1/ 15/ 14
Assignment Print View
Score: 50 out of 50 points (100%)
1.
award:
10 out of
10.00 points
Exercise 1-3 Fixed and Variable Cost Behavior [LO3]
Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly
expense of a coffee stand is $2,300 and the variable cost per cup of coffee served is $0.34.
Required:
1. Fill in the following table with your estimates of total costs and average cost per cup of coffee at the
indicated levels of activity for a coffee stand. (Round your answers to nearest dollar amount. Round
the "Average cost per cup of coffee" to 3 decimal places.)
Fixed cost
Variable cost
Cu
Cup
ps of Co
Coff
ffe
ee Se
Serrved
ved in a Wee
Week
1, 40
400
1, 50
500
1, 60
600
$ 2,300
$ 2,300
$ 2,300
476
510
544
Total cost
$ 2,776
$ 2,810
$ 2,844
Average cost per cup of coffee served
$ 1.983
$ 1.873
$ 1.778
2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number
of cups of coffee served in a week increases?
Decreases
Worksheet
Exercise 1-3 Fixed and Variable Cost Behavior [LO3]
Learning Objective: 01-03 Understand cost behavior
patterns including variable costs, fixed costs, and mixed
costs.
Exercise 1-3 Fixed and Variable Cost Behavior [LO3]
Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly
expense of a coffee stand is $2,300 and the variable cost per cup of coffee served is $0.34.
Required:
1. Fill in the following table with your estimates of total costs and average cost per cup of coffee at the
indicated levels of activity for a coffee stand.(Round
stand.(Round your answers to nearest dollar amount. Round
the "Average cost per cup of coffee" to 3 decimal places.)
Cu
Cup
ps of Co
Coff
ffe
ee Se
Serv
rve
ed in a Wee
Week
Fixed cost
Variable cost
$
1,400
2,300
476
$
1, 50
500
2,300
510
$
1, 60
600
2,300
544
Total cost
$
2,776
$
2,810
$
2,844
Ave
Avera
rage
ge cos
costt per
per cup of coffee
coffee se
serve
rved
d
$
1.983
$
1.873
$
1.778
2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number
of cups of coffee served in a week increases?
Decreases
Explanation:
1.
Average cost per cup of coffee served = Total cost ÷ Cups of coffee served in a week
2.
The average cost of a cup of coffee served declines as the number of cups of coffee served increases
because the fixed cost is spread over more cups of coffee.
2.
award:
10 out of
10.00 points
Exercise 1-5 Traditional and Contribution Format Income Statements [LO5]
Redhawk, Inc., is a merchandiser that provided the following information:
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Assignment Print View
Number of units sold
Selling price per unit
Variable selling expense per unit
Va
Vari
riab
able
le admi
admin
nist
istra
rativ
tive
e exp
expense
ense per unit
unit
Total fixed selling expense
Tota
Totall fi
fixe
xed
d admi
min
nis
istr
tra
ati
tive
ve expe
xpense
Mer
Mercha
chand
ndise
ise invento
inventory,
ry, begin
beginnin
ning
g balan
balance
ce
Me
Merch
rchan
andi
dise
se in
inve
vento
ntory,
ry, endi
ending
ng bala
balanc
nce
e
Merchandise purchases
$
$
$
$
$
$
$
$
11,000
16
2
1.5
1.5
18,000
14,00
,000
9,0
9,000
00
26,00
26,000
0
87,000
Required:
1. Prepare a traditional income statement. (Input all amounts as positive values except losses which
should be indicated by a minus sign.)
Redhawk, Inc.
Traditional Income Statement
$ 176,000
70,000
Sales
Cost of goods sold
Gross margin
Se
Sell
llin
ing
ga
an
nd a
ad
dmi
min
nis
istr
tra
ati
tive
ve e
exp
xpe
enses:
ses:
Selling expenses
106,000
40,000
$
30,500
Administrative expense
expenses
s
70,500
$ 35,500
Net operating income
2. Prepare a contribution format income statement. (Input all amounts as positive values except losses
which should
should be indica
indicated
ted by a minus sign.)
Redhawk, Inc.
Contribution Format Income Statement
$ 176,000
Sales
Variable expenses:
Selling expenses
Administrative expense
expenses
s
Cost of goods sold
22,000
16,500
70,000
$
Contribution margin
Fixed expenses:
Selling expenses
Administrative expense
expenses
s
108,500
67,500
18,000
14,000
32,000
$ 35,500
Net operating income
Exercise 1-5 Traditional and Contribution Format Income
Statements [LO5]
Worksheet
Learning Objective: 01-05 Prepare income statements for a
merchandising company using the traditional and
contribution formats.
