293) A number of costs and measures of activity are listed below.
Cost Description
Possible Measure of Activity
1.
Cost of vaccine used at a clinic
Vaccines administered
2.
Building rent at a taco shop
Dollar sales
3.
Salary of production manager at a snowboard manufacturer
Snowboards produced
4.
Cost of electricity for production equipment at a snowboard manufacturer
Snowboards produced
5.
Ferry captain's salary on a regularly scheduled passenger ferry
Number of passengers
6.
Cost of glue used in furniture production
Units produced
7.
Janitorial wages at a snowboard manufacturer
Snowboards produced
8.
Depreciation on factory building at a snowboard manufacturer
Snowboards produced
9.
Cost of advertising at a snowboard company
Snowboards sold
10.
Cost of shipping bags of fertilizer to a customer at a chemical plant
Bags shipped
Required:
For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.
Answer:
1. Cost of vaccine used at a clinic; Vaccines administered; Variable
2. Building rent at a taco shop; Dollar sales; Fixed
3. Salary of production manager at a snowboard manufacturer; Snowboards produced; Fixed
4. Cost of electricity for production equipment at a snowboard manufacturer; Snowboards produced; Variable
5. Ferry captain's salary on a regularly scheduled passenger ferry; Number of passengers; Fixed
6. Cost of glue used in furniture production; Units produced; Variable
7. Janitorial wages at a snowboard manufacturer; Snowboards produced; Fixed
8. Depreciation on factory building at a snowboard manufacturer; Snowboards produced; Fixed
9. Cost of advertising at a snowboard company; Snowboards sold; Fixed
10. Cost of shipping bags of fertilizer to a customer at a chemical plant; Bags shipped; Variable
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
294) Morrisroe Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$6.65
Direct labor
$3.30
Variable manufacturing overhead
$1.70
Fixed manufacturing overhead
$10,000
Sales commissions
$1.00
Variable administrative expense
$0.50
Fixed selling and administrative expense
$5,000
Required:
a. If the selling price is $25.90 per unit, what is the contribution margin per unit sold?
b. What incremental manufacturing cost will the company incur if it increases production from 5,000 to 5,001 units?
Answer:
a.
Selling price per unit
$25.90
Direct materials
$6.65
Direct labor
3.30
Variable manufacturing overhead
1.70
Sales commissions
1.00
Variable administrative expense
0.50
Variable cost per unit sold
13.15
Contribution margin per unit
$12.75
b.
Direct materials
$6.65
Direct labor
3.30
Variable manufacturing overhead
1.70
Incremental manufacturing cost
$11.65
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior; Cost Classifications for Decision Making; Using Different Cost Classifications for Different Purposes
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.