Похожие публикации

1 Определите молекулярную формулу предельного углеводорода, если а относительная плотность по водороду равна 43; б относительная плотность по кислороду равна 4,44 Дано: Решение
Решение
3. Убедимся, истинная это формула или простейшая. Для этого найдём молекулярную массу (СН); Мr(СН) = 12 + 1 = 13, а у нас 78 => нашли простейшую форму...полностью>>

Игра «Если нравится тебе, то делай так!»
Документ
Дети стоят в кругу, кто-нибудь из них показывает любое движение, произнося при этом первые слова песенки «Если нравится тебе, то делай так…», остальны...полностью>>

Общая характеристика работы
Документ
Проблема приобщения подрастающего поколения к духовным ценностям народа осознается сегодня образовательным сообществом как одна из важнейших задач шко...полностью>>

Общая характеристика работы
Документ
Проблема приобщения подрастающего поколения к духовным ценностям народа осознается сегодня образовательным сообществом как одна из важнейших задач шко...полностью>>



1-14b contribution Format versus Traditional Income Statement (LO5)

1-14B Contribution Format versus Traditional Income Statement (LO5)

CHECK FIGURE

(2) Net operating income: $65,674

House of Pianos, Inc., purchases pianos from a well-known manufacturer and sells them at the retail level. The pianos sell, on the average, for $3,300 each. The average cost of an piano from the manufacturer is $1,492. The costs that the company incurs in a typical month are presented below:

Costs

Cost Formula

Selling:

Advertising .........................................

$955 per month

Delivery of pianos ...............................

$61 per piano sold

Sales salaries and commissions.............

$4,823 per month, plus 4% of sales

Utilities ...............................................

$633 per month

Depreciation of sales facilities ..............

$4,944 per month

Administrative:

Executive salaries ................................

$13,490 per month

Depreciation of office equipment ..........

$943 per month

Clerical ...............................................

$2,499 per month, plus $37 per piano sold

Insurance ...........................................

$719 per month

During November, the company sold and delivered 60 pianos.

Required:

1. Prepare a traditional income statement for September.

2. Prepare a contribution format income statement for September. Show costs and revenues on both a total and a per unit basis down through contribution margin.

3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?

PROBLEM 1-15B Identifying Cost Behavior Patterns (LO3)

In Problem 1-15A in the text are a number of graphs displaying cost behavior patterns that might be found in a company’s cost structure. The vertical axis on each graph represents total cost, and the horizontal axis represents level of activity (volume).

Required:

1. For each of the following situations, identify the graph from Problem 1-15A in the text that illustrates the cost behavior pattern involved. Any graph may be used more than once.

a. City water bill, which is computed as follows:

First 200,000 gallons or less

$300

flat fee

Next 15,000 gallons

$0.004

per gallon used

Next 15,000 gallons

$0.008

per gallon used

Next 15,000 gallons

$0.012

per gallon used

Etc.

Etc.

b. Use of a machine under a lease, where a minimum charge of $2,500 is paid for up to 100 hours of machine time. After 100 hours of machine time, an additional charge of $4 per hour is paid up to a maximum charge of $4,000 per period.

c. Cost of raw materials used.

d. Rent on a factory building donated by the city, where the agreement calls for a fixed fee payment unless 500,000 labor-hours or more are worked, in which case no rent need be paid.

e. Depreciation of equipment, where the amount is computed by the straight-line method. When the depreciation rate was established, it was anticipated that the obsolescence factor would be greater than the wear and tear factor.

f. Rent on a factory building donated by the county, where the agreement calls for rent of $350,000 less $1 for each direct labor-hour worked in excess of 100,000 hours, but a minimum rental payment of $50,000 must be paid.

g. Salaries of maintenance workers, where one maintenance worker is needed for every 200 hours of machine-hours or less (that is, 0 to 200 hours requires one maintenance worker, 201 to 400 hours requires two maintenance workers, etc.)

h. Electricity bill -- a flat fixed charge, plus a variable cost after a certain number of kilowatt-hours are used.

i. Cost of raw materials, where the cost starts at $10.00 per unit and then decreases by 5 cents per unit for each of the first 100 units purchased, after which it remains constant at $4.00 per unit.

2. How would knowledge of cost behavior patterns such as those above be of help to a manager in analyzing the cost structure of his or her company?

(CPA, adapted)

PROBLEM 1–16B Variable and Fixed Costs; Subtleties of Direct and Indirect Costs (LO3, LO6)

Madison Seniors Care Center is a non-profit organization that provides a variety of health services to the elderly. The center is organized into a number of departments, one of which is the meals-on-wheels program that delivers hot meals to seniors in their homes on a daily basis. Below are listed a number of costs of the center and the meals-on-wheels program.

