mgmt 30b chapter 1 hw answers

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Exercise 13 Fixed and Variable Cost Behavior [LO3]Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weeklyexpense of a coffee stand is $2,300 and the variable cost per cup of coffee served is $0.34.

Required:1. Fill in the following table with your estimates of total costs and average cost per cup of coffee at the

indicated levels of activity for a coffee stand.(Round your answers to nearest dollar amount. Roundthe "Average cost per cup of coffee" to 3 decimal places.)

Cups of Coffee Served in a Week 1,400 1,500 1,600 Fixed cost $ 2,300 $ 2,300 $ 2,300 Variable cost 476 510 544 Total cost $ 2,776 $ 2,810 $ 2,844 Average cost per cup of coffee served $ 1.983 $ 1.873 $ 1.778

2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the numberof cups of coffee served in a week increases?

Decreases

Worksheet Exercise 13 Fixed and Variable Cost Behavior [LO3]Learning Objective: 0103 Understand cost behaviorpatterns including variable costs, fixed costs, and mixedcosts.

Exercise 13 Fixed and Variable Cost Behavior [LO3]Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weeklyexpense of a coffee stand is $2,300 and the variable cost per cup of coffee served is $0.34.

Required:1. Fill in the following table with your estimates of total costs and average cost per cup of coffee at the

indicated levels of activity for a coffee stand.(Round your answers to nearest dollar amount. Roundthe "Average cost per cup of coffee" to 3 decimal places.)

Cups of Coffee Served in a Week

1,400 1,500 1,600 Fixed cost $ 2,300 $ 2,300 $ 2,300 Variable cost 476 510 544 Total cost $ 2,776 $ 2,810 $ 2,844 Average cost per cup of coffee served $ 1.983 $ 1.873 $ 1.778

2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the numberof cups of coffee served in a week increases?

Decreases

Explanation:

1. Average cost per cup of coffee served = Total cost ÷ Cups of coffee served in a week

2.The average cost of a cup of coffee served declines as the number of cups of coffee served increasesbecause the fixed cost is spread over more cups of coffee.

Exercise 15 Traditional and Contribution Format Income Statements [LO5]Redhawk, Inc., is a merchandiser that provided the following information:



Number of units sold 11,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 1.5 Total fixed selling expense $ 18,000 Total fixed administrative expense $ 14,000 Merchandise inventory, beginning balance $ 9,000 Merchandise inventory, ending balance $ 26,000 Merchandise purchases $ 87,000

Required:1. Prepare a traditional income statement. (Input all amounts as positive values except losses which

should be indicated by a minus sign.)

Redhawk, Inc.Traditional Income Statement

Sales $ 176,000 Cost of goods sold 70,000 Gross margin 106,000 Selling and administrative expenses: Selling expenses $ 40,000 Administrative expenses 30,500 70,500 Net operating income $ 35,500

2. Prepare a contribution format income statement. (Input all amounts as positive values except losseswhich should be indicated by a minus sign.)

Redhawk, Inc.Contribution Format Income Statement

Sales $ 176,000 Variable expenses: Selling expenses $ 22,000 Administrative expenses 16,500 Cost of goods sold 70,000 108,500 Contribution margin 67,500 Fixed expenses: Selling expenses 18,000 Administrative expenses 14,000 32,000 Net operating income $ 35,500

Worksheet Exercise 15 Traditional and Contribution Format IncomeStatements [LO5]

Learning Objective: 0105 Prepare income statements for amerchandising company using the traditional andcontribution formats.

Exercise 15 Traditional and Contribution Format Income Statements [LO5]Redhawk, Inc., is a merchandiser that provided the following information:

Number of units sold 11,000 Selling price per unit $ 16 Variable selling expense per unit $ 2 Variable administrative expense per unit $ 1.5 Total fixed selling expense $ 18,000 Total fixed administrative expense $ 14,000 Merchandise inventory, beginning balance $ 9,000 Merchandise inventory, ending balance $ 26,000 Merchandise purchases $ 87,000

Required:1. Prepare a traditional income statement. (Input all amounts as positive values except losses which

should be indicated by a minus sign.)

Redhawk, Inc.Traditional Income Statement

Sales $ 176,000 Cost of goods sold 70,000 Gross margin 106,000 Selling and administrative expenses: Selling expenses $ 40,000 Administrative expenses 30,500 70,500 Net operating income $ 35,500

2. Prepare a contribution format income statement. (Input all amounts as positive values except losseswhich should be indicated by a minus sign.)




