Question 1
Variable costs increase as production activity increases and decreases as production activity decreases, but variable costs do not necessarily increase or decrease in direct proportion to increases and decreases in production. What are step-variable costs, and what role does the relevant range play in identifying variable costs?
Your response should be at least 200 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information.
Question 2
The following information was taken from the accounts of ABC Corp on December 31, 2010:
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1/1/2010
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12/31/2010
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Beginning Inventory
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Ending Inventory
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Inventories:
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|
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Raw materials
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30,000
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26,000
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|
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Work-in-progress
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24,000
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25,000
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|
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Finished goods
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15,000
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20,000
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|
|
|
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Costs incurred:
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Purchase of raw materials
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150,000
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|
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Direct labor
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60,000
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|
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Rent, factory
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40,000
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|
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Utilities, factory
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10,000
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Indirect materials
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5,000
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Indirect labor
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12,000
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Selling expenses
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21,000
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Administrative expenses
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26,000
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Prepare a schedule of the direct materials used in production during 2010.
All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information.
Question 3
The following information was taken from the accounts of ABC Corp on December 31, 2010:
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|
|
1/1/2010
|
12/31/2010
|
|
|
|
Beginning Inventory
|
Ending Inventory
|
|
Inventories:
|
|
|
|
|
|
Raw materials
|
30,000
|
26,000
|
|
|
Work-in-progress
|
24,000
|
25,000
|
|
|
Finished goods
|
15,000
|
20,000
|
|
|
|
|
|
|
Costs incurred:
|
Purchase of raw materials
|
150,000
|
|
|
|
Direct labor
|
60,000
|
|
|
|
Rent, factory
|
40,000
|
|
|
|
Utilities, factory
|
10,000
|
|
|
|
Indirect materials
|
5,000
|
|
|
|
Indirect labor
|
12,000
|
|
|
|
Selling expenses
|
21,000
|
|
|
|
Administrative expenses
|
26,000
|
|
Calculate the cost of manufacturing overhead incurred during 2010.
Question 4
Big Corporation makes a gear that it uses in the production of the Big Bicycles that it produces. The costs of making each of those gears are:
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Variable costs:
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Direct materials
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4.00
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Direct labor
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1.00
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Variable manufacturing overhead
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2.00
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Total variable costs
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7.00
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Fixed costs:
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Depreciation on production equipment
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1.50
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Depreciation on the factory building
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0.60
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Supervisors salary
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1.75
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Total fixed costs
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3.85
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Total cost per unit
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10.85
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Small Corporation has offered to produce the gear for $10.00 per unit and to provide all 5,000 gears that Big Corporation needs each year to produce the Big Bicycles. Assume that, if Big Corporation decides to buy the gears from Small Corporation, the production workers and supervisor who have been involved in producing gears will be re-assigned to other jobs with Big Corporation. However, the production equipment that Big Corporation uses to make gears cannot be used for other products by Big Corporation and that equipment has no resale value. The production facility used by Big Corporation to produce gears can be used by another function of Big Corporation that is currently leasing space at a cost of $35,000 per year.
What are the differential costs involved if Big Corporation decides to buy the gears from Small Corporation? What opportunity costs are involved if Big Corporation does not buy the gears from Small Corporation and continues to produce the gears?
Your response should be at least 200 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information.
Question 5
Identify each of the following as either a period cost or a product cost?
1. Depreciation on a production line machine
2. Cost of packing products for shipment
3. Lease of sales staff automobiles
4. Plastic bags that hold small screws that customers use to assemble products
5. Factory supervisors' wages
6. Cost of health insurance provided by the employer for employees
7. Wages of the CEO's secretary
8. Cost of maintaining production equipment
9. Costs of sales meetings
10. Costs of utilities for the production plant
All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information.