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ACC349 WEEK 4 BE5-1 BE5-4 BE6-6 BE6-8

Price: $3.50


BE5-1 Monthly production costs in Ogden Company for two levels of production are
as follows.

Cost 2,000 Units 4,000 Units
 Indirect labor   10,000  20,000
 Supervisory salaries   5,000  5,000
 Maintenance   2,500  4,000

Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.

BE5-4 Spitz Company accumulates the following data concerning a mixed cost, using
miles as the activity level.

  Miles Driven Total Cost   Miles Driven Total Cost
 January  8,000  $14,100 March  8,500  $15,000
 February  7,500  $13,500 April  8,200  $14,400

Compute the variable and fixed cost elements using the high-low method.

BE6-6 Each day, Dunham Corporation processes 1 ton of a secret raw material into
two resulting products, AB1 and XY1. When it processes 1 ton of the raw material the
company incurs joint processing costs of $60,000. It allocates $25,000 of these costs to
AB1 and $35,000 of these costs to XY1. The resulting AB1 can be sold for $90,000. Alternatively,
it can be processed further to make AB2 at an additional processing cost of
$50,000, and sold for $150,000. Each day’s batch of XY1 can be sold for $90,000. Alternatively,
it can be processed further to create XY2, at an additional processing cost of
$50,000, and sold for $130,000. Discuss what products Dunham Corporation should make.

BE6-8 Bitterman, Inc., manufactures golf clubs in three models. For the year, the Big
Bart line has a net loss of $5,000 from sales $200,000, variable costs $175,000, and fixed
costs $30,000. If the Big Bart line is eliminated, $15,000 of fixed costs will remain. Prepare
an analysis showing whether the Big Bart line should be eliminated.

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