Redhawk, Inc.Contribution Format Income Statement

Sales $ 176,000 Variable expenses: Cost of goods sold $ 70,000 Selling expenses 22,000 Administrative expenses 16,500 108,500 Contribution margin 67,500 Fixed expenses: Selling expenses 18,000 Administrative expenses 14,000 32,000 Net operating income $ 35,500

Explanation:

1.Sales: ($16 per unit × 11,000 units) = $176,000Cost of goods sold: ($9,000 + $87,000 – $26,000) = $70,000Selling expenses: (($2 per unit × 11,000 units) + $18,000) = $40,000Administrative expenses: (($1.5 per unit × 11,000 units) + $14,000) =$30,500

2.Cost of goods sold: ($9,000 + $87,000 – $26,000) = $70,000Selling expenses: ($2 per unit × 11,000 units) = $22,000Administrative expenses: ($1.5 per unit × 11,000 units) = $16,500

Exercise 11 Classifying Manufacturing Costs [LO1]Your Boat, Inc., assembles custom sailboats from components supplied by various manufacturers. Thecompany is very small and its assembly shop and retail sales store are housed in a Gig Harbor,Washington, boathouse. Below are listed some of the costs that are incurred at the company.

Required:

For each cost, indicate whether it would most likely be classified as direct labor, direct materials,manufacturing overhead, selling, or an administrative cost. (You may select more than one answer.Single click the box with the question mark to produce a check mark for a correct answer anddouble click the box with the question mark to empty the box for a wrong answer.)

1. The wages of employees who build the sailboats.

Direct labor cost

Direct materials cost

Manufacturing overhead cost

Marketing and selling cost

Administrative cost

2. The cost of advertising in the local newspapers.

Direct labor cost




Administrative cost

3. The cost of an aluminum mast installed in a sailboat.

Direct labor cost




Administrative cost

4. The wages of the assembly shop’s supervisor.

Direct labor cost






Administrative cost

5. Rent on the boathouse.

Direct labor cost




Administrative cost

6. The wages of the company’s bookkeeper.

Direct labor cost




Administrative cost

7. Sales commissions paid to the company’s salespeople.

Direct labor cost




Administrative cost

8. Depreciation on power tools.

Direct labor cost




Administrative cost

Worksheet Exercise 11 Classifying Manufacturing Costs [LO1] Learning Objective: 0101 Identify and give examples ofeach of the three basic manufacturing cost categories.

Exercise 11 Classifying Manufacturing Costs [LO1]Your Boat, Inc., assembles custom sailboats from components supplied by various manufacturers. Thecompany is very small and its assembly shop and retail sales store are housed in a Gig Harbor,Washington, boathouse. Below are listed some of the costs that are incurred at the company.

Required:For each cost, indicate whether it would most likely be classified as direct labor, direct materials,manufacturing overhead, selling, or an administrative cost. (You may select more than one answer.Single click the box with the question mark to produce a check mark for a correct answer anddouble click the box with the question mark to empty the box for a wrong answer.)

1. The wages of employees who build the sailboats.

Direct labor cost




Administrative cost

2. The cost of advertising in the local newspapers.

Direct labor cost







Administrative cost

3. The cost of an aluminum mast installed in a sailboat.

Direct labor cost




Administrative cost

4. The wages of the assembly shop’s supervisor.

Direct labor cost




Administrative cost

5. Rent on the boathouse.

Direct labor cost




Administrative cost

6. The wages of the company’s bookkeeper.

Direct labor cost




Administrative cost

7. Sales commissions paid to the company’s salespeople.

Direct labor cost




Administrative cost

8. Depreciation on power tools.

Direct labor cost




Administrative cost

Explanation:

5. Rent on the boathouse: a combination of manufacturing overhead, administrative, and marketing andselling cost. The rent would most likely be prorated on the basis of the amount of space occupied bymanufacturing, administrative, and marketing operations.