Exercise 1-5 Traditional and Contribution Format Income Statements [LO5]
Redhawk, Inc., is a merchandiser that provided the following information:
Number of units sold
Selling price per unit
Variable selling expense per unit
$
$
11,000
16
2
Va
Vari
riab
able
le admin
dminist
istra
rativ
tive
e expe
expens
nse
e per
per unit
unit
Total fixed selling expense
Tota
Totall fi
fixe
xed
d admi
min
nis
istr
tra
ati
tive
ve expe
xpense
Mer
Mercha
chand
ndise
ise invento
inventory,
ry, begin
beginnin
ning
g balan
balance
ce
Me
Merch
rchan
andi
dise
se in
inven
vento
tory,
ry, endi
ending
ng bala
balance
nce
Merchandise purchases
$
$
$
$
$
$
1.5
1.5
18,000
14,00
,000
9,0
9,000
00
26,0
26,000
00
87,000
Required:
1. Prepare a traditional income statement. (Input all amounts as positive values except losses which
should be indicated by a minus sign.)
Redhawk, Inc.
Traditional Income Statement
Sales
$
Gross margin
Se
Sell
llin
ing
ga
an
nd a
ad
dmi
min
nis
istr
tra
ati
tive
ve e
exp
xpe
enses:
ses:
Selling expenses
Administrative expenses
176,000
70,000
Cost of goods sold
106,000
$
40,00
30,50
Net operating income
70,500
$
35,500
2. Prepare a contribution format income statement. (Input all amounts as positive values except losses
which should
should be indica
indicated
ted by a minus sign.)
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Assignment Print View
Redhawk, Inc.
Contribution Format Income Statement
Sales
Variable expenses:
Cost of goods sold
$
$
Selling expenses
Administrative expenses
Contribution margin
Fixed expenses:
Selling expenses
Administrative expenses
176,000
70,000
22,000
16,500
108,500
67,500
18,000
14,000
Net operating income
32,000
$
35,500
Explanation:
1.
Sales: ($16 per unit × 11,000 units) = $176,000
Cost of goods sold: ($9,000 + $87,000 – $26,000) = $70,000
Selling expenses: (($2 per unit × 11,000 units) + $18,000) = $40,000
Administrative expenses: (($1.5 per unit × 11,000 units) + $14,000) =$30,500
2.
Cost of goods sold: ($9,000 + $87,000 – $26,000) = $70,000
Selling expenses: ($2 per unit × 11,000 units) = $22,000
Administrative expenses: ($1.5 per unit × 11,000 units) = $16,500
3.
award:
10 out of
10.00 points
Exercise 1-1 Classifying Manufacturing Costs [LO1]
Your Boat, Inc., assembles custom sailboats from components supplied by various manufacturers. The
company is very small and its assembly shop and retail sales store are housed in a Gig Harbor,
Washington, boathouse. Below are listed some of the costs that are incurred at the company.
Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, selling, or an administrative cost. (You may select more than one answer.
Single click the box with the question mark to produce a check mark for a correct answer and
double click the box with the question mark to empty the box for a wrong answer.)
1. The wages of employees who build the sailboats.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
2. The cost of advertising in the local newspapers.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
3. The cost of an aluminum mast installed in a sailboat.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
4. The wages of the assembly shop’s supervisor.
Direct labor cost
Direct materials cost
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Assignment Print View
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
5. Rent on the boathouse.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
6. The wages of the company’s bookkeeper.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
7. Sales commissions paid to the company’s salespeople.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
8. Depreciation on power tools.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
Worksheet
Exercise 1-1 Classifying Manufacturing Costs [LO1]
Learning Objectiv
Objective:
e: 01-01 Identif
Identify
y and give examples of
each of the three basic manufacturing cost categories.
Exercise 1-1 Classifying Manufacturing Costs [LO1]
Your Boat, Inc., assembles custom sailboats from components supplied by various manufacturers. The
company is very small and its assembly shop and retail sales store are housed in a Gig Harbor,
Washington, boathouse. Below are listed some of the costs that are incurred at the company.
Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, selling, or an administrative cost. (You may select more than one answer.
Single click the box with the question mark to produce a check mark for a correct answer and
double click the box with the question mark to empty the box for a wrong answer.)
