INCREMENTAL ANALYSIS TRUE-FALSE STATEMENTS 1. An important step in management ’s decision-making process is to determine and evaluate possible courses of action. 2. In making decisions‚ management ordinarily considers both financial and nonfinancial information. 3. In incremental analysis‚ total variable costs will always change under alternative courses of action‚ and total fixed costs will always remain constant. 4. Accountants are mainly involved in developing nonfinancial information
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Controllers Material $16.00 $20.00 $22.00 Direct Labor 4.00 8.00 6.40 Overhead 17.56 35.12 28.10 (439% of Direct Labor $) Standard unit cost $37.56 $63.12 $56.50 *Overhead Machine depreciation $270‚000 Set-up labor 2‚688 Receiving 20‚000 Materials handling 200‚000 Engineering 100‚000 Packing and shipping 60‚000 Maintenance 30‚000 Total overhead $682‚688 Total run labor = 9‚725 hours x $16 = $155‚600 Overhead rate = 682‚688 / 155‚600 = 439% Question 2. Estimated "Contribution Margin"
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Materials | |$360‚000 | | | | Direct Labor | |90‚000 | | | | Manufacturing Overhead | |135‚000 | |585‚000 | |Total costs to be accounted for | | | |$739‚000 | The beginning inventory of Work
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Having employees work at home as opposed to in-facility is significantly less costly. According to Table A in the case‚ annual recurring costs for each individual working in-facility is around $10‚650. That is over twice the recurring cost of the average work@home employee with an ISDN connection and over 20 times the annual recurring cost of a work@home employee with a cable modem connection. Given the large quantity work@home employees at Putnam‚ this program provides a method of greatly reducing
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page of the catalogue. Each plate requires 4 hours of labour at £7 per hour and £35 of materials. Overheads are absorbed on the basis of labour hours at an hourly rate of £9.50. In printing‚ paper costs £12 per thousand sheets. Material losses are expected to be 2% of input. Other printing materials will cost £7 per 500 catalogues. 1000 catalogues are printed per hour of machine time. Labour and overhead costs incurred in printing are absorbed at a rate of £62 per machine hour. Binding costs are recovered
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| 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
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ISSUES IN ACCOUNTING EDUCATION Vol. 28‚ No. 3 2013 pp. 637–652 American Accounting Association DOI: 10.2308/iace-50464 Dream Chocolate Company: Choosing a Costing System Kip R. Krumwiede and W. Darrell Walden ABSTRACT: This case is about a small‚ but real‚ company‚ Dream Chocolate (D.C.)‚ which makes custom-labeled‚ high-quality candy bars for special events and advertising purposes. Like many small companies‚ D.C. has an inadequate costing system and needs a much better one as it starts to get
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to each item produced—no allocation was needed. On the other hand‚ the rent of the building that houses the production area‚ warehouse‚ and office is not a direct cost of either the production department or the items produced. Indirect Costs (overheads) A.k.a facilities and administrative costs (F&A)‚ cannot be clearly related to the level of output of any single product‚ i.e. they are not directly linked with the level of production ot sale of a product. For example‚ the costs of fuel and power
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CHAPTER 18 SPOILAGE‚ REWORK‚ AND SCRAP 18-1 Managers have found that improved quality and intolerance for high spoilage have lowered overall costs and increased sales. 18-2 Spoilage—units of production that do not meet the standards required by customers for good units and that are discarded or sold at reduced prices. Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished units. Scrap—residual material
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TEST QUESTIONS: Questions 1-3 refer to the following: The following selected data for March were taken from Rubenstein Company’s financial statements: Cost of goods available for sale Manufacturing overhead Cost of goods manufactured Finished goods inventory ‑ ending Direct materials used Sales Selling and administrative expenses Direct labor Work in process inventory ‑ beginning $ 65‚000 20‚000 51‚000 10‚000 15‚000 105‚000 30‚000 20‚000 0 1. The gross
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