COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 2, Problem 2.27E
Variable and Fixed Costs. Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following
Plant management costs, $1,992,000 per year
Cost of leasing equipment, $1,932,000 per year
Workers’ wages, $800 per Surfer vehicle produced
Direct materials costs: Steel, $1,400 per Surfer; Tires, $150 per tire, each Surfer takes 5 tires (one spare).
City license, which is charged monthly based on the number of tires used in production:
| 0–500 tires | $ 40,040 |
| 501–1,000 tires | $ 65,000 |
| more than 1,000 tires | $249,870 |
Consolidated currently produces 170 vehicles per month.
- 1. What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
Required
- 2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your graphs? Explain.
- 3. What is the total manufacturing cost of each vehicle if 80 vehicles are produced each month? 205 vehicles? How do you explain the difference in the manufacturing cost per unit?
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b. Total avoidable cost
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Vernon Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
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Unit-level materials
Unit-level labor
Unit-level overhead
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$5,700
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the total avoidable costs. Should Vernon continue to make the containers?
a. Total relevant cost
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b. Should Vernon continue to make the containers?
Perez Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,300 containers follows.
Unit-level materials
$ 6,000
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3,600
8,400
26,500
Unit-level labor
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*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Perez for $2.80 each.
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a. Total relevant cost
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Chapter 2 Solutions
COST ACCOUNTING
Ch. 2 - Define cost object and give three examples.Ch. 2 - Define direct costs and indirect costs.Ch. 2 - Prob. 2.3QCh. 2 - Name three factors that will affect the...Ch. 2 - Define variable cost and fixed cost. Give an...Ch. 2 - What is a cost driver? Give one example.Ch. 2 - What is the relevant range? What role does the...Ch. 2 - Explain why unit costs must often be interpreted...Ch. 2 - Prob. 2.9QCh. 2 - What are three different types of inventory that...
Ch. 2 - Distinguish between inventoriable costs and period...Ch. 2 - Define the following: direct material costs,...Ch. 2 - Describe the overtime-premium and idle-time...Ch. 2 - Define product cost. Describe three different...Ch. 2 - What are three common features of cost accounting...Ch. 2 - Prob. 2.16MCQCh. 2 - Comprehensive Care Nursing Home is required by...Ch. 2 - Frisco Corporation is analyzing its fixed and...Ch. 2 - Year 1 financial data for the ABC Company is as...Ch. 2 - The following information was extracted from the...Ch. 2 - Computing and interpreting manufacturing unit...Ch. 2 - Direct, indirect, fixed, and variable costs....Ch. 2 - Classification of costs, service sector. Market...Ch. 2 - Classification of costs, merchandising sector....Ch. 2 - Classification of costs, manufacturing sector. The...Ch. 2 - Variable costs, fixed costs, total costs. Bridget...Ch. 2 - Variable and Fixed Costs. Consolidated Motors...Ch. 2 - Variable costs, fixed costs, relevant range. Gummy...Ch. 2 - Prob. 2.29ECh. 2 - Cost drivers and functions. The representative...Ch. 2 - Total costs and unit costs, service setting....Ch. 2 - Total and unit cost, decision making. Gayles...Ch. 2 - Inventoriable costs versus period costs. Each of...Ch. 2 - Computing cost of goods purchased and cost of...Ch. 2 - Cost of goods purchased, cost of goods sold, and...Ch. 2 - Flow of Inventoriable Costs. Renkas Heaters...Ch. 2 - Cost of goods manufactured, income statement,...Ch. 2 - Cost of goods manufactured, income statement,...Ch. 2 - Income statement and schedule of cost of goods...Ch. 2 - Interpretation of statements (continuation of...Ch. 2 - Income statement and schedule of cost of goods...Ch. 2 - Terminology, interpretation of statements...Ch. 2 - Labor cost, overtime, and idle time. David...Ch. 2 - Missing records, computing inventory costs. Ron...Ch. 2 - Comprehensive problem on unit costs, product...Ch. 2 - Prob. 2.46PCh. 2 - Cost classification; ethics. Paul Howard, the new...Ch. 2 - Prob. 2.48P
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