
Concept explainers
1.
(a)
To identify:
Whether the cost is variable or fixed.
1.
(a)

Explanation of Solution
1.
The cost is the variable costs.
Variable cost remains per unit fixed. It increases with respect to the increase in the units of the production. Here, cost of the plastic will increase with respect to increase in the number of the units. So, it is the variable cost.
2.
The cost is the variable costs.
Variable cost remains per unit fixed. It increases with respect to the increase in the units of the product. Here, cost of the wages of the assembly increases with respect to the increase in the number of the units. So, it is the variable cost.
3.
The cost is the fixed cost.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the units. Here property tax is fixed cost because it varies with increase or decrease of no of the units of the product.
4.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the unity. Here, accounting staff salary is fixed cost because it varies with increase or decrease of no of the units of the product.
5.
$26,000 is the variable cost.
Variable cost remains per unit fixed. It increases with respect to the increase in the units of the product. Here, cost of the Drum stand increases with respect to the increase in the number of the units. So, Drum stand is the variable cost.
6.
$10,000 is the fixed cost.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the unity. Here, Rent cost of the equipment of the sales staff is fixed cost because it varies with increase or decrease of no of the units of the product.
7.
$125,000 is fixed cost.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the unity. Here, Upper management salaries are fixed cost because it varies with increase or decrease of no of the units of the product.
8.
$10,000 is the fixed cost.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the unity. Here, Annual flat fee for factory maintenance service are fixed cost because it varies with increase or decrease of no of the units of the production.
9.
$15,000 is the variable cost.
Variable cost remains per unit fixed. It increases with respect to the increase in the units of the product. Here, cost of sales commission increases with respect to the increase in the number of the units. So, sales commission is the variable cost.
10.
$40,000 is the fixed cost.
Fixed cast is that cost which varies per unites from increase or decrease of the no of the unity. Here, Machinery
(b)
To identify:
Whether the cost is product or period cost.
(b)

Explanation of Solution
1.
The cost is the product cost.
Plastic for casing is related to the direct material and it related to the manufacturing the product. So, that is why it is related to the product cost.
2.
The cost is the product cost.
Product cost is that cost which is directly related to the manufacturing the product. Here, wages of assembly worker is related to the manufacturing of the product. So, it will be product cost.
3.
The cost is the period cost.
Period cost is the cost which is not related to the manufacturing of the product. Property tax is not related to the manufacturing of the product. It is related to the administration. So, it is the period cost.
4.
The cost is the period cost.
Period cost is the cost which is not related to the manufacturing of the product. Accounting staff salary is not related to the manufacturing of the product. It is related to the administration. So, it is the period cost.
5.
$26,000 is the product cost.
Product cost is that cost which is directly related to the manufacturing the product. Drum stand are related to the purchase and manufacturing of the product. So, drum stand is product cost.
6.
$10,000 is the period cost.
Period cost is the cost which is not related to the manufacturing of the product. Rent cost of equipment for sales staff is not related to the manufacturing of the product. It is related to the administration. So, it is the period cost.
7.
$125,000 is period cost.
Period cost is the cost which is not related to the manufacturing of the product. Upper management salary is not related to the manufacturing of the product. It is related to the administration. So, it is the period cost.
8.
$10,000 is the period cost.
Period cost is the cost which is not related to the manufacturing of the product. Annual flat fee for factory maintenance service is not related to the manufacturing of the product. It is related to the administration. So, it is the period cost.
9.
$15,000 is the period cost.
Period cost is the cost which is not related to the manufacturing of the product. Sales commission is not related to the manufacturing of the product. It is related to the administration and selling. So, it is the period cost.
10.
$40,000 is the period cost.
Machinery deprecation incurs once in the year and it is not related to the manufacturing of the production. So, it is the period cost.
2.
To compute:
2.

Explanation of Solution
Computation of the manufacturing cost per drum set:
Particulars | Amounts ($) |
Amounts ($) |
---|---|---|
Variable costs: | ||
Plastic for casting | 17,000 | |
Wages for assembly workers | 82,000 | |
Drum stands(1,000 stands purchased) | 26,000 | |
Total variable costs | 125,000 | |
Fixed cost: | ||
Property taxes on factory | 5,000 | |
Annual flat fee factory maintenance service | 10,000 | |
Machinery deprecation, |
40,000 | |
Total fixed cost | 55,000 | |
Total manufacturing cost (A) | 180,000 | |
Number of drum sets (B) | 1,000 | |
Manufacturing cost per drum set | 180 |
Table (1)
Hence, manufacturing cost per drum set is $180 per unit.
3.
To compute:
Total cost of plastic and per unit cost of plastic.
3.

Explanation of Solution
Given,
The total cost of the plastic is $17,000.
The numbers of drum sets are 1,000 units.
Formula to calculate per unit cost of the drum sets:
Substitute, $17,000 for total cost for plastic for casting and 1,000 units for number of drum sets,
Formula to calculate total cost of plastic for the casing:
Substitute $17 for per unit cost for plastic for casting and 1,200 unit for number of drum sets,
Hence, total cost of plastic for casing will be $20,400.
4.
To compute:
Per unit cost of property tax.
4.

Explanation of Solution
Given,
The total property tax is $5,000.
The numbers of drum sets are 1,200 units.
Formula to calculate per unit cost of the drum sets:
Substitute, $5,000 for property tax and 1,200 units for number of drum sets,
Hence, per unit property tax would be$41.67.
Want to see more full solutions like this?
Chapter 14 Solutions
Financial and Managerial Accounting: Information for Decisions
- Theron Interiors manufactures handcrafted cabinetry and uses a process costing system. During the month of October, the company started Production on 720 units and completed 590 units. The remaining 120 units were 60% complete in terms of materials and 40% complete in terms of labor and overhead. The total cost incurred during the month was $45,000 for materials and $31,200 for labor and overhead. Using the weighted-average method, what is the equivalent unit cost for materials and conversion costs (labor and overhead)?arrow_forwardGeneral Accountingarrow_forwardKamala Khan has to decide between the following two options: Take out a student loan of $70,000 and study accounting full time for the next three years. The interest on the loan is 4% per year payable annually. The principle is to be paid in full after ten years. Study part time and work part time to earn $15,000 per year for the following six years. Once Kamala graduates, she estimates that she will earn $30,000 for the first three years and $40,000 the next four years. Kamala's banker says the market interest for a ten-year horizon is 6%. Required Calculate NPV of the ten-year cash flows of the two options. For simplification assume that all cash flows happen at year-end. Based on the NPV which of the two options is better for Kamala?arrow_forward
- General accounting question and correct solutionarrow_forwardCan you explain the correct methodology to solve this financial accounting problem?arrow_forwardKiran Manufacturing produces a product with a standard direct labor cost of 1.8 hours at $18.75 per hour. During August, 2,250 units were produced using 4,150 hours at $17.50 per hour. What is the labor quantity variance (labor efficiency variance)?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





