成本与管理会计 第15版 亨格瑞

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。

成本与管理会计第15版亨格瑞简介《成本与管理会计》是由亨格瑞（Horngren）等人合著的一本经典教材，该教材详细介绍了成本和管理会计的基本概念、原则和技术。

本文将对该教材进行概览，探讨其中的关键内容。

第1章管理会计与组织绩效本章主要介绍管理会计的概念和作用，以及与组织绩效之间的关系。

管理会计是一种为管理决策提供支持的会计信息系统，通过提供与企业内部运营相关的成本和绩效信息，帮助管理层进行决策和控制。

第2章基本成本管理概念本章重点介绍成本管理的基本概念，包括成本对象、成本中心和成本效益分析等。

成本对象是指需要计算和分配成本的实体，成本中心是指组织内部负责经营活动的部门或单位，成本效益分析则是对不同决策方案进行成本与效益比较的方法。

第3章成本分类和费用估算本章讲解了成本分类和费用估算的方法和原则。

成本可以根据不同的分类方法进行归类，如按功能分类、按行业分类等。

费用估算的方法包括直接费用估算和间接费用估算，其中间接费用估算需要通过成本驱动因素进行分配。

第4章成本行为成本行为是指成本与产量或活动水平之间的关系。

本章将介绍常见的成本行为模式，如固定成本、变动成本和半固定成本。

了解成本行为模式有助于管理者预测和控制成本的变化。

第5章成本估算和预测成本估算和预测是管理会计的核心任务之一。

本章将介绍成本估算和预测的方法和技术，包括趋势分析、回归分析和敏感度分析等。

第6章作业成本系统作业成本系统是一种在生产中分配和追踪成本的方法。

本章将详细介绍作业成本系统的构成要素和运作流程，并介绍常见的作业成本方法，如作业订单和作业批次。

第7章过程成本系统过程成本系统是一种适用于连续流程生产的成本分配方法。

本章将介绍过程成本系统的特点和运作原理，以及与作业成本系统的异同。

第8章活动成本管理活动成本管理是一种基于活动的成本分析和管理方法。

本章将介绍活动成本管理的概念和技术，包括活动成本驱动因素的确定和活动成本分析模型的构建。

第9章管理会计信息系统管理会计信息系统是支持管理会计活动的信息系统。

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.。

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 usefew power tool operations and is predicting too little cost forsigns that use many power tool operations. As a result thecompany could be losing jobs that require few power tooloperations because its bids are too high -- it could afford tobid less on these jobs. Conversely, the company could be gettingtoo many jobs that require many power tool 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 owner better understood and used activity analysis. Evergreen Signs would be advised to adopt the activity-analysis recommendation, but also to closely monitor costs to see if the activity-analysis predictions of support 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 incost driver= $4,500 ÷ 900 = $5.00Fixed support cost per month = Total support cost - Variablesupport costAt 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 formachine hours does not change either the high or low level therewould be no change in the analysis.3. The regression analysis results differ from the results of thehigh-low method. As a result, estimates of total support costmay differ considerably depending on the expected machine hourusage. For example, consider the following support costestimates at three levels of machine hour usage (all within therelevant 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,the regression-based predictions exceed the high-low-basedpredictions at higher levels of machine usage, while the high-low estimates are greater at lower levels of usage. The high-lowmethod used only two data points, so the results may not bereliable. Fernandez would be advised to use the regressionresults, which are based on all relevant data.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 Q52Mark-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, directlabor costs are probably driven by direct labor hours; materialscosts are probably driven by levels of product output; and support costs may be driven by a variety of drivers, such as output levels,product complexity, number of 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 activityincreases. The slope of the 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 the desired accuracy of the description of step costbehavior. If the steps are wide, covering a wide range of costdriver activity, then within each range the cost may be regardedas fixed. If the steps are narrow and not too high, with smallchanges in cost, then the cost may be regarded as variable over awide range of activity level, with little error. If the steps are narrow and high, covering big changes in cost, then the costprobably 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. Amixed cost also has a variable portion that is a cost per unit ofcost driver activity. The variable portion of a mixed costincreases proportionately with increases 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 the organization. These choices include decisions aboutlocations, products, services, organization structure, and so on.Choices about product or service attributes (mix, quality,features, performance, etc.), capacity (committed anddiscretionary fixed costs), technology (capital/laborconsiderations, alternative technologies), and incentives(standard-based performance evaluation) can greatly affect costbehavior.3-6 Some fixed costs are called capacity costs because the levels of these fixed costs are determined by management's strategicdecisions about the 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 bechanged easily or quickly without drastically changing theoperations of the organization. Typical committed fixed costsinclude lease or mortgage payments, property taxes, and long-termmanagement compensation. Discretionary fixed costs are costs that may be necessary to achieve certain operational goals, but thereare no contractual obligations to continue these payments. Typical discretionary fixed costs include advertising, research and development, and employee training programs. The distinction between committed and discretionary fixed costs is that discretionary fixed costs are flexible and could be increased, 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 to change because doing so may mean greatly changing the way theorganization conducts its activities. Changing these committedfixed costs 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 ondiscretionary fixed costs. Both committed and discretionary fixed costs depend on the organization's strategy relating to capacity, product attributes, and technology. These elements will determine long-term cost commitments (committed costs) and flexible spending responses to changes 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 certainly effective use of discretionary costs requires prior planning. One would not know, however, if these costs hadbeen effective in meeting goals unless the organization has areliable and timely control system -- a means of checkingaccomplishments 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 costexpenditures. A simple example will illustrate the use ofincentives to control costs. Assume that you are an executive who travels for business, purchases professional literature, and keeps current with personal computer technology. Under one incentivesystem, you simply bill the organization for all your travel andprofessional expenses. Under another system, you are given anannual budget for travel and professional needs. Which system do you think would cause you to be more careful about how you spendmoney for travel and professional needs? Most likely, the latter system would be more effective in controlling costs. Usually theseincentives are economic, but other non-financial incentives mayalso be effective.3-13 Use of cost functions, or algebraic representations of cost behavior, allows cost analysts or management to build models ofthe organization's cost behavior. These models can be used to aid planning and control activities. One common use of cost functions is in financial planning models, which are algebraic models of the cost and revenue behavior of the firm, essentially extended C-V-P models similar to those discussed in Chapter 2. Understandingrelationships between costs and cost drivers allows managers tomake better decisions.3-14 A "plausible" cost function is one that is intuitively sound. A cost function is plausible if a knowledgeable analyst can makesound economic justifications why a particular cost driver couldcause the cost in question. A "reliable" cost function is onethat accurately and consistently describes actual cost behavior,past and future. Both plausibility and reliability are essential to useful cost functions. It is difficult to say that one is more important than the other, but one would not have much confidencein the future use of a cost function that is not plausible, evenif past reliability (e.g., based on statistical measures) has been high. Likewise, one would not be confident using a cost function that is highly plausible, but that has not been shown to bereliable. The cost analyst should strive for plausible andreliable cost functions.3-15 Activity analysis identifies underlying causes of cost behavior (appropriate cost drivers) and measures the relationships of costs to their cost drivers. A variety of methods may be used tomeasure cost functions, 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 ofhistorical data. Engineering analysis proceeds by the use ofinterviews, experimentation, and observation of current costgenerating activities. Engineering analysis will be more reliable if the organization has had past experience with the activities.Account analysis is a method of identifying and measuring costsand cost driver relationships that depend explicitly on historical cost data. An analyst selects a single cost driver and classifies each cost account as fixed or variable with respect to that costdriver. Account analysis will be reliable if the analyst isskilled and if the data are relevant to future 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) visual fit, and (4) regression.• Account analysis looks to the organization's cost accounts andclassifies each cost as either fixed, variable, or mixed withregard to an appropriate cost driver.• High-low analysis algebraically measures mixed cost behavior by constructing a straight line between the cost at the highestactivity level and that at the lowest activity level.• Visual-fit analysis seeks to place a straight line among datapoints on a plot of each cost and its appropriate cost driver.• Regression analysis fits a straight line to cost and activitydata 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 maycontain past inefficiencies. Therefore, account analysis measures what costs were, not necessarily what they should be. Differences in future costs may be desired and/or anticipated, and accountanalysis alone usually will not account for these differences.Engineering analysis may be combined with account analysis torevise account-based measures for desired improvements inefficiency 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 or statistical sophistication. This simplicity also meansthat the method may not be reliable because it may not use all the relevant data that are available, and choice of the two points to measure the linear cost relationship is subjective. The methoditself also does not give any measures 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 on where 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 the high- and low-cost points are more likely to havemeasurement 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 allthe relevant data and because easy-to-use computer software doesthe analysis and provides useful measures of cost functionreliability. The major disadvantage of regression analysis isthat it requires statistical sophistication to use properly.Because the software is easy to use, many users of