Solutions Manual Chapter 6
Problem 6-36 1. Machine supplies: $102,000 / 34,000 DLH = $3/hr
January: 23,000 DLH x $3 = $69,000
Depreciation: Fixed at $15,000 2. Plant maintenance cost: | March | January | | (34,000 hrs) | (23,000hrs) | Total cost*Less: Machine Supplies DepreciationPlant maintenance | $ 586,000(102,000) (15,000)$ 469,000 | $ 454,000(69,000) (15,000)$ 370,000 | *Excludes supervisory labor cost Variable maintenance cost = difference in cost / difference in DLH = ($469,000 - $370,000) / (34,000 – 23,000) = $99,000 / 11,000 hrs = $9/hr Fixed maintenance cost: | March | January | | (34,000 hrs) | (23,000hrs) | Total maintenance costLess: Variable cost at $9/hrFixed maintenance cost | $ 469,000 306,000$ 163,000 | $ 370,000 207,000$ 163,000 | 3. Manufacturing OH at 29,500 labor hours: Machine supplies at $3/hrDepreciationPlant maintenance cost: Variable at $9/hr Fixed Supervisory laborTotal | $ 88,50015,000265,500163,000 90,000$ 622,000 | 4. A fixed cost remains constant when a change occurs in the cost driver (or activity base). A step-fixed cost, on the other hand, remains constant within a range but will change (rise or fall) when activity falls outside that range. A fixed cost is constant over a much larger range of activity than is a step-fixed cost. 5. Ideally, the company should operate on the right-most portion of a step, just prior to the jump in cost. In this manner, a firm receives maximum benefit (1.e., the maximum amount of activity) for the dollars invested.
Problem 6-37 1. Straight-line depreciation-committed fixed
Charitable contributions-discretionary fixed
Mining labor/fringe benefits-variable
Royalties-semivariable
Trucking and hauling-step-fixed
The per ton mining labor/fringe benefit cost is constant at both volume
January: 23,000 DLH x $3 = $69,000
Depreciation: Fixed at $15,000 2. Plant maintenance cost: | March | January | | (34,000 hrs) | (23,000hrs) | Total cost*Less: Machine Supplies DepreciationPlant maintenance | $ 586,000(102,000) (15,000)$ 469,000 | $ 454,000(69,000) (15,000)$ 370,000 | *Excludes supervisory labor cost Variable maintenance cost = difference in cost / difference in DLH = ($469,000 - $370,000) / (34,000 – 23,000) = $99,000 / 11,000 hrs = $9/hr Fixed maintenance cost: | March | January | | (34,000 hrs) | (23,000hrs) | Total maintenance costLess: Variable cost at $9/hrFixed maintenance cost | $ 469,000 306,000$ 163,000 | $ 370,000 207,000$ 163,000 | 3. Manufacturing OH at 29,500 labor hours: Machine supplies at $3/hrDepreciationPlant maintenance cost: Variable at $9/hr Fixed Supervisory laborTotal | $ 88,50015,000265,500163,000 90,000$ 622,000 | 4. A fixed cost remains constant when a change occurs in the cost driver (or activity base). A step-fixed cost, on the other hand, remains constant within a range but will change (rise or fall) when activity falls outside that range. A fixed cost is constant over a much larger range of activity than is a step-fixed cost. 5. Ideally, the company should operate on the right-most portion of a step, just prior to the jump in cost. In this manner, a firm receives maximum benefit (1.e., the maximum amount of activity) for the dollars invested.
Problem 6-37 1. Straight-line depreciation-committed fixed
Charitable contributions-discretionary fixed
Mining labor/fringe benefits-variable
Royalties-semivariable
Trucking and hauling-step-fixed
The per ton mining labor/fringe benefit cost is constant at both volume