Problem 123A Cost Classification and Cost Behavior [LO2, LO3, LO6]Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The companyhas a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacityof 4,100 bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass) $ 427,000 Administrative office salaries $ 115,000 Factory supervision $ 70,000 Sales commissions $ 58,000 Depreciation, factory building $ 109,000 Depreciation, administrative office equipment $ 2,000 Indirect materials, factory $ 16,000 Factory labor (cutting and assembly) $ 86,000 Advertising $ 105,000 Insurance, factory $ 7,000 Administrative office supplies (billing) $ 5,000 Property taxes, factory $ 24,000 Utilities, factory $ 44,000

Required:1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is

classified in two ways: first, as either variable or fixed with respect to the number of units producedand sold; and second, as either a selling and administrative cost or a product cost. (If the item is aproduct cost, it should also be classified as either direct or indirect.) (Leave no cells blank becertain to enter "0" wherever required.)

Cost Behavior Selling or Product Cost Administrative

Cost Item Variable Fixed Cost Direct Indirect Direct materials used (wood, glass) $ 427,000 $ 0 $ 0 $ 427,000 $ 0 Administrative office salaries 0 115,000 115,000 0 0 Factory supervision 0 70,000 0 0 70,000 Sales commissions 58,000 0 58,000 0 0 Depreciation, factory building 0 109,000 0 0 109,000 Depreciation, admin. officeequipment 0 2,000 2,000 0 0

Indirect materials, factory 16,000 0 0 0 16,000 Factory labor (cutting and assembly) 86,000 0 0 86,000 0 Advertising 0 105,000 105,000 0 0 Insurance, factory 0 7,000 0 0 7,000 Administrative office supplies (billing) 5,000 0 5,000 0 0 Property taxes, factory 0 24,000 0 0 24,000 Utilities, factory 44,000 0 0 0 44,000 Total costs $ 636,000 $ 432,000 $ 285,000 $ 513,000 $ 270,000

2. Compute the average product cost per bookcase. (Round your answer to the nearest dollaramount.)

Average product cost $ 191 per bookcase

3. Due to a recession, assume that production drops to only 2,000 bookcases per year. Would youexpect the average product cost per bookcase to increase, decrease, or remain unchanged?

Increase

Worksheet Learning Objective: 0102 Distinguish between productcosts and period costs and give examples of each.

Learning Objective: 0106 Understand the differencesbetween the direct and indirect costs.

Problem 123A Cost Classification and Cost Behavior[LO2, LO3, LO6]

Learning Objective: 0103 Understand cost behaviorpatterns including variable costs, fixed costs, and mixedcosts.

Problem 123A Cost Classification and Cost Behavior [LO2, LO3, LO6]Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The companyhas a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacityof 4,100 bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass) $ 427,000 Administrative office salaries $ 115,000 Factory supervision $ 70,000 Sales commissions $ 58,000 Depreciation, factory building $ 109,000 Depreciation, administrative office equipment $ 2,000 Indirect materials, factory $ 16,000 Factory labor (cutting and assembly) $ 86,000 Advertising $ 105,000 Insurance, factory $ 7,000 Administrative office supplies (billing) $ 5,000 Property taxes, factory $ 24,000 Utilities, factory $ 44,000

Required:



1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item isclassified in two ways: first, as either variable or fixed with respect to the number of units producedand sold; and second, as either a selling and administrative cost or a product cost. (If the item is aproduct cost, it should also be classified as either direct or indirect.) (Leave no cells blank becertain to enter "0" wherever required.)

Cost Behavior Selling or Product Cost Administrative

Cost Item Variable Fixed Cost Direct Indirect Direct materials used (wood, glass) $ 427,000 $ 0 $ 0 $ 427,000 $ 0 Administrative office salaries 0 115,000 115,000 0 0 Factory supervision 0 70,000 0 0 70,000 Sales commissions 58,000 0 58,000 0 0 Depreciation, factory building 0 109,000 0 0 109,000 Depreciation, admin. officeequipment 0 2,000 2,000 0 0

Indirect materials, factory 16,000 0 0 0 16,000 Factory labor (cutting and assembly) 86,000 0 0 86,000 0 Advertising 0 105,000 105,000 0 0

Insurance, factory 0 7,000 0 0 7,000 Administrative office supplies (billing) 5,000 0 5,000 0 0 Property taxes, factory 0 24,000 0 0 24,000 Utilities, factory 44,000 0 0 0 44,000 Total costs $ 636,000 $ 432,000 $ 285,000 $ 513,000 $ 270,000

2. Compute the average product cost per bookcase. (Round your answer to the nearest dollaramount.)

Average product cost $ 191 per bookcase

3. Due to a recession, assume that production drops to only 2,000 bookcases per year. Would youexpect the average product cost per bookcase to increase, decrease, or remain unchanged?

