (items) ? 5 ? 5 ? 5Needed for production 975 765 935Desired ending inventory 383 468 588Needed 1,358 1,233 1,523Less: Beginning inventory 488 383 468Purchases 870 850 1,055Cellophane: Sept. Oct. Nov.Production 195 153 187。

CHAPTER 3 COVERAGE OF LEARNING OBJECTIVESCHAPTER 3Measurement of Cost Behavior3-A1 (20-25 min.) Some of these answers are controversial, and reasonable cases can be built for alternative classifications. Class discussion of these answers should lead to worthwhile disagreements about anticipated cost behavior with regard to alternative cost drivers.1. (b) Discretionary fixed cost.2. (e) Step cost.3. (a) Purely variable cost with respect to revenue.4. (a) Purely variable cost with respect to miles flown.5. (d) Mixed cost with respect to miles driven.6. (c) Committed fixed cost.7. (b) Discretionary fixed cost.8. (c) Committed fixed cost.9. (a) Purely variable cost with respect to cases of 7-Up.10. (b) Discretionary fixed cost.11. (b) Discretionary fixed cost.3-A2 (25-30 min.)1. Support costs based on 60% of the cost of materials:Sign A SignBDirect materials cost $400 $200Support cost (60% of materials cost) $240 $120Support costs based on $50 per power tool operation:Sign A SignBPower tool operations 3 6Support cost $150 $3002. If the activity analysis is reliable, by using the current method,Evergreen Signs is predicting too much cost for signs that use fewpower tool operations and is predicting too little cost for signs thatuse many power tool operations. As a result the company could belosing jobs that require few power tool operations because its bids are too high -- it could afford to bid less on these jobs. Conversely, thecompany could be getting too many jobs that require many powertool operations, because its bids are too low -- given what the "true"costs will be, the company cannot afford these jobs at those prices.Either way, the sign business could be more profitable if the ownerbetter understood and used activity analysis. Evergreen Signs wouldbe advised to adopt the activity-analysis recommendation, but also toclosely monitor costs to see if the activity-analysis predictions ofsupport costs are accurate.3-A3 (25-30 min.)1. High-Low Method:Support Cost Machine HoursHigh month = September $13,500 1,750Low month = May 9,000 850Difference $ 4,500 900Variable cost per machine hour = Change in cost ÷ Change in costdriver= $4,500 ÷ 900 = $5.00Fixed support cost per month = Total support cost - Variable supportcostAt the high point: = $13,500 - $5.00 × 1,750= $13,500 - $8,750= $ 4,750or at the low point: = $ 9,000 - $5.00 × 850= $ 9,000 - $4,250= $ 4,7502. The high-low method uses the high and low activity levels todetermine the cost function. Since the new October data for machinehours does not change either the high or low level there would be no change in the analysis.3. The regression analysis results differ from the results of the high-lowmethod. As a result, estimates of total support cost may differconsiderably depending on the expected machine hour usage. Forexample, consider the following support cost estimates at three levelsof machine hour usage (all within the relevant range):Machine Hour Usage950 Hours 1,200 Hours 1,450 HoursHigh-Low:Fixed $4,750 $ 4,750 $ 4,750 Variable: $5.00 × 950 4,750$5.00 × 1,200 6,000$5.00 × 1,450 7,250 Total $9,500 $10,750 $12,000Regression:Fixed $3,355 $ 3,355 $ 3,355 Variable: $6.10 × 950 5,795$6.10 × 1,200 7,320$6.10 × 1,450 8,845 Total $9,150 $ 10,675 $12,200Because the high-low method has a lower variable cost estimate, theregression-based predictions exceed the high-low-based predictions at higher levels of machine usage, while the high-low estimates aregreater at lower levels of usage. The high-low method used only twodata points, so the results may not be reliable. Fernandez would beadvised to use the regression results, which are based on all relevantdata.3-B1 (20-25 min.)The following classifications are open to debate. With appropriate assumptions, other answers could be equally supportable. For example, in #2, the health insurance would be a committed fixed cost if the number of employees will not change. This problem provides an opportunity to discuss various aspects of cost behavior. Students should make an assumption regarding the time period involved. For example, if the time period is short, say one month, more costs tend to be fixed. Over longer periods, more costs are variable. They also must assume something about the nature of the cost. For example, consider #4. Repairs and maintenance are often thought of as a single cost. However, repairs are more likely to vary with the amount of usage, making them variable, while maintenance is often on a fixed schedule regardless of activity, making them fixed.Another important point to make is the cost/benefit criterion applied to determining “true” cost behavior. A manager may accept a cost driver that is plausible but may