Concept explainers
a.
Modify the previously designed cost system for Company CT.
a.

Explanation of Solution
The costs for each season fluctuate on the basis of the excess capacity unused in the winter season. There are two approaches through which the costs could be determined.
Approach 1:
In this approach the excess capacity costs are assigned in the season in which they are incurred, and then to the products.
Compute the product cost for winter:
Compute the
Compute the product cost:
Compute the product cost for summer:
Compute the overhead rate:
Compute the product cost:
Approach 2:
In this approach the excess capacity costs are assigned in the seasons and then to the products.
Compute the product cost for winter:
Compute the overhead rate:
Compute the product cost:
Compute the product cost for summer:
Compute the overhead rate:
Compute the product cost:
The price to be paid by Company RCC to Company KC under exclusive contract is $5.62. In case of delay, the price of Company KC must be compared with the price of Company TG, as it offers the next best price to Company
b.
Identify the maximum price to be considered by Company RCC to offer Company KC, in case of absence of any delay.
b.

Explanation of Solution
Compute the number of loads delayed:
Compute the cost of delayed deliveries:
Compute the change in price:
The price to be paid by Company RCC to Company KC under exclusive contract is $5.70.
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Chapter 10 Solutions
FUNDAMENTALS OF COST ACCOUNTING
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