HOMEWORK Case Studies Managerial Accounting
Managerial Accounting
10th of March
Anhar Hardjakusumah
Understanding Cost Concepts
Cost Terminology
Product (Manufacturing over(head+ direct labor and materials) and Period Cost (selling + administrative)
Variable and Fixed Cost
Direct and Indirect Cost
Controlable and uncontrollable cost
Differential (the difference between the cost of two alternative decisions) Marginal (the change in the total cost that arises when the quantity produced has an increment by unit. That is, it is the cost of producing one more unit of a good.) average cost
Relevant Cost
Opportunity Cost
Sunk Cost
Out of Pocket Cost (Cost requiring cash disbursements in the current accounting period. Thus, depreciation is not an out-of-pocket cost because it does not require spending of cash)
Requirement: 900 gallons
Perishable
Inventory 1300 gallons
Average price $9.50 for inventory
Current price for endor $11.00
If accepted need to replace 900 gallons for an expected $11.50 (uncontrollable cost)
a. What is the real cost of endor it it is produced?
Option A: use inventory so: (900x 9.50) $8550 + (900 x 11.50) $10,350 = $18,900 ( if the special order is made and are using the inventory)
Option B: don’t use the inventory use the current price so: (900x 11) $9900 + (900x 9.50) $8550 = $18450
Option B is better. To use the current price and still make the order with a differential cost of 450 (18900-18450)
b. What is the real cost of tatooine to be used in the special order?
requirement: 1400 kg of tatooine inventory of 1900 kg
Receive an offer for $28,000 (has to be all 1900)
Paid $40,000 for the 1900 kg of tatooine (sunk cost)
Todays market $22,00/ kg
Need to get rid of its entire supply
$2000 for 500 kg of disposal
Determining the price:
Paid 40,000 so 40,000/1900 = $21.05/ kg
Offer of 28,000 so 28,000/1900 = $14.7/kg
Option A: If they sell and purchase with current price:
(40,000- 28,000) 12,000 + (22 x 1400) 30,800 = $42,800
Option B: use from inventory and
10th of March
Anhar Hardjakusumah
Understanding Cost Concepts
Cost Terminology
Product (Manufacturing over(head+ direct labor and materials) and Period Cost (selling + administrative)
Variable and Fixed Cost
Direct and Indirect Cost
Controlable and uncontrollable cost
Differential (the difference between the cost of two alternative decisions) Marginal (the change in the total cost that arises when the quantity produced has an increment by unit. That is, it is the cost of producing one more unit of a good.) average cost
Relevant Cost
Opportunity Cost
Sunk Cost
Out of Pocket Cost (Cost requiring cash disbursements in the current accounting period. Thus, depreciation is not an out-of-pocket cost because it does not require spending of cash)
Requirement: 900 gallons
Perishable
Inventory 1300 gallons
Average price $9.50 for inventory
Current price for endor $11.00
If accepted need to replace 900 gallons for an expected $11.50 (uncontrollable cost)
a. What is the real cost of endor it it is produced?
Option A: use inventory so: (900x 9.50) $8550 + (900 x 11.50) $10,350 = $18,900 ( if the special order is made and are using the inventory)
Option B: don’t use the inventory use the current price so: (900x 11) $9900 + (900x 9.50) $8550 = $18450
Option B is better. To use the current price and still make the order with a differential cost of 450 (18900-18450)
b. What is the real cost of tatooine to be used in the special order?
requirement: 1400 kg of tatooine inventory of 1900 kg
Receive an offer for $28,000 (has to be all 1900)
Paid $40,000 for the 1900 kg of tatooine (sunk cost)
Todays market $22,00/ kg
Need to get rid of its entire supply
$2000 for 500 kg of disposal
Determining the price:
Paid 40,000 so 40,000/1900 = $21.05/ kg
Offer of 28,000 so 28,000/1900 = $14.7/kg
Option A: If they sell and purchase with current price:
(40,000- 28,000) 12,000 + (22 x 1400) 30,800 = $42,800
Option B: use from inventory and