Increase

Explanation:

2.The average product cost per bookcase will be:

Direct $ 513,000 Indirect 270,000 Total $ 783,000 $783,000 ÷ 4,100 bookcases = $191 per bookcase

3.The average product cost per bookcase would increase if the production drops. This is because the fixedcosts would be spread over fewer units, causing the average cost per unit to rise.




Problem 121A Cost Classification [LO2, LO3, LO6]Listed below are costs found in various organizations. For each cost item, indicate whether it would bevariable or fixed with respect to the number of units produced and sold; and then whether it would be aselling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whetherit would typically be treated as a direct cost or an indirect cost with respect to units of product. Threesample answers are provided for illustration. Manufacturing (Product) Cost Cost Item Variable or Fixed Selling Cost Administrative Cost Direct Indirect

Ex. Direct labor Variable No No Yes No Executive salaries Fixed No Yes No No Factory rent Fixed No No No Yes1. Depreciation, executive jet Fixed No Yes No No2. Costs of shipping finished goods to customers Variable Yes No No No3. Wood used in manufacturing furniture Variable No No Yes No4. Sales manager’s salary Fixed Yes No No No5. Electricity used in manufacturing furniture Variable No No No Yes6. Secretary to the company president Fixed No Yes No No7. Aerosol attachment placed on a spray canproduced by the company Variable No No Yes No

8. Billing costs Variable Yes Yes No No9. Packing supplies for shipping products overseas Variable Yes No No No10. Sand used in manufacturing concrete Variable No No Yes No11. Supervisor’s salary, factory Fixed No No No Yes12. Executive life insurance Fixed No Yes No No13. Sales commissions Variable Yes No No No14. Fringe benefits, assemblyline workers Variable No No Yes Yes15. Advertising costs Fixed Yes No No No16. Property taxes on finished goods warehouses Fixed Yes No No No17. Lubricants for production equipment Variable No No No Yes

Worksheet Learning Objective: 0102 Distinguish between productcosts and period costs and give examples of each.

Learning Objective: 0106 Understand the differencesbetween direct and indirect costs.

Problem 121A Cost Classification [LO2, LO3, LO6]Learning Objective: 0103 Understand cost behaviorpatterns including variable costs, fixed costs, and mixedcosts.

Problem 121A Cost Classification [LO2, LO3, LO6]Listed below are costs found in various organizations. For each cost item, indicate whether it would bevariable or fixed with respect to the number of units produced and sold; and then whether it would be aselling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whetherit would typically be treated as a direct cost or an indirect cost with respect to units of product. Threesample answers are provided for illustration. Manufacturing (Product) Cost Cost Item Variable or Fixed Selling Cost Administrative Cost Direct Indirect

Ex. Direct labor Variable No No Yes No Executive salaries Fixed No Yes No No Factory rent Fixed No No No Yes1. Depreciation, executive jet Fixed No Yes No No2. Costs of shipping finished goods to customers Variable Yes No No No3. Wood used in manufacturing furniture Variable No No Yes No4. Sales manager’s salary Fixed Yes No No No5. Electricity used in manufacturing furniture Variable No No No Yes6. Secretary to the company president Fixed No Yes No No7. Aerosol attachment placed on a spray canproduced by the company Variable No No Yes No

8. Billing costs Variable Yes Yes No No9. Packing supplies for shipping products overseas Variable Yes No No No10. Sand used in manufacturing concrete Variable No No Yes No11. Supervisor’s salary, factory Fixed No No No Yes12. Executive life insurance Fixed No Yes No No13. Sales commissions Variable Yes No No No14. Fringe benefits, assemblyline workers Variable No No Yes Yes15. Advertising costs Fixed Yes No No No16. Property taxes on finished goods warehouses Fixed Yes No No No17. Lubricants for production equipment Variable No No No Yes

Explanation:

Item 8 Billing costs could be either a selling cost or an administrative cost.Item 14 Fringe benefits, assemblyline workers could be either a direct or indirect cost.

mgmt 30b chapter 1 hw answers

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