Chaper 2 Cost
Chaper 2 Cost
Chaper 2 Cost
1. In what way does a typical manufacturing business differ from merchandising concern? In what
ways are they similar?
- A manufacturing company produces goods from raw materials, which is later sold as a finished
product. While a merchandising company resells goods that it purchases from its suppliers.
5. Does prime cost plus conversion cost equal to the total manufacturing cost?
-No, the total manufacturing cost is equal to prime cost plus factory overhead.
6. In what way does the accounting treatment of factory overhead differ from that of direct materials
and direct labor costs?
-It is because factory overhead is untraceable in the finished goods that’s why it is harder to
determine and is more complex to compute than that of direct labor and direct labor costs.
7. Explain why the fixed cost per unit declines as volume increases. Give an example.
Fixed costs per unit decreases because the same total fixed cost is spread over more units. The more
the units produce the less the fixed per unit will be. For example total fixed cost is 50,000 from 100
units to 1000 units produced. If the company produces 100 units of product fixed cost per unit will be
500. But if the company produces 1000 units the fixed cost per unit will be 50.
9. How would you classify the monthly bill (plan) for Smart/Globe cellphone?
- Fixed overhead cost
10. Consider education as a product. What are the direct costs and the indirect costs to a university in
educating student?
-Direct costs would be the tuition fees and miscellaneous while indirect costs would be the
departmental fees, donations, fares and other small expenses.
Problem 1
1. A
2. C
3. A
4. B
5. C
6. C
7. A
8. C
9. C
10. C
Problem 2
1. Fixed
2. Variable
3. Fixed
4. Fixed
5. Fixed
6. Fixed
7. Mixed
8. Variable
9. Variable
10. Fixed
Problem 3
1. M
2. S
3. M
4. M
5. A
Problem 4
1. F , P
2. F , I
3. F , I
4. V , I
5. V , I
6. V , P
7. V , I
8. F , I
9. F , P
10. F , I
Problem 5
1. P102,000 (50,000 + 52,000)
2. P147,000 *(52,000 + 95,000)
3. P197,000 (52,000 + 95,000 + 50,000)
4. P21,200 (2,600 + 18,600)
5. P6,800 [(50x4,500)-(197,000+21,200)]
Problem 6
1. P530,000 (285,000 + 145,000)
2. P575,000 (245,000 + 175,000 + 155,000)
3. P860,000 (285,000 + 245,000 + 175,000 + 155,000)
4. P305,000 (160,000 + 145,000)
Problem 7
1. 99 (9 + 30 + 60)
2. 105 (6 + 9 + 30 + 60)
3. 124 [(30,000/1200) + 9 + 30 +60]
4. 150 [(24,000/1200) + (30,000/1200) + 6 + 9 + 30 + 60]
Problem 8
1. The variable cost per machine hour - 7 [(60,000-39,000)/(6,000-3,000)]
2. The monthly fixed electricity costs – 18,000 [60,000 - (6,000 x 7)]
3. The total electricity costs if 4,800 machine hours are projected to be used next month – 51,600
Problem 9
1. Compute the variable rate per machine hour. –> 7.8
2. Compute the fixed portion of Johnson’s electricity expense. –> 4,400
3. Compute the total manufacturing costs if Johnson’s actual machine hours used is 4,500. –> 50,000
Problem 10
1. 23.08 variable, 628 fixed
2.
3. 22.49 variable, 708 fixed
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