Student Name:
Class:
A B C D
75.00$ 75.00$ 75.00$ 75.00$ 75.00$
150.00 150.00 150.00 150.00 150.00
45.00 45.00 45.00 45.00 45.00
Per device cost basis
Administrative (fixed)
Marketing (variable)
Indirect costs (fixed)
A. Only the differential production costs could be considered as the cost basis.
B. The total cost per device for normal production of 60,000 devices could be used as the
cost basis.
C. The total cost per device for production of 66,000 devices, excluding marketing costs,
could be used as the cost basis.
Supplies (variable)
IMPERIAL DEVICES
McGraw-Hill/Irwin
Instructor
Costs
(One Unit = One Device)
Unit Cost Options
D. The total cost per device for production of 66,000 devices, including marketing costs,
could be used as the cost basis.
Problem 01-39
Labor (variable)
Materials (variable)
Leave cells blank if costs are not to be included. Where necessary, round to the nearest cent.
Enter data to compute the following options:
66,000
60,000
Total Cost per
Cost Device
4,500,000$ 75$
9,000,000 150
2,700,000 45
2,700,000 45
1,800,000 30
5,400,000 90
26,100,000$ 435$
State Government cost per unit calculation:
Materials
Labor
Supplies and other costs that will vary with production
Per unit selling price expected by State Government
Selling price percentage above cost
Per unit selling price expected on contract
Amount invoiced for 500 units
Given P01-39:
IMPERIAL DEVICES
A B C
200$ 200$ 200$ 200$
96 96 96 96
Cost plus 15%
Per unit cost
Fixed costs
Other variable costs
Direct Labor (variable)
Costs
Unit Cost Options
Production Costs
Direct Materials (variable)
Problem 01-41
T-COMM
Enter data in the shaded cells to compute the following options:
A. Use the full per unit cost for normal production of 2,400 units.
B. Use only differential costs as the cost basis.
C. Use differential costs plus a share of fixed costs, based on actual production
volume (with North’s order) of 3,000 units.
Leave cells blank if costs are not to be included.
3,000
2,400
Total Cost per
Cost Unit
480,000$ 200$
Size of North’s order (in units)
Selling price percentage above cost
North Division’s Order:
Fixed costs (do not vary with output)
Other costs varying with output
Direct labor
Given P01-41:
Cost to Produce 2400 units:
T-COMM
Annual production planned before North Division‘s order (units)
South Division’s annual production capacity (units)
Materials
Status Quo: Alternative:
No Express With Express
Service Service Difference
(1) (2) (3)
152,000$ 202,000$ 50,000$
60,000 67,500 7,500
48,000 72,000 24,000
8,000 12,000 4,000
Total Costs
Manager’s salary
Other costs
Rent
Correct! Correct! Correct!
Costs:
Sales revenue
Labor
Vehicle leases
Utilities
Problem 01-42
CAMPUS PACKAGE DELIVERY
Income Statement
50,000$
7,500$
50%
20%
152,000$
60,000
48,000
8,000
Rent
Other costs
Manager’s salary
Total costs
CAMPUS PACKAGE DELIVERY
Given P01-42:
Annual Income Statement before Expansion
Vehicle leases
Sales revenue
Costs
Labor
Utilities
Without
The Differential
Contract Costs
504,000$ 90,000$
239,400 85,000
35,280 1,764
30,240
22,680 2,268
147,000
15,960 2,394
Total Costs
Correct! Correct!
Requirement b: If the contract pays $90,000 should it be accepted?
Other factors would include (1) whether this will enable the company to get into
a new, profitable line of business; (2) what other opportunities the company
has for expanding; and (3) whether the contract will provide for more revenues
in the future. In short, the company must consider the long run as well as the
first year’s results.
Costs
Sales revenue
B-YOU
Problem 01-44
Equipment lease
before making this decision?
Requirement c: What considerations, other than costs, are necessary
Officers‘ salaries
Supplies
Rent
Requirement a:
Other costs
Labor
90,000$
85,000$
5%
10%
15%
504,000$
239,400
35,280
Officers‘ salaries
Other costs
Total costs
Rent
Supplies
Given P01-44:
B-YOU
Annual Income Statement
Labor
Sales revenue
Costs
Equipment lease