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Solutions Manual, Chapter 1 11
The Foundational 15 (continued)
14. Direct materials per unit ………………………. $6.00
Direct labor per unit ……………………………. 3.50
Direct manufacturin
g
cost per unit …………. $9.50
15. Direct materials per unit ……………………….
$6.00
Direct labor per unit ……………………………. 3.50
g
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12 Managerial Accounting, 16th edition
Exercise 1-1 (15 minutes)
Cost Cost Object
Direct
Cost
Indirect
Cost
1.
he wa
es of pediatric
nurses
T
he pediatric
department X
2. Prescription dru
g
s
A
particular patient X
3. Heatin
g
the hospital
T
he pediatric
department X
T
A
A
A
A
T
T
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Solutions Manual, Chapter 1 13
Exercise 1-2 (10 minutes)
1. The cost of a hard drive installed in a computer: direct materials.
2. The cost of advertising in the
Puget Sound Computer User
newspaper:
selling.
3. The wages of employees who assemble computers from components:
direct labor.
8. Rent on the facility in the industrial park: a combination of
manufacturing overhead, selling, and administrative. The rent would
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14 Managerial Accounting, 16th edition
Exercise 1-3 (15 minutes)
Product
Cost
Period
Cost
1. Depreciation on salespersons’ cars …………………… X
2. Rent on equipment used in the factory ……………… X
3. Lubricants used for machine maintenance………….. X
4. Salaries of personnel who work in the finished
goods warehouse ………………………………………. X
5. Soap and paper towels used by factory workers at
the end of a shift ……………………………………….. X
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Solutions Manual, Chapter 1 15
Exercise 1-4 (15 minutes)
1.
Cups of Coffee Served
in a Week
2,00
0
2,10
0
2,20
0
Fixed cost …………………………. $1,200 $1,200 $1,200
Variable cost ……………………… 440 462 484
2. The average cost of a cup of coffee decreases as the number of cups of
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16 Managerial Accounting, 16th edition
Exercise 1-5 (15 minutes)
Item
Differential
Cost
Sunk
Cost
Opportunity
Cost
1. Cost of the old X-ray machine …. X
2.
T
he salary of the head of the
Radiology Department ………….
3.
T
he salary of the head of the
Laboratory Department ………..
4. Cost of the new color laser
printer …………………………….. X
Note: The costs of the salaries of the head of the Radiology Department
and Laboratory Department and the rent on the space occupied by
Radiology are neither differential costs, nor opportunity costs, nor sunk
T
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Solutions Manual, Chapter 1 17
Exercise 1-6 (15 minutes)
1. Traditional income statement
Cherokee Inc.
Traditional Income Statement
Sales ($30 per unit × 20,000 units) ………………. $600,000
Cost of
g
oods sold
($24,000 + $180,000 – $44,000) ……………….. 160,000
Gross mar
g
in …………………………………………… 440,000
A
2. Contribution format income statement
Cherokee Inc.
Contribution Format Income Statement
Sales ($30 per unit × 20,000 units) ………………. $600,000
V
ariable expenses:
Cost of
g
oods sold
($24,000 + $180,000 – $44,000) …………….. $160,000
A
A
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18 Managerial Accounting, 16th edition
Exercise 1-7 (20 minutes)
1a. The total direct manufacturing cost incurred is computed as follows:
Direct materials per unit ………………………. $7.00
Direct labor per unit ……………………………. 4.00
T
1b. The total indirect manufacturing cost incurred is computed as follows:
V
ariable manufacturin
g
overhead per unit… $1.50
Fixed manufacturin
g
overhead per unit……. 5.00
T
2a. The total manufacturing cost that is directly traceable to the
Manufacturing Department is computed as follows:
Direct materials per unit ………………………. $7.00
Direct labor per unit ……………………………. 4.00
V
g
T
T
2b. None of the manufacturing costs should be treated as indirect costs
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Solutions Manual, Chapter 1 19
Exercise 1-7 (continued)
3a. The first step in calculating the total direct selling expense is to
determine the fixed portion of the sales representatives’ compensation
as follows:
Fixed sellin
g
expense per unit (a)…………… $3.50
Number of units sold (b) ……………………… 20,000
T
otal fixed sellin
g
expense (a) × (b) ……….. $70,000
T
g
A
T
The second step is to calculate the total direct selling expense that is
traceable to individual sales representatives as follows:
Sales commissions per unit (a)………………. $1.00
T
T
3b. The total indirect selling expense that cannot be traced to individual
4. No. Kubin’s administrative expenses could be direct or indirect
depending on the cost object. For example, the chief financial officer’s
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20 Managerial Accounting, 16th edition
Exercise 1-8 (20 minutes)
1. Direct materials ………………………………….. $ 7.00
Direct labor ……………………………………….. 4.00
V
ariable manufacturin
g
overhead ……………. 1.50
V
ariable manufacturin
g
cost per unit ……….. $12.50
A
T
T
2. Sales commissions ………………………………. $1.00
V
ariable administrative expense ……………… 0.50
V
ariable sellin
g
and administrative per unit .. $1.50
V
ariable sellin
g
and admin. per unit (a) ……. $1.50
Number of units sold (b) ………………………. 20,000
T
otal variable sellin
g
and admin. expense
A
T
T
V
g
T