Answers to Warm-Up Exercises E9-1. Answer: Weighted average cost of capital N 10‚ PV $20‚000 (1 0.02) $19‚600‚ PMT Solve for I 8.30% 0.08 $20‚000 $1‚600‚ FV $20‚000 E9-2. Cost of preferred stock Answer: The cost of preferred stock is the ratio of the preferred stock dividend to the firm’s net proceeds from the sale of the preferred stock. rp Dp Np rp (0.15 $35) ($35 $3) rp $5.25 $32 16.4% E9-3. Cost of common stock equity Answer: The cost of common stock equity can be found by dividing the dividend
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Cost Accounting‚ 14e (Horngren/Datar/Rajan) Chapter 2 An Introduction to Cost Terms and Purposes Objective 2.1 1) Cost objects include: A) products B) customers C) departments D) All of these answers are correct. Answer: D Diff: 2 Terms: cost object Objective: 1 AACSB: Reflective thinking 2) Actual costs are: A) the costs incurred B) budgeted costs C) estimated costs D) forecasted costs Answer: A Diff: 1 Terms: actual costing Objective: 1 AACSB: Reflective thinking 3) The general term used to identify
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Chapter 8: Cost Estimation Strategic Role of Cost Estimation * Cost Estimationthe development of a well-defined relationship b/t a cost object and its cost drivers for the purpose of predicting the cost * Facilitates strategic mgmt is 2 ways * Helps predict future costs * Helps identify key cost drivers for a cost object and which driver is most useful * Using Cost Estimation to Predict future costs * Strategic mgmt requires accurate estimates for the
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1. Cost of goods manufactured will usually include: A. only direct labor and direct materials costs. B. some costs incurred during the prior period as well as costs incurred during the current period. C. only costs incurred during the current period. D. some period costs as well as some product costs. 2. During the month of August‚ direct labor cost totaled $13‚000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August were $88‚000‚ the manufacturing overhead
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to add that cost behavior is also identifying the key resources that are performed‚ resources used in performing these activities‚ costs of the resources‚ and what the cost is driven from. 2-2. Two rules of thumb when analyzing cost behavior are to manage what the company manufactures‚ sells‚ and to give advice as to where costs can be reduced. 2-3. Three examples of a variable cost are a 12% increase in the production of dresses‚ which will cause a 12% increase in variable costs. A 10% increase
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Answer 1. A cost that remains the same in total even when volume of activity varies is a: A. Fixed cost. B. Curvilinear cost. C. Variable cost. D. Step-wise variable cost. E. Standard cost. 2. An important tool in predicting the volume of activity‚ the costs to be incurred‚ the sales to be earned‚ and the profit to be received is: A. Target income analysis. B. Cost-volume-profit analysis. C. Least-squares regression of costs. D. Variance analysis. E. Process costing. 3. Cost-volume-profit
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B313F Management and Cost Accounting Assignment 1 Date due: 29 October 2008 Weighting: 15% of the total marks of the course Question 1 (25 marks) Mini Case – Seto’s Storage Warehouse Paul Seto owns and manages a commercial storage warehouse. He stores a vast variety of perishable goods for his customers. Under the existing pricing policy‚ he has charged customers using a flat rate of $2.40 per kilogram per month for goods stored. His storage warehouse has 10‚000 cubic metres of
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COST-VOLUMEPROFIT ANALYSIS Julie E. Colandog A systematic examination of the relationship among cost‚ cost driver or level of activity (volume)‚ and Sales Less: Variable Costs Contribution Margin Less: Fixed Costs Net Profit xxxx xxxx xxxx xxxx xxxx CONTRIBUTION MARGIN INCOME STATEMENT e s Sa l Total Cost Break-even point Fixed Cost Break-even point is a condition where total revenue equals total cost and profit is equal to zero BREAK-EVEN POINT Break-even point (pesos) = Total Fixed
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Relevant Costs and Decision Making 4.16 A. The fixed overhead cost will be the same regardless of which method Regina Corp goes. Based on the analysis of Yoklic‚ they will incur the additional cost of $6 per unit by purchasing the subassemblies versus manufacturing them. B. The $50‚000 that is saved by eliminating the fixed overhead reduces the cost for outsourcing. This will give Yoklic an overall $20‚000 savings for 5‚000 units by purchasing externally versus manufacturing internally
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The cost profit analysis (CVP) determines how cost and volume affect a company’s operating income. To successfully perform the analysis the five basic components have to be known. The components are volume or level of activity‚ unit selling prices‚ variable cost per unit‚ total fixed cost‚ and sales mix. Volume or level of activity is how many units are produced or sold. The unit selling prices are the cost that each unit produced is sold or thought to be sold will sale for. The variable cost per
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