Accounting for Decision Makers

Question 1 -

a) A company estimates that its total cost( look at hint)  to send out invoices, receive payments, deposit the payments, and update accounting records was $10 per sale in 2014. In 2014, there were 10,000 sales and fixed costs of $60,000. In 2015, the company expects total fixed costs and variable costs per unit to be the same as in 2014. If the company budgets 10,500 sales in 2015, what are the expected total costs and expected costs per unit for 2015?

b) Assume the same facts as in part a, except the company expects 9,500 sales in 2015. What are the expected total costs and expected costs per unit for 2015?

HINT: TOTAL COSTS = FIXED COST + VARIABLE COST. So you have to figure out Variable cost and Fixed cost from this cost.

Question 2 -

a) A company estimates that its total cost to acquire materials, set up machines, and produce products is $25 per unit produced in 2014. In 2014, there were 50,000 units produced and variable costs per unit produced totaled $15. In 2015, the company expects total fixed costs and variable costs per unit to be the same as in 2014. If the company budgets to produce 52,000 units in 2015, what are the expected total costs and expected costs per unit for 2015?

b) Assume the same facts as in part a, except the company expects to produce 49,000 units in 2015. What are the expected total costs and expected costs per unit for 2015?

Question 3 -

The Bear Company collected the following monthly information on units produced and electricity costs:

Using the high-low method, prepare an estimate of electricity costs for July, assuming 53,500 units are expected to be produced in July.

Textbook - Managerial Accounting, 7^th Edition by Al L. Hartgraves and Wayne J. Morse

Chapter 2 - Cost Behavior, Activity Analysis, and Cost Estimation