Professional Documents
Culture Documents
Full Download Managerial Accounting Decision Making and Motivating Performance 1st Edition Datar Solutions Manual
Full Download Managerial Accounting Decision Making and Motivating Performance 1st Edition Datar Solutions Manual
https://testbankfan.com/download/managerial-accounting-decision-making-and-motiv
ating-performance-1st-edition-datar-solutions-manual/
CHAPTER 2
AN INTRODUCTION TO COST TERMS AND PURPOSES
2-1 A cost object is anything for which a separate measurement of costs is desired.
Examples include a product, a service, a project, a customer, a brand category, an activity,
and a department.
2-2 Managers believe that direct costs that are traced to a particular cost object are more
accurately assigned to that cost object than are indirect allocated costs. When costs are
allocated, managers are less certain whether the cost allocation base accurately measures the
resources demanded by a cost object. Managers prefer to use more accurate costs in their
decisions.
2-4 A variable cost changes in total in proportion to changes in the related level of total
activity or volume. An example is a sales commission that is a percentage of each sales
revenue dollar.
A fixed cost remains unchanged in total for a given time period, despite wide changes
in the related level of total activity or volume. An example is the leasing cost of a machine
that is unchanged for a given time period (such as a year) regardless of the number of units of
product produced on the machine.
2-5 A cost driver is a variable, such as the level of activity or volume, that causally
affects total costs over a given time span. A change in the cost driver results in a change in
the level of total costs. For example, the number of vehicles assembled is a driver of the costs
of steering wheels on a motor-vehicle assembly line.
2-6 The relevant range is the band of normal activity level or volume in which there is a
specific relationship between the level of activity or volume and the cost in question. Costs
are described as variable or fixed with respect to a particular relevant range.
2-7 A unit cost is computed by dividing some amount of total costs (the numerator) by
the related number of units (the denominator). In many cases, the numerator will include a
fixed cost that will not change despite changes in the denominator. It is erroneous in those
cases to multiply the unit cost by activity or volume change to predict changes in total costs
at different activity or volume levels.
2-8 Inventoriable costs are all costs of a product that are considered as assets in the
balance sheet when they are incurred and that become cost of goods sold when the product is
sold. These costs are included in work-in-process and finished goods inventory (they are
“inventoried”) to accumulate the costs of creating these assets.
Period costs are all costs in the income statement other than cost of goods sold. These
costs are treated as expenses of the accounting period in which they are incurred because
they are expected not to benefit future periods (because there is not sufficient evidence to
2-9 A product cost is the sum of the costs assigned to a product for a specific purpose.
Purposes for computing a product cost include
pricing and product mix decisions,
contracting with government agencies, and
preparing financial statements for external reporting under generally accepted
accounting principles.
2-10 The main issue between variable costing and absorption costing is the proper timing
of the release of fixed manufacturing costs as costs of the period:
a. at the time of incurrence, or
b. at the time the finished units to which the fixed overhead relates are sold.
Variable costing uses (a) and absorption costing uses (b).
1.
(in millions)
Supreme Deluxe Regular Total
Direct material cost $ 88.00 $ 53.00 $64.00 $205.00
Direct manuf. labor costs 11.00 20.00 19.00 50.00
Manufacturing overhead costs 41.00 88.00 61.00 190.00
Total manuf. costs 140.00 161.00 144.00 445.00
Fixed costs allocated at a rate
of $25M $50M (direct mfg.
labor) equal to $0.50 per
dir. manuf. labor dollar
(0.50 $11; 20; 19) 5.50 10.00 9.50 25.00
Variable manufacturing costs $134.50 $151.00 $134.50 $420.00
Units produced (millions) 50 100 80
Cost per unit (Total manuf.