regressionanalysis may not be able to critically evaluate the output and may be misled to believe that they have developed a reliable costfunction 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,regression software provides useful output that can be used toevaluate the reliability of the measured cost function. If oneunderstands the assumptions of least-squares regression, thisoutput can be used to critically evaluate the measured function.However, the regression software cannot evaluate the relevance or accuracy of the data that are used. Even though regressionanalysis is statistically objective, irrelevant or inaccurate data used as input will lead to unreliable cost functions, regardlessof the strength of the statistical indicators of reliability.3-23 Plotting data helps to identify outliers, that is, observations that are unusual and may indicate a situation that is notrepresentative of the environment for which cost predictions arebeing made. It can also show nonlinear cost behavior that canlead to transformations of the data before applying linearregression 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 workrules and the like may make changing cost behavior difficult.There are tradeoffs, of course, and the instructor should expectthat students could get into an impassioned debate over where the balance lies -- union job protection versus improved efficiency.This debate gets to one of the major roles of accounting inorganizations, and it is important that students realize thataccounting does matter greatly to individuals, 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 the compensation is part fixed cost and partvariable 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 havelittle discretion over the amount of the cost. In contrast,research and development costs are discretionary fixed costsbecause their size is often 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 cost impact of their decisions, decision makers apply the cost function to each possible volume of production. This is important in many decisions, such as pricing decisions, promotion and advertisingdecisions, sales staff deployment decisions, and many moredecisions that affect the volume of product that the companyproduces.3-29 Regression analysis is a statistical method of fitting a cost-function line to observed costs. It is objective; that is, eachcost analyst would come up with the same regression line, whereas different analysts might have different cost functions when usinga visual fit method. In addition, regression analysis providesmeasures of how well the cost-function line fits the data, so that managers know how much reliance they can put on cost predictionsthat 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 volumesin the relevant range.(b) This is a true step cost. Each time 15 students are added,the cost increases by the amount of one teacher’s salary.(c) This is a variable cost that may be different per unit atdifferent levels of volume. It is not a step cost. Why? Because each unit of product 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 variablecost together produces 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 betweenequal intervals in number of orders and order-department costsshould be the same.2. The visual-fit line is too high, and the slope is too steep. Itappears that the line has been purposely drawn to pass through the (100,450) data point and the $200 point on the y-axis to simplifythe analysis. A visual-fit line most often will not pass throughany one data point. Choosing one point (any point) or a data point and the Y-intercept makes this similar to the high-low method,ignoring much of the information contained in the rest of the data.3. The total cost for 90 orders is wrong. Either the fixed costsshould be expressed in thousands of dollars or the unit variablecosts should be $2,000 per order. Even if the derived total costfunction was accurate, the resulting cost prediction is incorrect.The formula should be expressed 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 visualfit line shown indicates that fixed costs are about $200,000 andvariable cost is about $2,250 per order – a lower slope than thatshown 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 fixedcost. But the additional $59 of sales revenue in 2002 generated a total contribution margin of $59 × (1 - .37) = $37 that could go directly to operating income because there was no increase infixed 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 $ 47,000Company health insurance 21,000 Management salaries 85,000Payment of long-term debt 50,000Property tax 32,000Grounds 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, investment cost, and the time value of money, which are covered in Chapter 11.Alternative 1 Alternative 2 Variable cost per order $8.00 $4.00Expected number of orders 70,000 70,000Annual variable costs $560,000 $280,000Annual fixed cost 200,000 400,000Annual 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 of product, machine hours, labor hours).b. Batch-level activities -- performed each time a batch of goods isprocessed or handled (number of orders processed, number ofsetups, 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 ofdesign time, number of inspections).d. Facility-level activities -- sustain a facility’s generalmanufacturing process (square footage, number of employees, hours of training).In this exercise, a batch-level activity is involved -- setups.。