have less reliability than an alternative due to the cost associated with maintaining data for the more reliable cost driver.Cost Cost Behavior Likely Cost Driver(s)1. X-ray operating cost Mixed Number of x-rays2. Insurance Step (or variable) Number of employees3. Cancer research Discretionary fixed4. Repairs Variable Number of patients5. Training cost Discretionary fixed6. Depreciation Committed fixed7. Consulting Discretionary fixed8. Nursing supervisors Step Number of nurses,patient-days3-B2 (25-30 min.) Board Z15 Board Q52 Mark-up method:Material cost $40 $60Support costs (100%) $40 $60Activity analysis method:Manual operations 15 7Support costs (@$4) $60 $28The support costs are different because different cost behavior is assumed by the two methods. If the activity analyses are reliable, then boards with few manual operations are overcosted with the markup method, and boards with many manual operations are undercosted with the markup method.3-B3 (25-30 min.)Variable cost per machine hour = Change in Repair Cost ÷ Change in Machine Hours= (P260,000,000 –P200,000,000) ÷ (12,000 –8,000)= P15,000 per machine hourFixed cost per month = total cost - variable cost= P260,000,000 - P15,000 × 12,000= P260,000,000 - P180,000,000= P 80,000,000 per monthor = P200,000,000 - P15,000 × 8,000= P200,000,000 - P120,000,000= P 80,000,000 per month3-1 A cost driver is any output measure that is believed to cause costs to fluctuate in a predictable manner. For example, direct labor costs areprobably driven by direct labor hours; materials costs are probablydriven by levels of product output; and support costs may be driven bya variety of drivers, such as output levels, product complexity, numberof different products and/or parts, and so on.3-2 Linear cost behavior assumes that costs behave as a straight line. This line is anchored by an intercept, or fixed cost estimate, and total costs increase proportionately as cost driver activity increases. The slope ofthe line is the estimate of variable cost per unit of cost driver activity.3-3 Whether to categorize a step cost either as a fixed cost or as a variable cost depends on the "size" of the steps (height and width) and on thedesired accuracy of the description of step cost behavior. If the stepsare wide, covering a wide range of cost driver activity, then within each range the cost may be regarded as fixed. If the steps are narrow andnot too high, with small changes in cost, then the cost may beregarded as variable over a wide range of activity level, with little error.If the steps are narrow and high, covering big changes in cost, then the cost probably should not be regarded as variable, since small changesin activity level can result in large changes in cost.3-4 Mixed costs are costs that contain both fixed and variable elements. A mixed cost has a fixed portion that is usually a cost per time period.This is the minimum mixed cost per period. A mixed cost also has avariable portion that is a cost per unit of cost driver activity. Thevariable portion of a mixed cost increases proportionately withincreases in the cost driver.3-5 In order to achieve the goals set for the organization, management makes critical choices -- choices that guide the future activities of theorganization. These choices include decisions about locations, products, services, organization structure, and so on. Choices about product orservice attributes (mix, quality, features, performance, etc.), capacity(committed and discretionary fixed costs), technology (capital/laborconsiderations, alternative technologies), and incentives (standard-based performance evaluation) can greatly affect cost behavior.3-6 Some fixed costs are called capacity costs because the levels of these fixed costs are determined by management's strategic decisions aboutthe organization's expected levels of activities, or capacity.3-7 Committed fixed costs are costs that are often driven by the planned scale of operations. These costs typically cannot be changed easily orquickly without drastically changing the operations of the organization.Typical committed fixed costs include lease or mortgage payments,property taxes, and long-term management compensation.Discretionary fixed costs are costs that may be necessary to achievecertain operational goals, but there are no contractual obligations tocontinue these payments. Typical discretionary fixed costs includeadvertising, research and development, and employee trainingprograms. The distinction between committed and discretionary fixedcosts is that discretionary fixed costs are flexible and could beincreased, decreased, or eliminated entirely on short notice if necessary, but committed fixed costs usually must be incurred for some time --greater effort is needed to change or eliminate them.3-8 Committed fixed costs are the most difficult to change because long-term commitments generally have been made. These long-termcommitments