Example: The cost of groceries used in meal preparation.

a. The cost of leasing the meals-on-wheels van.

b. The cost of incidental supplies such as salt, pepper, napkins, and so on.

c. The cost of gasoline consumed by the meals-on-wheels van.

d. The rent on the facility that houses Madison Seniors Care Center, including the meals-on-wheels program.

e. The salary of the part-time manager of the meals-on-wheels program.

f. Depreciation on the kitchen equipment used in the meals-on-wheels program.

g. The hourly wages of the caregiver who drives the van and delivers the meals.

h. The costs of complying with health safety regulations in the kitchen.

i. The costs of mailing letters soliciting donations to the meals-on-wheels program.

Required:

For each cost listed above, indicate whether it is a direct or indirect cost of the meals-on-wheels program, whether it is a direct or indirect cost of particular seniors served by the program, and whether it is variable or fixed with respect to the number of seniors served. Use the below form for your answer.

Direct or Indirect Cost of the Meals-On-Wheels Program

Direct or Indirect Cost of Particular Seniors Served by the Meals-On-Wheels Program

Variable or Fixed with Respect to the Number of Seniors Served by the Meals-On-Wheels Program

Description

Direct

Indirect

Direct

Indirect

Variable

Fixed

Example: The cost of polio immunization tablets .........

X

X

X

PROBLEM 1–17B High-Low Method; Predicting Cost (LO3, LO4)

CHECK FIGURE

(3) Total cost: 257,146 pesos

Armondo SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its production facility. These costs (in Argentinian pesos) at high and low levels of activity over recent years are given below:

Level of Activity

Low

High

Machine-hours .............................

47,700

63,600

Total factory overhead costs .........

248,560

pesos

277,180

pesos

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 47,700 machine-hours level of activity as follows:

Indirect materials (variable) ...................

62,010

pesos

Rent (fixed) ..........................................

135,000

Maintenance (mixed) .............................

51,550

Total factory overhead costs ..................

248,560

pesos

For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the factory overhead cost of 277,180 pesos at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 277,180 pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixed costs.)

2. Using the high-low method, estimate a cost formula for maintenance.

3. What total overhead costs would you expect the company to incur at an operating level of 52,470 machine-hours?

PROBLEM 1–18B Cost Behavior; High-Low Method; Contribution Format Income Statement (LO3, LO4, LO5)

CHECK FIGURE

(2) Shipping expense: Y = £19,700 + £12X

Arnall Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company’s revenues and expenses (in British pounds) for the last three months are given below:

Arnall Ltd.

Comparative Income Statements

For the Three Months Ended June 30

April

May

June

Sales in units ...................................................

1,800

3,200

4,800 

Sales revenue ...................................................

£313,200 

£556,800

£835,200

Cost of goods sold ...........................................

120,600

214,400

321,600

Gross margin ...................................................

192,600

342,400

513,600

Selling and administrative expenses:

Shipping expense .........................................

41,300

58,100

77,300

Advertising expense .....................................

70,000

70,000

70,000

Salaries and commissions ...........................

104,400

157,600

218,400

Insurance expense .......................................

9,900

9,900

9,900

Depreciation expense ...................................

42,300

42,300

42,300

Total selling and administrative expenses .......

267,900

337,900

417,900

Net operating income (loss) .............................

£(75,300)

£   4,500

£  95,700

(Note: Arnall Ltd.’s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by £.)

Required:

1. Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, or mixed.

2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.

3. Redo the company’s income statement at the 4,800-unit level of activity using the contribution format.

PROBLEM 1–19B High-Low and Scattergraph Analysis (LO4)

CHECK FIGURE

(1) Y = $780 + $42X

Tristan Wire Company heats copper ingots to very high temperatures by placing the ingots in a large heat coil. The heated ingots are then run through a shaping machine that shapes the soft ingot into wire. Due to the long heat-up time, the coil is never turned off. When an ingot is placed in the coil, the temperature is raised to an even higher level, and then the coil is allowed to drop to the “waiting” temperature between ingots. Management needs to know the variable cost of power involved in heating an ingot and the fixed cost of power during “waiting” periods. The following data on ingots processed and power costs are available:

Month

Number of Ingots

Power
 Cost

  January

111

$5,782

  February

91

$4,782

  March

81

$4,682

  April

101

$5,282

  May

131

$6,282

  June

121

$5,882

  July

71

$4,282

  August

61

$3,482

  September

44

$3,682

  October

34

$2,208

Required:

1. Using the high-low method, estimate a cost formula for power cost. Express the formula in the form Y = a + bX.

2. Prepare a scattergraph by plotting ingots processed and power cost on a graph. Draw a straight line though the two data points that correspond to the high and low levels of activity. Make sure your line intersects the Y-axis.

3. Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis estimated the total fixed costs to be $1,438.20 per month and the variable cost to be $37.783 per ingot. How would the straight line that you drew in requirement 2 differ from a straight line that minimizes the sum of the squared errors?

PROBLEM 1–20B High-Low Method; Predicting Cost (LO3, LO4)

CHECK FIGURE

(4) Total cost: $178,500

Harvest Company’s total overhead cost at various levels of activity are presented below:

Month

Machine-Hours

Total Overhead Cost

March ......................................

