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    Topic 3 Class Exercise Question

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    Muhd Imran
    This document contains instructions for 5 exercises analyzing cost behavior. Exercise 1 asks to classify costs of a company producing a single product as variable, fixed, or mixed based on cost data at different production levels. Exercise 2 asks to analyze the behavior of direct materials and rent costs for a new product and calculate relevant range and variable cost per unit. Exercise 3 asks to use the high-low method to determine fixed and variable maintenance cost components from monthly cost and machine hour data. Exercises 4 and 5 ask to classify listed costs as variable, fixed, or mixed and graph maintenance cost behavior to identify fixed and variable portions.

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    Topic 3 Class Exercise Question

    Uploaded by

    Muhd Imran
    35 views3 pages
    This document contains instructions for 5 exercises analyzing cost behavior. Exercise 1 asks to classify costs of a company producing a single product as variable, fixed, or mixed based on cost data at different production levels. Exercise 2 asks to analyze the behavior of direct materials and rent costs for a new product and calculate relevant range and variable cost per unit. Exercise 3 asks to use the high-low method to determine fixed and variable maintenance cost components from monthly cost and machine hour data. Exercises 4 and 5 ask to classify listed costs as variable, fixed, or mixed and graph maintenance cost behavior to identify fixed and variable portions.

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    This document contains instructions for 5 exercises analyzing cost behavior. Exercise 1 asks to classify costs of a company producing a single product as variable, fixed, or mixed based on cost data at different production levels. Exercise 2 asks to analyze the behavior of direct materials and rent costs for a new product and calculate relevant range and variable cost per unit. Exercise 3 asks to use the high-low method to determine fixed and variable maintenance cost components from monthly cost and machine hour data. Exercises 4 and 5 ask to classify listed costs as variable, fixed, or mixed and graph maintenance cost behavior to identify fixed and variable portions.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    35 views3 pages

    Topic 3 Class Exercise Question

    Uploaded by

    Muhd Imran
    This document contains instructions for 5 exercises analyzing cost behavior. Exercise 1 asks to classify costs of a company producing a single product as variable, fixed, or mixed based on cost data at different production levels. Exercise 2 asks to analyze the behavior of direct materials and rent costs for a new product and calculate relevant range and variable cost per unit. Exercise 3 asks to use the high-low method to determine fixed and variable maintenance cost components from monthly cost and machine hour data. Exercises 4 and 5 ask to classify listed costs as variable, fixed, or mixed and graph maintenance cost behavior to identify fixed and variable portions.

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    BAC1054 – PRINCIPLES OF MANAGEMENT ACCOUNTING

    CLASS EXERCISE
    TOPIC 3: COST BEHAVIOUR ANALYSIS

    1. Turgo Company manufactures a single product. Annual production costs incurred in


    manufacturing process are shown below for two levels of production.

    Costs Incurred
    Productions in 5,000 10,000
    Units
    Production Total Cost Cost/Unit Total Cost Cost/Unit
    costs
    Direct materials RM8,000 RM1.60 RM16,000 RM1.60
    Direct labor 9,500 1.90 19,000 1.90
    Utilities 2,000 0.40 3,500 0.35
    Rent 4,000 0.80 4,000 0.40
    Maintenance 800 0.16 1,100 0.11
    Supervisory 1,000 0.20 1,000 0.10
    salaries

    Instructions
    a) Define the terms variable costs, fixed costs, and mixed costs.
    b) Classify each cost above as either variable, fixed, or mixed.

    2. Shingle Enterprises is considering manufacturing a new product. It projects the cost of


    direct materials and rent for a range of output as shown below.

    Output in Units Rent Expenses Direct Materials


    1,000 RM5,000 RM4,000
    2,000 5,000 7,200
    3,000 8,000 9,000
    4,000 8,000 12,000
    5,000 8,000 15,000
    6,000 8,000 18,000
    7,000 8,000 21,000
    8,000 8,000 24,000
    9,000 10,000 29,300
    10,000 10,000 35,000
    11,000 10,000 44,000

    Instructions
    a) Diagram the behavior each cost for output ranging from 1,000 to 11,000 units.
    b) Determine the relevant range of activity for this product.
    c) Calculate the variable costs per unit within the relevant range.
    d) Indicate the fixed cost within the relevant range.

    PNIR
    BAC1054 – PRINCIPLES OF MANAGEMENT ACCOUNTING
    CLASS EXERCISE
    TOPIC 3: COST BEHAVIOUR ANALYSIS

    3. The controller of Furgee Industries has collected the following monthly expense data
    for use in analyzing the cost behavior of maintenance costs.

    Month Total Maintenance Costs Total Machine Hours


    January RM2,500 300
    February 3,000 350
    March 3,600 500
    April 4,500 690
    May 3,200 400
    June 4,900 700

    Instructions
    a) Determine the fixed- and variable-cost components using the high-low method.
    b) Prepare a graph showing the behavior of maintenance costs, and identify the
    fixed- and variable-cost elements. Use 100-hour increments and RM1,000 cost
    increments.

    4. Family Furniture Corporation incurred the following costs.


    1. