Lesson 13
Managerial Accounting I,Concepts and Principles
Exercise
1,Sunny Brockman has developed a new device that is so exciting he is considering quitting his job in order to produce and market it on a large-scale basis,Sunny will rent a garage for $1000 per month for production purposes,Utilities will cost $200 per month,Sunny has already taken an industrial design course at the local community college to help prepare for this venture,The course cost $1000,Sunny will rent production equipment at a monthly cost of $4000,He estimates the material cost per unit will be $25,and the labour cost will be $15,He will hire workers and spend his time promoting the product,To do this,he will quit his job,which pays $10000 per month,Advertising and promotion will cost $3000 per month.
Required,Complete the chart below by placing an "(" under each heading that helps to identify the cost involved,You can place an,(” under more than one heading for a single cost,for example,a cost may be a sunk cost,an overhead cost,and a product cost; you would place an "(" under each of these headings opposite the cost.
Opportu-
nity cost
Sunk
cost
Variable
cost
Fixed
cost
Manu-
facturing
overhead
Product
cost
Selling-
cost
Garage rent
Utilities
Cost of the industrial design course
Equipment rented
Material cost
Labour cost
Present salary
Advertising
2,The following information summarizes the XYZ company's cost structure:
Variable cost per unit
$2.60
Fixed cost per unit
$9.00
Total cost per unit
$11.60
Units produced and sold
96000
Assume that all of the activity levels mentioned in this problem are within the relevant range
Required,Prepare a schedule showing predictions for the following items at the 30,000 unit level of activity:
Total variable cost.
Total fixed cost.
Variable cost per unit.
Fixed cost per unit.
Managerial Accounting I,Concepts and Principles
Exercise
1,Sunny Brockman has developed a new device that is so exciting he is considering quitting his job in order to produce and market it on a large-scale basis,Sunny will rent a garage for $1000 per month for production purposes,Utilities will cost $200 per month,Sunny has already taken an industrial design course at the local community college to help prepare for this venture,The course cost $1000,Sunny will rent production equipment at a monthly cost of $4000,He estimates the material cost per unit will be $25,and the labour cost will be $15,He will hire workers and spend his time promoting the product,To do this,he will quit his job,which pays $10000 per month,Advertising and promotion will cost $3000 per month.
Required,Complete the chart below by placing an "(" under each heading that helps to identify the cost involved,You can place an,(” under more than one heading for a single cost,for example,a cost may be a sunk cost,an overhead cost,and a product cost; you would place an "(" under each of these headings opposite the cost.
Opportu-
nity cost
Sunk
cost
Variable
cost
Fixed
cost
Manu-
facturing
overhead
Product
cost
Selling-
cost
Garage rent
Utilities
Cost of the industrial design course
Equipment rented
Material cost
Labour cost
Present salary
Advertising
2,The following information summarizes the XYZ company's cost structure:
Variable cost per unit
$2.60
Fixed cost per unit
$9.00
Total cost per unit
$11.60
Units produced and sold
96000
Assume that all of the activity levels mentioned in this problem are within the relevant range
Required,Prepare a schedule showing predictions for the following items at the 30,000 unit level of activity:
Total variable cost.
Total fixed cost.
Variable cost per unit.
Fixed cost per unit.
