Accounting Assignment - the Problems

Topics: Costs, Variable cost, Inventory Pages: 4 (723 words) Published: February 17, 2013
Exercise 2-3 (CC 1, 2, 3, 4) (15 minutes)
| | Cost Behaviour| | To Quantity of Baked Goods Produced| | Cost Item| Variable| Fixed| | Direct| Indirect|
1.| Account Manager’s salary| | X| | | X|
2.| Rent on building| | X| | | X|
3.| Flour used in the making of croissants| X| | | X| | 4.| Bakery manager’s salary| | X| | | X|
5.| Wages of bakers| X| | | X| |
6.| Amortization of commercial ovens used in baking| | X| | | X| 7.| Insurance on building| | X| | | X|

Problem 2-3 (CC 1, 2, 3, 4, 7, 9) (60 minutes)
1.
| Cost Behaviour| Selling or Administrative| Product Cost| Cost Item| Variable| Fixed| Cost| Direct| Indirect|
Factory labour, direct| $118,000 | | | $118,000 | |
Advertising| | $ 50,000 | $ 50,000 | | |
Factory supervision| | 40,000| | | $40,000 |
Property taxes, factory building| | 3,500| | | 3,500| Sales commissions| 80,000| | 80,000| | |
Insurance, factory| | 2,500| | | 2,500|
Amortization, office equipment| | 4,000| 4,000| | |
Lease cost, factory equipment| | 12,000| | | 12,000| Indirect materials, factory| 6,000| | | | 6,000|
Amortization, factory building| | 10,000| | | 10,000| General office supplies| 3,000| | 3,000| | |
General office salaries| | 60,000| 60,000| | |
Direct materials used| 94,000| | | 94,000| |
Utilities, factory|    20,000|              |              |              |  20,000| Total costs| $321,000 | $182,000 | $197,000 | $212,000 | $94,000 |

Problem 2-3 (continued)
2.
Direct| $212,000 |
Indirect|    94,000|
Total| $306,000 |
$306,000 ÷ 2,000 sets = $153 per set| |

3.The average product cost per set would increase. This is because the fixed costs would be spread over fewer units, causing the cost per unit to rise.

4.a)Yes, the president may expect a minimum price of $153,...
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