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COST ACCOUNTING 9TH EDITION

Chapter 21

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COST ACCOUNTING 9TH EDITION


CHAPTER 21 EXERCISES
Exercise 21.1 1 Normal Capaciity Fixed Cost Variable cost 75000 225000 10 Units Dollars per Units 67500 225000 675000 900000 60000 225000 600000 825000 75000

Cost at 90 % of Normal Capacity Fixed Cost Variable Cost Total Cost Cost at 80 % of Normal Capacity Fixed Cost Variable Cost Total Cost

Differential Cost between 80% &90 of Capacilty 2 a The differntial Production cost of 5000 Units Fixed Cost 10000 Variable Csot 50000 Total Cost Per Unit total Production cost Fixed Cost Actual 225000 Extended 10000 Total Variable Cost 80000*10 Total Cost of Production Unit Cost of Production(80000) c Per Unit differential Cost of 5000 Units Cost Units Differential Cost

60000

235000 800000 1035000 12.9375

60000 5000 12

Exercise 21.2 Saugus Insecticide Company Income Statement for New Business For the Month Ended---Sales(1.8*5000) Cost to Manufacture Direct Material (.6+.01)*5000 Direct Labour(.5*5000) Factory Over Head Indrect labour(.2*5000) Power(600/30000)*5000 Supplies(.02*5000) Maintenance and Repair(.027*5000) Depreciation(3000/24) 9000 3050 2500 1000 100 100 135 125

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Insurance (.007*5000) 35 Payroll Taxes 210 Total FOH Total Manufacturing Costs Gross Profit Contribution Administrative Expenses Profit Contribution form accepting new business 1705 7255 1745 150 1595

Exercise 21.4 Mininum Selling Price Direct Material Direct Labour Variable Factory over head Shipping expneses Minimum Selling Prince should be greater than or equal to $13 Exercise 21.5 Current Cost of Manufacturing 10000 Units Cost of Purchasing 10000 Units Cost Purchase Fixed Cost Less Saving in Cost Rent of facilities Cost of Purchasing 10000 Units Loss on Purchase

4 5 2 2 13

190000

10000*18

180000 30000 210000

15000 195000 5000

Exercise 21.3 Income statement at 10000 units level Sales 10000*15 Cost of Sales Direct Material Direct Labur Variable FOH Fixed FOH Varialbe Marketing & Admn Exp Fixed Marketing & Admn Exp Total Cost of sales Profit 1 150000 10000*2 10000*3.5 10000*1.5 15000*1 20000 35000 15000 24000 10000 13000 117000 33000

The company should accept the special order because the proposed $9 sale price covers all variable Sale Price Direct material Direct Labour Variable factory overhead Total 9 2 3.5 1.5 7

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COST ACCOUNTING 9TH EDITION


Less Variable Marketing & Admn Expenses Current Special order Profit per unit on special order Total Profit on accepted order 1 0.3 1.3 5000*.7 8.3 0.7 3500

Combined Income statement will be as follows Sales 10000*15 5000*9 150000 45000 195000 15000*2 15000*3.5 15000*1.5 15000*1 30000 52500 22500 24000 15000 13000 1500 158500 36500

Total Sales Cost of Sales Direct Material Direct Labur Variable FOH Fixed FOH Varialbe Marketing & Admn Exp Fixed Marketing & Admn Exp Special order Marketing & Admin Exp Total Cost of sales Profit 2 If Total Plant Capacity is 13000 Units Sales 8000*15 5000*9

120000 45000

Total Sales 165000 Cost of Sales Direct Material 15000*2 30000 Direct Labur 15000*3.5 52500 Variable FOH 15000*1.5 22500 Fixed FOH 24000 Varialbe Marketing & Admn Exp 15000*1 15000 Fixed Marketing & Admn Exp 13000 Special order Marketing & Admin Exp 1500 Total Cost of sales 158500 Profit 6500 So there is loss of profit if the total plant capacity is 13000 units and 5000 units are accepted at 9 per unit

Exercise 21.6 Current Cost of Manufacturing 100000 Direct Material 260*1000 Direct Labour 100*1000 Varialbe FOH 120*1000 Fixed FOH 160*1000 Total Cost Cost of Purchasing 100000 Units Cost Purchase 1000*600 Fixed Cost(160000-90000-50000) Profit on Purchase

260000 100000 120000 160000 640000 600000 20000

620000 20000

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