53,000

$190,500

April .........................................

43,000

$166,500

May .........................................

63,000

$214,500

June ........................................

73,000

$238,500

Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine-hour level of activity is as follows:

Utilities (variable) ...............................

$ 51,600

Supervisory salaries (fixed) .................

49,000

Maintenance (mixed) ..........................

65,900

Total overhead cost ............................

$166,500

The company wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the $238,500 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $238,500 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.)

2. Using the high-low method, estimate a cost formula for maintenance.

3. Express the company’s total overhead cost in the form Y = a x bX.

4. What total overhead cost would you expect to be incurred at an activity level of 48,000 machine-hours?

PROBLEM 1–21B Cost Classification (LO2, LO3, LO)

Listed below are costs found in various organizations.

1. Property taxes, factory.

2. Boxes used for packaging detergent produced by the company.

3. Salespersons’ commissions.

4. Supervisor’s salary, factory.

5. Depreciation, executive autos.

6. Wages of workers assembling computers.

7. Insurance, finished goods warehouses.

8. Lubricants for production equipment.

9. Advertising costs.

10. Microchips used in producing calculators.

11. Shipping costs on merchandise sold.

12. Magazine subscriptions, factory lunchroom.

13. Thread in a garment factory.

14. Billing costs.

15. Executive life insurance.

16. Ink used in textbook production.

17. Fringe benefits, assembly-line workers.

18. Yarn used in sweater production.

19. Wages of receptionist, executive offices.

Required:

Prepare an answer sheet with column headings as shown below. For each cost item, indicate

whether it would be variable or fixed with respect to the number of units produced and sold; and then whether it would be a selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration.

Variable or

Selling

Administrative

Manufacturing

(Product) Cost

Cost Item

Fixed

Cost

Cost

Direct

Indirect

Direct labor

V

X

Executive salaries

F

X

Factory rent

F

X

PROBLEM 1–22B High-Low Method; Contribution Format Income Statement (LO4, LO5)

CHECK FIGURE

(1) Y = $57,000 + $4X

McKenzie Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas:

Cost

Cost Formula

Cost of goods sold ................................

$26 per unit sold

Advertising expense ..............................

$183,000 per quarter

Sales commissions ................................

7% of sales

Administrative salaries ..........................

$93,000 per quarter

Shipping expense ..................................

?

Depreciation expense ............................

$63,000 per quarter

Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters are given below:

Quarter

Units Sold

Shipping Expense

Year 1:

First ...............................

29,000

$173,000

Second .......................

31,000

$188,000

Third ...........................

36,000

$230,000

Fourth .........................

32,000

$193,000

Year 2:

First ...............................

30,000

$183,000

Second .......................

33,000

$198,000

Third ...........................

47,000

$245,000

Fourth .........................

44,000

$221,000

Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.

Required:

1. Using the high-low method, estimate a cost formula for shipping expense.

2. In the first quarter of Year 3, the company plans to sell 35,000 units at a selling price of $56 per unit. Prepare a contribution format income statement for the quarter.

PROBLEM 1–23B Cost Classification and Cost Behavior (LO2, LO3, LO6)

Shulmans Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant’s full capacity of 3,900 bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass)

$431,000

Administrative office salaries

$111,000

Factory supervision

$67,000

Sales commissions

$64,000

Depreciation, factory building

$101,000

Depreciation, administrative office equipment

$2,000

Indirect materials, factory

$19,000

Factory labor (cutting and assembly)

$87,000

Advertising

$97,000

Insurance, factory

$6,000

Administrative office supplies (billing)

$4,000

Property taxes, factory

$16,000

Utilities, factory

$44,000

Required:

1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. Note that each cost item is classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold; and second, as either a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classified as either direct or indirect as shown.)

Cost Behavior

Selling or Admin. Cost

Product Cost

Cost Item

Variable

Fixed

Direct

Indirect

Direct materials used (wood, glass)

$431,000

$431,000

Administrative office salaries

$111,000

$111,000

2. Total the dollar amounts in each of the columns in (1) above. Compute the average product cost per bookcase.

3. Due to a recession, assume that production drops to only 2,000 bookcases per year. Would you expect the average product cost per bookcase to increase, decrease, or remain unchanged? Explain. No computations are necessary.

4. Refer to the original data. The president’s next-door neighbor has considered making himself a bookcase and has priced the necessary materials at a building supply store. He has asked the president whether he could purchase a bookcase from the Shulmans Company “at cost,” and the president has agreed to let him do so.

a. Would you expect any disagreement between the two men over the price the neighbor should pay? Explain. What price does the president probably have in mind? The neighbor?

b. Because the company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge the full, regular price to the neighbor and still be selling “at cost”? Explain.

© The McGraw-Hill Companies, Inc., 2013. All rights reserved.

Chapter 1 “B” Problems 1-11