may involve legal contracts that would be costly torenegotiate or dissolve. Committed fixed costs also are difficult tochange because doing so may mean greatly changing the way theorganization conducts its activities. Changing these committed fixedcosts may also mean changing organization structure, location,employment levels, and products or services.3-9 An organization’s capacity generally determines its committed fixed costs. Management’s choice is the main influence on discretionaryfixed costs. Both committed and discretionary fixed costs depend onthe organization's strategy relating to capacity, product attributes, andtechnology. These elements will determine long-term costcommitments (committed costs) and flexible spending responses tochanges in the environment (discretionary costs).3-10 Both planning for and controlling discretionary costs are important. It is hard to say that one is more important than the other, but certainlyeffective use of discretionary costs requires prior planning. One would not know, however, if these costs had been effective in meeting goalsunless the organization has a reliable and timely control system -- ameans of checking accomplishments against goals.3-11 High technology production systems often mean higher fixed costs and lower variable costs.3-12 Incentives to control costs are means of making cost control in the best interests of the people responsible for making cost expenditures. Asimple example will illustrate the use of incentives to control costs.Assume that you are an executive who travels for business, purchasesprofessional literature, and keeps current with personal computertechnology. Under one incentive system, you simply bill theorganization for all your travel and professional expenses. Underanother system, you are given an annual budget for travel andprofessional needs. Which system do you think would cause you to be more careful about how you spend money for travel and professionalneeds? Most likely, the latter system would be more effective incontrolling costs. Usually these incentives are economic, but other non-financial incentives may also be effective.3-13 Use of cost functions, or algebraic representations of cost behavior, allows cost analysts or management to build models of theorganization's cost behavior. These models can be used to aidplanning and control activities. One common use of cost functions isin financial planning models, which are algebraic models of the costand revenue behavior of the firm, essentially extended C-V-P modelssimilar to those discussed in Chapter 2. Understanding relationshipsbetween costs and cost drivers allows managers to make betterdecisions.3-14 A "plausible" cost function is one that is intuitively sound. A cost function is plausible if a knowledgeable analyst can make soundeconomic justifications why a particular cost driver could cause the cost in question. A "reliable" cost function is one that accurately andconsistently describes actual cost behavior, past and future. Bothplausibility and reliability are essential to useful cost functions. It isdifficult to say that one is more important than the other, but onewould not have much confidence in the future use of a cost functionthat is not plausible, even if past reliability (e.g., based on statisticalmeasures) has been high. Likewise, one would not be confident usinga cost function that is highly plausible, but that has not been shown tobe reliable. The cost analyst should strive for plausible and reliablecost functions.3-15 Activity analysis identifies underlying causes of cost behavior (appropriate cost drivers) and measures the relationships of costs totheir cost drivers. A variety of methods may be used to measure costfunctions, including engineering analysis and account analysis.3-16 Engineering analysis is a method of identifying and measuring cost and cost driver relationships that does not require the use of historical data.Engineering analysis proceeds by the use of interviews, experimentation, and observation of current cost generating activities. Engineeringanalysis will be more reliable if the organization has had pastexperience with the activities.Account analysis is a method of identifying and measuring costs andcost driver relationships that depend explicitly on historical cost data.An analyst selects a single cost driver and classifies each cost accountas fixed or variable with respect to that cost driver. Account analysiswill be reliable if the analyst is skilled and if the data are relevant tofuture uses of the derived cost function.3-17 There are four general methods covered in this text to measure mixed costs using historical data: (1) account analysis, (2) high-low, (3) visualfit, and (4) regression.• Account analysis looks to the organization's cost accounts andclassifies each cost as either fixed, variable, or mixed with regard to anappropriate cost driver.