1. The wages of employees who build the sailboats.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
2. The cost of advertising in the local newspapers.
Direct labor cost
Direct materials cost
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Assignment Print View
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
3. The cost of an aluminum mast installed in a sailboat.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
4. The wages of the assembly shop’s supervisor.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
5. Rent on the boathouse.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
6. The wages of the company’s bookkeeper.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
7. Sales commissions paid to the company’s salespeople.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
8. Depreciation on power tools.
Direct labor cost
Direct materials cost
Manufacturing overhead cost
Marketing and selling cost
Administrative
Administra
tive cost
Explanation:
5. Rent on the boathouse: a combination of manufacturing overhead, administrative, and marketing and
selling cost. The rent would most likely be prorated on the basis of the amount of space occupied by
manufacturing, administrative, and marketing operations.
4.
award:
10 out of
10.00 points
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Assignment Print View
Problem 1-23A Cost Classification and Cost Behavior [LO2, LO3, LO6]
Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company
has a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity
of 4,100 bookcases per year. Annual cost data at full capacity follow:
Dir
Direc
ectt ma
mate
teri
rial
als
s used
used (w
(woo
ood
d and
and gl
gla
ass)
Administrative office salaries
Factory supervision
Sales commissions
Depreciation, factory building
Depre
Deprecia
ciatio
tion,
n, admin
administr
istrat
ative
ive office
office equi
equipm
pmen
entt
Indirect materials, factory
Fac to
tory l a
ab
bor (c ut
ut titi n
ng
g and as se
sembl
mbl y)
y)
Advertising
Insurance, factory
Ad
Admi
min
nis
istr
tra
ati
tive
ve off
ffic
ice
e sup
suppli
lie
es (b
(bil
illi
lin
ng)
$
$
$
$
$
$
$
$
$
$
$
427
427,000
,000
115,000
70,000
58,000
109,000
2,00
2,000
0
16,000
8
86
6, 00
000
105,000
7,000
5,00
,000
Property taxes, factory
Utilities, factory
$ 24,000
$ 44,000
Required:
1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is
classified in two ways: first, as either variable or fixed with respect to the number of units produced
and sold; and second, as either a selling and administrative cost or a product cost. (If the item is a
product cost, it should also be classified as either direct or indirect.) (Leave no cells blank - be
certain to enter "0" wherever required.)
Cost Behavior
Cost Item
Direct materials used (wood, glass)
Administrative office salaries
Factory supervision
Sales commissions
Depreciation, factory building
Depreciation, admin. office
equipment
Indirect materials, factory
Factory labor (cutting and assembly)
Advertising
Insurance, factory
Administrative office supplies (billing)
Property taxes, factory
Utilities, factory
Variable
$ 427,000
0
0
58,000
0
Total costs
Fixed
$0
115,000
70,000
0
109,000
Selling or
Administrative
Cost
$0
115,000
0
58,000
0
Product Cost
Direct
$ 427,000
0
0
0
0
Indirect
$0
0
70,000
0
109,000
0
2,000
2,000
0
0
16,000
86,000
0
0
5,000
0
44,000
0
0
105,000
7,000
0
24,000
0
0
0
105,000
0
5,000
0
0
0
86,000
0
0
0
0
0
16,000
0
0
7,000
0
24,000
44,000
$ 636,000
$ 432,000
$ 285,000
$ 513,000
$ 270,000
2. Compute the average product cost per bookcase. (Round your answer to the nearest dollar
amount.)
Average product cost
$ 191
per bookcase
3. Due to a recession, assume that production drops to only 2,000 bookcases per year. Would you
expect the average product cost per bookcase to increase, decrease, or remain unchanged?
Increase
Worksheet
Learning Objectiv
Objective:
e: 01-02 Distinguish between product
costs and period costs and give examples of each.
Problem 1-23A Cost Classification and Cost Behavior
[LO2, LO3, LO6]
Learning Objective: 01-03 Understand cost behavior
patterns including variable costs, fixed costs, and mixed
costs.
Learning Objective: 01-06 Understand the differences
between the direct and indirect costs.
