Brief Exercise 9-1 Identifying Relevant Costs (LO1 - CC1) Following are a number of costs that may be relevant in decisions faced by the management of Yacht ASA, a Norwegian manufacturer of sailing yachts: Required: 1. Management is considering purchasing a Model XB machine to use in addition to the company's present Model XA machine. This would increase the company's production and sales. The increase in volume would be large enough to require increases in fixed manufacturing overhead and in general administrative overhead, but not in fixed selling expenses. 2. Management is instead considering replacing its present Model XA machine with a new Model XB machine. The Model XA machine would be sold. This change would have no effect on production or sales, other than some savings in direct materials costs due to reduced waste. Item a. Sales revenue b. Direct materials c. Direct labour d. Variable manufacturing overhead e. Depreciation-Model XA machine f. Book value-Model XA machine g. Disposal value-Model XA machine h. Market value-Model XB machine (cost) i. Depreciation-Model XB machine j. Fixed manufacturing overhead (general) k. Variable selling expense 1. Fixed selling expense m. General administrative overhead Case 1 Case 2
Brief Exercise 9-1 Identifying Relevant Costs (LO1 - CC1) Following are a number of costs that may be relevant in decisions faced by the management of Yacht ASA, a Norwegian manufacturer of sailing yachts: Required: 1. Management is considering purchasing a Model XB machine to use in addition to the company's present Model XA machine. This would increase the company's production and sales. The increase in volume would be large enough to require increases in fixed manufacturing overhead and in general administrative overhead, but not in fixed selling expenses. 2. Management is instead considering replacing its present Model XA machine with a new Model XB machine. The Model XA machine would be sold. This change would have no effect on production or sales, other than some savings in direct materials costs due to reduced waste. Item a. Sales revenue b. Direct materials c. Direct labour d. Variable manufacturing overhead e. Depreciation-Model XA machine f. Book value-Model XA machine g. Disposal value-Model XA machine h. Market value-Model XB machine (cost) i. Depreciation-Model XB machine j. Fixed manufacturing overhead (general) k. Variable selling expense 1. Fixed selling expense m. General administrative overhead Case 1 Case 2
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Brief Exercise 9-1 Identifying Relevant Costs (LO1 - CC1)
Following are a number of costs that may be relevant in decisions faced by the management of Yacht ASA, a Norwegian manufacturer
of sailing yachts:
Required:
1. Management is considering purchasing a Model XB machine to use in addition to the company's present Model XA machine. This
would increase the company's production and sales. The increase in volume would be large enough to require increases in fixed
manufacturing overhead and in general administrative overhead, but not in fixed selling expenses.
2. Management is instead considering replacing its present Model XA machine with a new Model XB machine. The Model XA machine
would be sold. This change would have no effect on production or sales, other than some savings in direct materials costs due to
reduced waste.
Item
a. Sales revenue
b. Direct materials
c. Direct labour
d. Variable manufacturing overhead
e. Depreciation-Model XA machine
f. Book value-Model XA machine
g. Disposal value-Model XA machine
h. Market value-Model XB machine (cost)
i. Depreciation-Model XB machine
j. Fixed manufacturing overhead (general)
k. Variable selling expense
1. Fixed selling expense
m. General administrative overhead
Case 1
Case 2
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