• High-low analysis algebraically measures mixed cost behavior by con-structing a straight line between the cost at the highest activity leveland that at the lowest activity level.• Visual-fit analysis seeks to place a straight line among data points on a plot of each cost and its appropriate cost driver.• Regression analysis fits a straight line to cost and activity data according to statistical criteria.3-18 Engineering analysis and account analysis often are combined. One of the problems of account analysis is that historical data may containpast inefficiencies. Therefore, account analysis measures what costswere, not necessarily what they should be. Differences in future costsmay be desired and/or anticipated, and account analysis alone usuallywill not account for these differences. Engineering analysis may becombined with account analysis to revise account-based measures fordesired improvements in efficiency and/or planned changes in inputs or processes.3-19 The strengths of the high-low method are also its weaknesses -- the method is simple to apply since it does not require extensive data orstatistical sophistication. This simplicity also means that the methodmay not be reliable because it may not use all the relevant data thatare available, and choice of the two points to measure the linear costrelationship is subjective. The method itself also does not give anymeasures of reliability.The visual-fit method is an improvement over the high-low methodbecause it uses all the available (relevant) data. However, this method, too, may not be reliable since it relies on the analyst's judgment onwhere to place the line.3-20 The cost-driver level should be used to determine the two data points to be used to determine the cost function. Why? Because thehigh- and low-cost points are more likely to have measurement errors, an unusually high cost at the high-cost point and an unusually low cost at the low-cost point.3-21 Regression analysis is usually preferred to the high-low method (and the visual-fit method) because regression analysis uses all the relevantdata and because easy-to-use computer software does the analysis and provides useful measures of cost function reliability. The majordisadvantage of regression analysis is that it requires statisticalsophistication to use properly. Because the software is easy to use,many users of regression analysis may not be able to critically evaluate the output and may be misled to believe that they have developed areliable cost function when they have not.3-22 This is a deceptive statement, because it is true on the face of it, but regression also has many pitfalls for the unwary. Yes, regressionsoftware provides useful output that can be used to evaluate thereliability of the measured cost function. If one understands theassumptions of least-squares regression, this output can be used tocritically evaluate the measured function. However, the regressionsoftware cannot evaluate the relevance or accuracy of the data that are used. Even though regression analysis is statistically objective,irrelevant or inaccurate data used as input will lead to unreliable costfunctions, regardless of the strength of the statistical indicators ofreliability.3-23 Plotting data helps to identify outliers, that is, observations that are unusual and may indicate a situation that is not representative of theenvironment for which cost predictions are being made. It can alsoshow nonlinear cost behavior that can lead to transformations of thedata before applying linear regression methods.3-24 R2 is a goodness-of-fit statistic that describes the percentage of variation in cost explained by changes in the cost driver.3-25 Control of costs does require measurement of cost behavior, either what costs have been or what costs should be. Problems of work rules and the like may make changing cost behavior difficult. There aretradeoffs, of course, and the instructor should expect that studentscould get into an impassioned debate over where the balance lies --union job protection versus improved efficiency. This debate gets toone of the major roles of accounting in organizations, and it isimportant that students realize that accounting does matter greatly toindividuals, and, ultimately, to society.3-26 The fixed salary portion of the compensation is a fixed cost. It is independent of how much is sold. In contrast, the 5% commission is a variable cost. It varies directly with the amount of sales. Because thecompensation is part fixed cost and part variable cost, it is considered a mixed cost.3-27 Both depreciation and research and development costs are fixed costs because they are independent of the volume of operations.Depreciation is generally a committed fixed cost. Managers have littlediscretion over the amount of the cost. In contrast, research anddevelopment costs are discretionary fixed costs because their size isoften the result of management’s