Chapter 2 – Cost Behavior and Cost Estimation
2-11
Exercise 2-9
$290 $100
700 200
not equal the actual cost.
Exercise 2-10
a. Variable cost =
$10,000 $6,500
1,200 500
= $5 per instrument
2-12
Exercise 2-11
Answer Calculations
$20,000 $10,000
no calculations are needed.
$10,500 $5,500
$16,000 $10,000
no calculations are needed.
Chapter 2 – Cost Behavior and Cost Estimation
2-13
Exercise 2-12
a. Current system = (.03 sales) + $60,000
b.
Current
system
Salary and 5%
commission
12%
commission
Sales revenuea
$1,000,000
$1,120,000
$1,200,000
Cost of goods sold
300,000
336,000
360,000
Gross profit
700,000
784,000
840,000
Compensation expense
90,000b
106,000c
144,000d
Operating income
$610,000
$678,000
$696,000
company.
a.3 Sales revenue
Exercise 2-13
Per Unit
Sales revenue
$50,000
$100
Variable expenses:
Cost of goods sold
$30,000
60
Commissions expense
3,000
6
Shipping expense
1,000
2
Total variable expenses
34,000
68
Contribution margin
16,000
$ 32
Fixed expenses:
Salaries expense
8,000
Advertising expense
6,000
Total fixed expenses
14,000
Operating income
$ 2,000
2-14
Exercise 2-14
a.
b.
c.
d.
Sales revenue
$300,000
$450,000
$280,000
$600,000
Variable expenses
210,000
300,000
96,000
200,000
Contribution margin
90,000
150,000
184,000
400,000
Fixed expenses
75,000
90,000
120,000
180,000
Operating income
15,000
60,000
64,000
220,000
Income taxes
4,500
18,000
16,000
55,000
Net income
$10,500
$42,000
$48,000
$165,000
Exercise 2-15
Per Unit
Sales revenue
$10,000
$5.00
Variable costs:
Cost of goods sold
$3,000
1.50
Operating expenses
1,000a
.50
Total variable expenses
4,000
2.00
Contribution margin
6,000
$3.00
Fixed operating expenses
1,500b
Operating Income
$4,500
Chapter 2 – Cost Behavior and Cost Estimation
2-15
Exercise 2-16
a. Sales price $5.00
Less variable costs:
b.
$3.25
$5.00
= 65%
c.
Unit
Sales revenue
$25,000
$5.00
Variable expenses:
Towel, water, shake
8,750
1.75
Contribution margin
16,250
$3.25
Fixed expenses:
Instructor salaries expense
$3,000
Management salary expense
4,000
Rent expense
1,500
Depreciation expense
1,250
Utilities & insurance expense
1,800
Total fixed expenses
11,550
Operating Income
$ 4,700
2-16
Exercise 2-17
a.
Sales revenue
$50,000
Variable expenses:
Cost of goods sold
$25,575
Selling expense (20%)
1,600a
Administrative expense (60%)
7,200b
Total variable expenses
34,375
Contribution margin
15,625
Fixed expenses:
Selling expense (80%)
6,400c
Administrative expense (40%)
4,800d
Total fixed expenses
11,200
Operating Income
$4,425
Exercise 2-18
a.
$175,000
$35 per unit
= 5,000 phone covers
b.
$99,750
5,000 units
= $19.95 per phone cover
c.
$19.95
$35.00
= 57%
Chapter 2 – Cost Behavior and Cost Estimation
2-17
SOLUTIONS TO PROBLEMS
Problem 2-19
a.
Minutes
Cost per minute
Total Cost
10
$5.00
$50
100
$0.50
$50
250
$0.20
$50
500
$0.10
$50
minute decreases as minutes used increases.
Problem 2-20
a.
be calculated as follows:
$7,600 $3,500
80,000 0
= $0.05125 per copy
b. Variable cost =
$10,000 $6,500
120,000 50,000
= $0.05 per copy
0
2,000
4,000
6,000
8,000
10,000
12,000
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000
Cost
Copies
Chapter 2 – Cost Behavior and Cost Estimation
2-19
Problem 2-21
a. Variable cost =
$77,000 $55,000
7,500 2,500
= $4.40 per labor hour
Fixed cost = $77,000 – ($4.40 × 7,500) = $44,000
b. Total cost = ($4.40 × 2,800) + $44,000 = $56,320
c. Additional overhead = $4.40 × 200 = $880
Problem 2-22
a. Variable cost =
$83,050 $74,525
561,000 390,500
= $0.05 per spike set sold
e. Variable cost =
$83,050 $82,330
561,000 543,000
= $0.04 per spike set sold
Fixed cost = $83,050 – ($0.04 × 561,000) = $60,610
Marketing cost = ($0.04 × sets sold) + $60,610
normal sales volumes and costs.