costs ÷ units produced) $2.80 $1.61 $1.80
Variable manuf. cost per unit
(Variable manuf. costs
Units produced) $2.69 $1.51 $1.68
(in millions)
Supreme Deluxe Regular Total
2. Based on total manuf. cost
per unit ($2.80 90;
$1.61 140; $1.80 160) $252.00 $225.40 $288.00 $765.40
Correct total manuf. costs based
on variable manuf. costs plus
fixed costs equal
Variable costs ($2.69 90; $242.10 $211.40 $268.80 $722.30
$1.51 140; $1.68 160)
Fixed costs 25.00
1. Yeast—direct, variable
Flour—direct, variable
Packaging materials—direct (or could be indirect if small and not traced to each unit),
variable
Depreciation on ovens—indirect, fixed (unless “units of output” depreciation, which then
would be variable)
Depreciation on mixing machines—indirect, fixed (unless “units of output” depreciation,
which then would be variable)
Rent on factory building—indirect, fixed
Fire Insurance on factory building—indirect, fixed
Factory utilities—indirect, probably some variable and some fixed (e.g. electricity may be
variable but heating costs may be fixed)
Finishing department hourly laborers—direct, variable (or fixed if the laborers are under a
union contract)
Mixing department manager—indirect, fixed
Materials handlers—depends on how they are paid. If paid hourly and not under union
contract, then indirect, variable. If salaried or under union contract then indirect,
fixed
Custodian in factory —indirect, fixed
Night guard in factory—indirect, fixed
Machinist (running the mixing machine)—depends on how they are paid. If paid hourly
and not under union contract, then indirect, variable. If salaried or under union
contract then indirect, fixed
Machine maintenance personnel—indirect, probably fixed, if salaried, but may be variable
if paid only for time worked and maintenance increases with increased production
Maintenance supplies—indirect, variable
Cleaning supplies—indirect, most likely fixed since the custodians probably do the same
amount of cleaning every night
2. If the cost object is Mixing Department, then anything directly associated with the Mixing
Department will be a direct cost. This will include:
Depreciation on mixing machines
Mixing Department manager
Materials handlers (of the Mixing Department)
Machinist (running the mixing machines)
Machine Maintenance personnel (of the Mixing Department)
Maintenance supplies (if separately identified for the Mixing Department)
Another random document with
no related content on Scribd:
we shall reach the Pole. We don’t need any more to get there, but if
necessary we can spend fourteen days on the homeward trip.”
These words we repeat to each other over and over again, and
comfort ourselves with the knowledge of the excellence of the
machines and their crews, and the recollection that they warned us
that in bad weather they might only return after an absence of
fourteen days. Yet it seems strange that they should be so long away
when, so far as we can judge, the weather has been favorable.
When Amundsen made his rush to the South Pole he could only stay
to make observations for three days, as he had to trek back again
and food allowance was limited. In this case, however, he can return
to his base in eight, ten, or twelve hours so why should he jeopardize
the benefit to the world’s scientific knowledge by leaving his point of
observation before necessity demanded? If they have found land up
there, they will wish to make maps—to photograph it—to measure it
—a week will soon go by. But—but—but—this little word comes up
every time we try to find a reason for the delay—and yet it is absurd
to give up hope so soon.
This evening a council of war has been held on board the
“Fram.” An announcement has arrived from the Norwegian
Luftseiladsforeningen that they are planning a reconnoitering
expedition. Two naval hydroplanes are to be sent north to help in the
patroling of the ice borders. Captain Hagerup, First Lieutenant
Horgen, Shipper Johansen, and First Mate Astrup Holm are to send
word at once if such machines will be of any use. To give an answer
of this kind is difficult, for the ice this year lies with a broad belt of
drifting ice screwing in shoals in front of the solid ice border. Thus
the hydroplanes could not negotiate this obstacle to any great
distance. Should they themselves have to make a forced landing any
distance from the open sea, both they and their crews would be lost.
On the other hand, they would be able to fly over the entire area of
the fairway north of Spitzbergen in a few hours, a distance which it
would take several days for ships to cruise over, and thus they would
make the patroling much more effective. Our answer was based on
this latter consideration.
To-day it is eight days since they started, and we enter a new
phase in our waiting time. Until to-day none of us have gone far
away from the ships. The American journalist, James B. Wharton,
who is with us, the film photographer, Paul Berge, and I had not set
our feet out of the ship. We have always waited in the expectation of
seeing the machines at any moment appear from behind
Amsterdamöen. We have lain fully clad on our mattresses, ready to
set the wireless working broadcasting the news. Berge’s film camera
has stood on its three legs on the bridge ready to turn out hundreds
of yards of film. We have always kept a boat ready at “Fram’s” side
so that we could row across to the flying machines the moment they
landed, and every night before we went to rest we instructed the
watchman on deck that he must waken us the first moment he heard
anything. But this evening as the telegraph station from the coast
asked if they should keep open all night with extra supervision, I had
answered that it was no longer necessary. As these words were
broadcast from the little wireless compartment, it seemed as though
we had sent a telegram to a waiting world that showed them that
even we had begun to doubt. The same doubt is felt now by almost
every one on the two boats. The possibility of seeing them come
flying back is gradually diminishing. We still believe, but to-morrow
our confidence will be less. We feel that on the 9th day from the start
we shall give up hope. To-day it is decided that to-morrow “Fram”
shall go down to Ny-Aalesund, partly for coaling reasons, partly to
take away those members of the expedition who wish to take
advantage of the opportunity to go down to Advent Bay, whence a
coal steamer can carry them to Norway. When we shall see our
comrades carried southwards while we are left behind, we shall
enter into an anxious period of waiting which will seem unending.