judgment.3-28 Decision makers should know a product’s cost function if their decisions affect the amount of product produced. To know the costimpact of their decisions, decision makers apply the cost function toeach possible volume of production. This is important in manydecisions, such as pricing decisions, promotion and advertisingdecisions, sales staff deployment decisions, and many more decisionsthat affect the volume of product that the company produces.3-29 Regression analysis is a statistical method of fitting a cost-function line to observed costs. It is objective; that is, each cost analyst would come up with the same regression line, whereas different analysts might have different cost functions when using a visual fit method. In addition,regression analysis provides measures of how well the cost-functionline fits the data, so that managers know how much reliance they canput on cost predictions that use the cost function.3-30 (5 min.) Only (b) is a step cost.(a) This is a fixed cost. The same cost applies to all volumes in therelevant range.(b) This is a true step cost. Each time 15 students are added, the costincreases by the amount of one teacher’s salary.(c) This is a variable cost that may be different per unit at differentlevels of volume. It is not a step cost. Why? Because each unit ofproduct requires a particular amount of steel, regardless of the form in which the steel is purchased.3-31 (5 min.) The $8,000 is a fixed cost and the $52 per unit is a variable cost. By definition, adding a fixed cost and a variable cost togetherproduces a mixed cost.3-32 (10-15 min.)1. Machining labor: G, number of units completed or labor hours2. Raw material: B, units produced; could also be D if the company’spurchases do not affect the price of the raw material.3. Annual wage: C or E (depending on work levels), labor hours4. Water bill: H, gallons used5. Quantity discounts: A, amount purchased6. Depreciation: E, capacity7. Sheet steel: D, number of implements of various types8. Salaries: F, number of solicitors9. Natural gas bill: C, energy usage3-33 (15 min.)The analysis is faulty because of the following errors.1. The scales used for both axes are incorrect. The space between equalintervals in number of orders and order-department costs should bethe same.2. The visual-fit line is too high, and the slope is too steep. It appears thatthe line has been purposely drawn to pass through the (100,450) datapoint and the $200 point on the y-axis to simplify the analysis. Avisual-fit line most often will not pass through any one data point.Choosing one point (any point) or a data point and the Y-interceptmakes this similar to the high-low method, ignoring much of theinformation contained in the rest of the data.3. The total cost for 90 orders is wrong. Either the fixed costs should beexpressed in thousands of dollars or the unit variable costs should be$2,000 per order. Even if the derived total cost function was accurate,the resulting cost prediction is incorrect. The formula should beexpressed as:Total cost (thousands of dollars) = $200 + $2.50 × Number of orders processed, orTotal cost = $200,000 + $2,500 × Number of orders processedThis would result in a predicted total cost for 90 orders of:Total cost (thousands of dollars) = $200 + $2.50 × 90 = $425, orTotal cost = $200,000 + $2,500 × 90 = $425,000.Correct AnalysisThe following graph has correctly constructed scales. The visual fit lineshown indicates that fixed costs are about $200,000 and variable cost isabout $2,250 per order – a lower slope than that shown in the text.The total cost function is:Total cost (thousands of dollars) = $200 + $2.25 × Number of orders, or Total cost = $200,000 + $2,250 × Number of ordersVariable cost (thousands of dollars) $180 ÷ 80 orders = $2.25The predicted total cost for 90 orders is:Total cost = $200,000 + $2,250 × 90 = $200,000 + $202,500 = $402,500.3-34 (15-20 min.) Amounts are in millions.1. 2001 2002Sales revenues $57 $116Less: Operating income (loss) (19) 18Operating expenses $76 $ 982. Change in operating expenses ÷ Change in revenues = Variable cost percentage($98 - $76) ÷ ($116 - $57) = $22 ÷ $59 = .37 or 37%Fixed cost = Total cost – Variable cost= $76 - .37 × $57= $55or= $98 - .37 × $116= $55Cost function = $55 + .37 × Sales revenue3. Because fixed costs to not change, the entire additional totalcontribution margin is added to operating income. The $57 salesrevenue in 2001 generated a total contribution margin of $57 × (1 - .37) = $36, which was $19 short of covering the $55 of fixed cost. But theadditional $59 of sales revenue in 2002 generated a total contributionmargin of $59 × (1 - .37) = $37 that could go directly to operatingincome because there was no increase in fixed costs. It wiped out the$19 operating loss and left $18 of operating income.3-35 (10-15 min.)1. Fuel costs: $.40 × 16,000 miles per month = $6,400 per month.2. Equipment rental: $5,000 × 7 × 3 = $105,000 for seven pieces ofequipment for three months3. Ambulance and EMT cost: $1,200 × (2,400/200) = $1,200 × 12 =$14,4004. Purchasing: $7,500 + $5 × 4,000 = $27,500 for the month.3-36 (10-15 min.) There may be some disagreement about these classifications, but reasons for alternative classifications should be explored.Cost Discretionary Committed Advertising $22,000Depreciation $ 47,000 Company health insurance 21,000 Management salaries 85,000 Payment of long-term debt 50,000 Property tax 32,000 Grounds maintenance 9,000Office remodeling 21,000Research and development 46,000Totals $98,000 $235,0003-37 (15-20 min.)This problem extends the chapter analysis to preview short-run decision making and capital budgeting. This problem ignores taxes, invest-ment cost, and the time value of money, which are covered in Chapter 11.Alternative 1 Alternative 2 Variable cost per order $8.00 $4.00 Expected number of orders 70,000 70,000 Annual variable costs $560,000 $280,000 Annual fixed cost 200,000 400,000 Annual total costs $760,000 $680,000Therefore, Alternative 2 is less costly than Alternative 1 by $80,000.Let X = the break-even number of orders, the level at which expected costs are equal.Costs for Alternative 1 = Costs for Alternative 2$200,000 + $8X = $400,000 + $4X$4X = $200,000X = 50,000 ordersAt 50,000 orders, the alternatives are equivalent. If order levels are expected to be below 50,000 orders, then Alternative 1 would have lower costs because fixed costs are lower. If orders are expected to be greater than 50,000, then Alternative 2 would have lower costs because variable costs are lower.3-38 (20-25 min.) A master of the scatter-diagrams with least-square regression lines and high-low lines appears in Exhibit 3-38 on the following page.This exercise enables a comparison of the high-low and visual-fit methods of decomposing mixed-costs into fixed and variable parts. Students find it interesting to compare their best guesses to the least-squares regression results. They find it interesting that a fairly complete and accurate analysis is possible based on a scatter-diagram and a little common sense. We normally have the class determine a “class best guess” before showing the transparency of the regression results.The exercise also introduces students to the concept of a hierarchy of activity levels, although this topic is not covered in the text. The literature contains discussions of four general levels of activities. Recognizing each of these levels can be an aid in choosing appropriate cost drivers. These levels and example cost drivers are:a. Unit-level activities -- performed each time a unit is produced (units ofproduct, machine hours, labor hours).b. Batch-level activities -- performed each time a batch of goods isprocessed or handled (number of orders processed, number of setups,number of material moves).c. Product-level activities -- performed as needed to support theproduction of each different type of product (number of tests, number of parts, number of engineering change notices, hours of design time,number of inspections).d. Facility-level activities -- sustain a facility’s general manufacturingprocess (square footage, number of employees, hours of training).In this exercise, a batch-level activity is involved -- setups.。

Cost and Management Accounting English Version 15th Edition Exercise Questions with Answers Cost and management accounting is a crucial aspect of any business organization. It is a process that involves collecting, analyzing, and interpreting financial information to help companies make informed decisions. The 15th edition of Cost and Management Accounting focuses on the principles, techniques, and practices that are important inanalyzing costs in a manufacturing and service environment.In this article, we will provide a series of exercise questions with answers from the 15th edition of Cost and Management Accounting.Exercise Questions1.Expln the difference between actual and normal capacity.2.Describe the different types of cost behavior: fixed,variable, and semi-variable.3.What is cost-volume-profit analysis? How can this analysisbe used to make decisions?4.What are the different methods for allocating overhead costs?Which method is most appropriate in a particular situation?5.Expln the difference between job-order costing and processcosting.6.What is activity-based costing? How can it be used toimprove decision-making?7.Define cost of goods manufactured and cost of goods sold.8.What is the difference between job costing and processcosting?9.Expln the difference between direct materials, direct labor,and manufacturing overhead.10.How can a company use budgeting to plan, control, andevaluate performance?Answers1.Actual capacity refers to the maximum amount of goods orservices a company can produce in a given period, while normal capacity is the expected capacity level given typical business conditions.2.Fixed