Textbook Notes (368,796)
Canada (162,165)
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ACCTG424 (4)
Chapter 5

Chapter 5 In Class questions_solutions_only.pdf

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Trish Stringer

In Class #5.1 Cost Hierarchy Classifications Requirem1ent Requirement 2 Classification Cost Drivers a Designing new products Product-sustaining Engineering hours b Setting up machines Batch # of setups c Quality inspection Unit or Batch* # of units inspected d Moving materials Batch # of parts e Receiving raw materials Batch # of orders f Performinegguaraintenance Pr oduct or Facility** Machine-hours g Updating inventory software Facility level Programmer hours * If all units are inspected this would be a unit-le vel activity. If products are sampled, this would likely be a batch-level activity. **If the production equipment services one pro duct line, it would be product sustaining. If the equipment is general purpose, thenit would be facility sustaining. In Class #5.2 Special order, activity-based costing Required 1 Should Medal Plus accept this special order? Explain briefly. Medal Plus’s operating income under the alternes of accepting/rejecting the special order are: One- With Without Time-Only One-Time- Special Special Only Difference Order Order 9,000 Units 11,500 Units Sales $1,800,000 $2,220,000 $420,000 Variable costs: Directaterials 360,000 460,000 1 100,000 Directanufacturgbour 405,000 517,500 2 112,500 Batmhanufacturi ng costs 126,000 143,5003 17,500 Fixed costs: Fixmdanufacturcosts 325,000 325,000 Fixed marketing costs 224,000 224,000 Total costs 1,440,000 1,670,000 Operating income $ 360,000 $ 550,000 1 Unit cost of direct materials = $360,000/9,000 = $40 per medal $40  11,500 = $460,000 2Unit cost of direct labour= $405,000/9,000= $45 per medal $45  11,500 = $517,500 3Batch costs $126,000 + (25 * $700) Alternatively, we could calculatethe incremental revenue andthe incremental costs of the additional 2,500 units as follows: Incremental revenue $168 2,500 Incremental direct material costs 2,500 × $40 Incremental direct manufacturingbour costs 2,500× $45 Incremental batch manufacturingcosts $700 × 25 = Total incremental costs Total incremental operating income from accepting the special order Medal
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