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Chapter 2 Tutorial Solutions Discussed In Week 3

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Chapter 2 Tutorial Solutions Discussed In Week 3
ACC2131 Cost Information for Decision Making
Week 3 (Chapter 2) Tutorial Solutions
Semester 1, 2015
Note to students: Beware! These solutions are not necessarily model answers. In exams, you will not have demonstrated your understanding of the answers to these exercises if you seek only to memorise them. You are encouraged to use tutorial time to discuss issues that will test and clarify your understanding of these exercises, as well as expanding your analytical and critical-thinking skills. 2.5

Costs can be classified and reported in many different ways, depending on the purpose for which managers will use the information. Students should be careful how they interpret this phrase. It is not really different costs but the same bundle of costs with different cost classifications for different purposes. Cost data that are classified and reported in a particular way for one purpose may be inappropriate for another use.

2.6

Fixed costs remain constant in total across changes in activity levels, whereas variable costs change in proportion to the level of activity. Examples are:

Fixed costs

Variable costs

Salaries of permanent staff

Casual staff salaries will vary with forecast demand and the need to cover permanent staff leave arrangements

Depreciation of buildings and equipment

Paper and postage costs, while declining, vary with the number of customers who have not adopted the online communication methods

Security services: if they are outsourced
Telephone banking costs and across the they are often subject to long-term contracts counter retail banking may decline as internet which would also make them fixed banking increases
Other long-term contracts may include those for cleaning
Students should note that it is important to recognise what a variable cost ‘varies with’.

1

The answer to Question 2.7 is directly relevant here. In the context of a bank it is interesting to discuss the measures of output, the activities and the measures of input; cost is one

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