costs remn constant regardless of the level ofactivity, while variable costs change in proportion to changes in activity levels. Semi-variable costs have both fixed and variable cost components.3.Cost-volume-profit analysis is a tool used to understand howchanges in volume, price, and costs affect a company’s profits.It can be used to make decisions regarding pricing, product mix, and cost reduction strategies.4.The different methods for allocating overhead costs includedirect labor hours, direct labor cost, machine hours, andactivity-based costing. The most appropriate method depends on the nature of the costs and the activities being performed.5.Job-order costing is used for unique, customized products orservices, while process costing is used for mass-produced products or services that are identical.6.Activity-based costing is a costing method that identifiesall the activities that go into producing a product or service and assigns costs based on the activities. It can be used to improvedecision-making by providing more accurate cost information andidentifying areas where costs can be reduced.7.Cost of goods manufactured is the total cost of producinggoods, including direct materials, direct labor, and manufacturing overhead. Cost of goods sold is the cost of the goods that havebeen sold during a period.8.The mn difference between job costing and process costing isthe type of product being produced. Job costing is used for unique, customized products, while process costing is used for mass-produced products.9.Direct materials are the materials that go into a product,such as raw materials or components. Direct labor is the cost ofthe workers directly involved in producing the product.Manufacturing overhead includes all other costs that are necessary for producing a product, such as utilities, rent, and equipmentmntenance.10.Budgeting can be used to plan, control, and evaluateperformance. By setting targets and monitoring actual performanceagnst those targets, a company can identify areas where it needsto make changes to achieve its goals.In conclusion, cost and management accounting is a critical aspectof business decision-making. The 15th edition of Cost and Management Accounting provides a comprehensive overview of the principles, techniques, and practices that are essential for analyzing costs in amanufacturing and service environment. These exercise questions and answers can be used to reinforce your understanding and test your knowledge.。

5.1 Select the best answer for each of the following unrelated items1.A2. A3.D4. B5.C6. D7. B0.20 x Prime cost = Direct labor0.20 x Prime cost = $13,000Prime cost = $65,000Prime cost = Direct materials + Direct labor$65,000 = Direct materials + $13,000Direct materials = $52,0008. A0.25 x Conversion costs = Direct labor0.75 x Conversion costs = Manufacturing overhead0.75 x Conversion costs = $45,000Conversion costs = $60,000Conversion costs = Direct labor + Manufacturing overhead$60,000 = Direct labor + $45,000Direct labor = $15,0009.D10. D11.A12. A13.D14. B15.C16. D17. DVariable cost = Change in cost Change in activity= ($11,250 - $9,000) (11,000 - 8,000) = $0.75Fixed cost element = Total cost - Variable cost element= $11,250 - ($0.75 x 11,000) = $3,000Therefore, the cost formula for total shipping cost is $3,000 per period plus $0.75 per pound shipped, or Y = $3,000 + $0.75X.At an activity level of 9,000 pounds shipped, total cost is estimated to be:Y = $3,000 + ($0.75 x 9,000) = $9,75018.C19. D20.C5.2 A partial listing of costs incurred at Rust Corporation during August appears below:Direct materials $ 135,000Utilities, factory $ 11,000Sales commissions $ 69,000Administrative salaries $ 101,000Indirect labour $ 29,000Advertising $ 94,000Depreciation of production equipment $ 31,000Direct labour $ 73,000Depreciation of administrative equipment $ 40,000Required:1. What is the total amount of product cost listed above? Show your work.2. What is the total amount of period cost listed above? Show your work. Solution:1. Product costs consist of direct materials, direct labor, and manufacturing overhead: 25.3 Dinius Corporation has provided the following data for the month of December: Raw material purchases $ 55,000Direct labour cost $ 22,000Manufacturing overhead $ 68,000Inventories:Beginning EndingRaw materials $ 25,000 $ 27,000Work in process $ 16,000 $ 22,000Finished goods $ 39,000 $ 25,000Required:Prepare a Schedule of Cost of Goods Manufactured for December.Solution:Schedule of Cost of Goods Manufactured5.4 Lavell Corporation reported the following data for the month of February: Inventories:Beginning EndingRaw materials $ 34,000 $ 37,000Work in process $ 11,000 $ 23,000Finished goods $ 31,000 $ 56,000Additional information:Sales $ 250,000Raw materials purchases $ 66,000Direct labour cost $ 38,000 Manufacturing overhead $ 70,000Selling expense $ 19,000 Administrative expense $ 37,000Required:1. What