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Cost Assignment, Direct Costs
Harry Whipple, owner of an inkjet printer, has agreed to allow Mary and Natalie, two friends who are pursuing master’s degrees, to print several papers for their graduate courses. However, he has imposed two conditions. First, they must supply their own paper. Second, they must pay Harry a fair amount for the usage of the ink cartridge. Harry’s printer takes two types of cartridges, a black one and a color one that contains the inks necessary to print in color. Black replacement cartridges cost $25.50 each and print approximately 850 pages. The color cartridge replacement cost $31 and prints approximately 310 color pages. One ream of paper costs $2.50 and contains 500 sheets. Mary’s printing requirements are for 500 pages, while Natalie’s are for 1,000 pages.
Required:
- 1. Assuming that both women write papers using text only (i.e., black ink), what is the total amount owed to Harry by Mary? By Natalie?
- 2. What is the total cost of printing (ink and paper) for Mary? For Natalie?
- 3. Now suppose that Natalie illustrates her writing with many large colorful pie charts and pictures and that about 20% of her total printing is primarily color. Mary uses no color illustrations. What is the total amount owed to Harry by Natalie? What is the total cost of printing (ink and paper) for Natalie?
1.
Calculate the amount owed to Person H by Person M and Person N.
Answer to Problem 52P
The amount owed to person H by Person M and Person N is $15 and $30 respectively.
Explanation of Solution
Cost:
Cost can be defined as the cash and cash equivalent which is incurred against the products or its related services which will benefit the organization in the future. There are two types of costs that are direct and indirect costs.
Use the following formula to calculate the amount owed to Person H by Person M:
Substitute 500 pages for the number of printing pages and $0.03 for cost per page for black ink in the above formula.
Therefore, the amount owed to person H by Person M is $15.
Use the following formula to calculate the amount owed to Person H by Person N:
Substitute 1,000 pages for the number of printing pages and $0.03 for cost per page for black ink in the above formula.
Therefore, the amount owed to person H by Person N is $30.
Working Note:
Calculation of cost of printing per page of black ink:
Hence, the amount of cost of printing per page for black ink is $0.03.
2.
Calculate the amount of printing cost for Person M and N.
Answer to Problem 52P
The total printing cost for Person M and Person N is $17.50 and $35 respectively.
Explanation of Solution
Use the following formula to calculate the total printing cost for Person M:
Substitute 500 pages for the number of printing pages, $0.03 for cost per page for black ink and $0.005 for the cost of one sheet in the above formula.
Therefore, the total printing cost for Person M is $17.50.
Use the following formula to calculate the total printing cost for Person N:
Substitute 1,000 pages for the number of printing pages, $0.03 for cost per page for black ink and $0.005 for the cost of one sheet in the above formula.
Therefore, the total printing cost for Person N is $35.
Working Note:
Calculation of cost of one sheet:
Hence, the amount of cost of one sheet is $0.005.
3.
Calculate the amount owed to Person H by Person N if the proportion of primary color is 20%. Also, calculate the amount of total printing cost for Person N.
Answer to Problem 52P
The amount owned to Person H by Person N is $44 and the total printing cost for Person N is $49.
Explanation of Solution
Use the following formula to calculate the amount owed to Person H by Person N is,
Substitute 800 pages for black ink pages, $0.03 for cost per page for black ink, 200 pages for color ink pages and $0.10 for cost per page for color ink in the above formula.
Therefore, the amount owned to Person H by Person N is $44.
Use the following formula to calculate total printing cost for Person N is,
Substitute $0.03 for the cost per page for black ink, $0.005 for cost per sheet, 800 pages for the number of black ink pages, $0.10 for the cost per page for color ink, $0.005 for cost per sheet, 200 pages for the number of color ink pages in the above formula.
Therefore, the total printing cost for Person N is $49.
Working Notes:
Calculation of cost per page of color ink:
Hence, the cost per page of color ink is $0.10.
Calculation of the number of color ink pages:
Therefore, the numbers of color ink pages are 200.
Calculation of the number of black ink pages:
Therefore, the numbers of black ink pages are 800.
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Chapter 2 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
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