CHAPTER 5: COST THEORY Overview of Huxley Maquiladora Huxley Manufacturing Company‚ a large firm in the defense industry‚ is considering a strategic move to shift production from its California plant to Mexico. Tariff reductions made possible by the North American Free Trade Agreement (NAFTA) opened up the potential to enjoy significant cost savings by shifting production south of the Mexican border. Huxley is considering three options. The simplest option is to negotiate a subcontracting
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data‚ what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production? What was the actual per unit cost of production and shipping? Total budgeted costs (both variable and fixed) = 512‚800 + 26‚000 = $772‚800 Total budgeted units = 18‚000 Total expected cost per unit = 772‚800 / 18‚000 = $42.93 Total actual costs (both variable an fixed) = 432‚000 + 261‚200 = $693
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production. B12 B18 ------ ------ Machine hours required per unit 2.5 3.0 Standard cost per unit: Direct material $ 2.25 $ 3.75 Direct labor 4.00 4.50 Manufacturing overhead: Variable (See Note 1) 2.00 2.25 Fixed (See Note 2) 3.75 4.50 ------ ------
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$20 per 10 gallon bottle and the company currently sells 2‚000 bottles per day. Following is a summary of the company’s income and costs on a daily basis. Sales Revenue $40‚000 Incremental Variable Costs $16‚000 Nonincremental Fixed Costs $20‚000 Note: You can assume that variable costs are constant so that the average of them is the variable cost relevant for a change in sales. One can calculate the change in sales volume necessary for the price change to be profitable by using
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separates fixed costs from proportional costs in relation to the output quantity of the objects. In particular‚ Marginal Costing is a comprehensive and sophisticated method of planning and monitoring costs based on resource drivers. Selecting the resource drivers and separating the costs into fixed and proportional components ensures that cost fluctuations caused by changes in operating levels‚ as defined by marginal analysis‚ are accurately predicted as changes in authorized costs and incorporated
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Calculate the variable costs per order received at a trade show and the variable costs per order received through a sales rep? For each order received at a trade show‚ the variable cost can be determined as follow: Manufacturing cost for necklace | $8.05 | | Number of necklaces | 25 | | | Sub-total | $201.25 | Manufacturing cost for a pair of earring | $5.50 | | Number of pairs of earrings | 12 | | | Sub-total | $66.00 | Shipping cost | | $15 | | Total variable cost | $282
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addition‚ the cost of goods sold rate is 70% and the desired inventory level is 30% of next month’s cost of sales. Prepare a purchases budget for July through September. (TCO 1) Merriamn Company provides the following ABC costing information: (TCO 2) A master budget (TCO 2) Dalyrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $80‚000. The budgeted number of nozzles to be inserted is 40‚000. What is the budgeted indirect cost allocation
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REVIEW QUESTIONS CHP 2‚3 CHAPTER 2 True/False ____ 1. The cost management information system is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives. ____ 2. Cost assignment is one of the key processes of the cost accounting system. ____ 3. The three methods of cost assignment are direct tracing‚ driver tracing‚ and allocation. ____ 4. Intangible products are goods produced by converting raw material into finished products
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process is to determine and evaluate possible courses of action. 2. In making decisions‚ management ordinarily considers both financial and nonfinancial information. 3. In incremental analysis‚ total variable costs will always change under alternative courses of action‚ and total fixed costs will always remain constant. 4. Accountants are mainly involved in developing nonfinancial information for management ’s consideration in choosing among alternatives. 5. Decision-making involves choosing
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and fixtures are the only variable cost with respect to revenue hours. All other costs are fixed with respect to revenue hours. With higher fixed cost‚ Salem Data Services has a higher leverage and is therefore riskier. 2. ($7‚896 + $1‚546) / 329 hours = $28.70 / hour. For every hour spent working‚ the company spends 28.70 dollars. 3. Intracompany Commercial Total Number of Hours (a): 205 138 343 Revenue (a x b): $82‚000 $110‚400 $192‚400 Variable Costs (a x c): ($5‚883.50) ($3
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