Problem 1-23A Cost Classification and Cost Behavior [LO2, LO3, LO6]
Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company
has a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity
of 4,100 bookcases per year. Annual cost data at full capacity follow:
Dir
Direc
ectt ma
mate
teri
rial
als
s used
used (w
(woo
ood
d and
and gl
glas
ass)
s)
Administrative office salaries
Factory supervision
Sales commissions
Depreciation, factory building
Depre
Deprecia
ciatio
tion,
n, admin
administr
istrati
ative
ve office
office equi
equipm
pmen
entt
Indirect materials, factory
F ac
ac to
tory l a
ab
bor (c ut
ut titi n
ng
g and as se
sembl y)
y)
Advertising
Insurance, factory
$
$
$
$
$
$
$
$
$
$
427,
427,0
000
115,000
70,000
58,000
109,000
2,000
2,000
16,000
86
86, 00
000
105,000
7,000
Ad
Admi
istr
tive
ffic
su
lie
es (b
(bil
illi
lin
ng)
P
romin
penris
tytra
taati
xve
es,offf
aice
cteorsup
y ppli
Utilities, factory
$ 24
5,,00
,0
00
0
$
00
$ 44,000
Required:
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5.
Assignment Print View
award:
10 out of
10.00 points
Problem 1-21A Cost Classification [LO2, LO3, LO6]
Listed below are costs found in various organizations. For each cost item, indicate whether it would be
variable or fixed with respect to the number of units produced and sold; and then whether it would be a
selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether
it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three
sample answers are provided for illustration.
Cost Item
Ex. Direct labor
Executive salaries
Factory rent
1. Depreciation, executive jet
2. Costs of shipping finished goods to customers
3. Wood used in manufacturing furniture
4. Sales manager’s salary
5. Electricity used in manufacturing furniture
6. Secretary to the company president
7. Aerosol attachment placed on a spray can
produced by the company
8. Billing costs
9. Packing supplies for shipping products overseas
10. Sand used in manufacturing concrete
11. Supervisor’s salary, factory
12. Executive life insurance
13. Sales commissions
14. Fringe benefits, assembly-line workers
15. Advertising costs
16. Property taxes on finished goods warehouses
17. Lubricants for production equipment
Variable or Fixed
Variable
Fixed
Fixed
Fixed
Variable
Variable
Fixed
Variable
Fixed
Variable
Variable
Variable
Variable
Fixed
Fixed
Variable
Variable
Fixed
Fixed
Variable
Selling Cost
No
No
No
No
Yes
No
Yes
No
No
No
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
Worksheet
Learning Objectiv
Objective:
e: 01-02 Distinguish between product
costs and period costs and give examples of each.
Problem 1-21A Cost Classification [LO2, LO3, LO6]
Learning Objective: 01-03 Understand cost behavior
patterns including variable costs, fixed costs, and mixed
costs.
Administrative Cost
No
Yes
No
Yes
No
No
No
No
Yes
No
Yes
No
No
No
Yes
No
No
No
No
No
Manufacturing (Product) C
Direct
Ind
Yes
No
No
No
N
No
N
Yes
N
No
N
No
Ye
No
N
Yes
No
No
Yes
No
No
No
Yes
No
No
No
N
N
N
N
Ye
N
N
Ye
N
N
Ye
Learning Objective: 01-06 Understand the differences
between direct and indirect costs.
Problem 1-21A Cost Classification [LO2, LO3, LO6]
Listed below are costs found in various organizations. For each cost item, indicate whether it would be
variable or fixed with respect to the number of units produced and sold; and then whether it would be a
selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether
it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three
sample answers are provided for illustration.
Cost Item
Ex. Direct labor
Executive salaries
Factory rent
1. Depreciation, executive jet
2. Costs of shipping finished goods to customers
3. Wood used in manufacturing furniture
4. Sales manager’s salary
5. Electricity used in manufacturing furniture
6. Secretary to the company president
7. Aerosol attachment placed on a spray can
produced by the company
8. Billing costs
9. Packing supplies for shipping products overseas
10. Sand used in manufacturing concrete
11. Supervisor’s salary, factory
12. Executive life insurance
13. Sales commissions
14. Fringe benefits, assembly-line workers
15. Advertising costs
16. Property taxes on finished goods warehouses
17. Lubricants for production equipment
Variable or Fixed
Variable
Fixed
Fixed
Fixed
Variable
Variable
Fixed
Variable
Fixed
Selling Cost
No
No
No
No
Yes
No
Yes
No
No
Administrative Cost
No
Yes
No
Yes
No
No
No
No
Yes
Variable
Variable
Variable
Variable
Fixed
Fixed
Variable
Variable
Fixed
Fixed
Variable
No
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
No
No
No
Manufacturing (Product) C
Direct
In
Yes
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
Yes
No
No
No
Explanation:
Item 8 - Billing costs could be either a selling cost or an administrative cost.
Item 14 - Fringe benefits, assembly-line workers could be either a direct or indirect cost.
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