is the total amount of manufacturing cost for February? Show your work.2. What is the cost of goods manufactured for February? Show your work.3. What is the cost of goods sold for February? Show your work.4. What is the net operating income for February? Show your work.Solution:1. What is the total amount of manufacturing cost for February? Show your work.2. What is the cost of goods manufactured for February? Show your work.3. What is the cost of goods sold for February? Show your work.4. What is the net operating income for February?5.5 In July, Neidich Inc., a merchandising company, had sales of $295,000, selling expenses of $24,000, and administrative expenses of $29,000. The cost of merchandise purchased during the month was $215,000. The beginning balance in the merchandise inventory account was $25,000 and the ending balance was $30,000. Required:Prepare an Income Statement in good form for July.Solution:5.6 At an activity level of 2,400 units, Koter Corporation's total variable cost is $118,008 and its total fixed cost is $9,000.Required:For the activity level of 2,500 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range.Solution:5.7 Parter Inc., operates a local parcel delivery service. The company keeps detailed records relating to operating costs of trucks, and has found that if a truck is driven 110,000 miles per year the operating cost is 7.5 cents per mile. This cost increases to 8.75 cents per mile if a truck is driven 60,000 miles per year.Required:Estimate the cost formula for truck operating costs using the high-low method. Solution:Total cost at high level of activity: 110,000 x $0.075 = $8,250Total cost at low level of activity: 60,000 x $0.0875 = $5,250Variable cost = Change in cost Change in activity= $3,000 50,000 miles = $0.06 per mileFixed cost element = $8,250 - ($0.06 per mile x 110,000 miles) = $1,650The cost formula is $1,650 per year plus $0.06 per mile.5.8 Siber Inc., a manufacturing company, has provided the following financial data for October:Sales $ 590,000Variable production expense $ 106,000Variable selling expense $ 18,000Variable administrative expense $ 78,000Fixed production expense $ 145,000Fixed selling expense $ 72,000Fixed administrative expense $ 132,000The company had no beginning or ending inventories.Required:a. Prepare an income statement in good form for October using the traditional approach.b. Prepare an income statement in good form for October using the contribution approach.Solution:5.9 Eag Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years:Variable costing net operating income, last year $84,400Variable costing net operating income, this year $87,900Increase in ending inventory, last year 1,300Increase in ending inventory, this year 0Fixed manufacturing overhead cost per unit $2Required:1. Calculate the absorption costing net operating income for last year.2. Calculate the absorption costing net operating income for this year.Solution:5.10 Data concerning Emma Corporation's single product appear below:Per Unit Percent of SalesSelling price $130 100%Variable expenses $26 20%Contribution margin $104 80%Fixed expenses are $650,000 per month. The company is currently selling 8,000 units per month.Required:The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $12 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $79,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units. Calculate the overall effect on the company's monthly net operating income of this change.Solution:5.11 The following monthly budgeted data are available for the International company:Product A Product B Product CSelling price $500,000 $300,000 $900,000 Variable expenses $300,000 $210,000 $720,000 Contribution margin $200,000 $90,000 $180,000 Budgeted net operating income for the month is $220,000.Required:1. Calculate the break-even dollar sales for the month.2. Calculate the margin of safety.3. Calculate the operating leverage.Solution:1. Break-even salesDollar sales to break even = Fixed ExpensesCM Ratio = $250,000 0.28 =$892,857 Product A Product B Product C2. Margin of safety= Total sales - Break-even sales = $1,700,000 - $892,857 = $807,1433. Operating leverage = Contribution margin Net operating income = $470,000$220,000 = 2.145.12 Houn Corporation produces and sells a single product. Data concerning that product appear below:Selling price per unit $120.00Variable expense per unit $50.40Fixed expense per month $257,520Required:1. Assume the company's monthly target profit is $20,880. Calculate the unit sales to attain that target profit.2. Assume the company's monthly target profit is $6,960. Calculate the dollar sales to attain that target profit.Solution:1. Unit sales to attain target profit = (Target profit + Fixed expenses)/Unit CM = ($257,520 + $20,880)/$69.60 = 4,0002. Dollar sales to attain target profit = (Target profit + Fixed expenses)/CM ratio = ($257,520 + $6,960)/0.58 = $456,000。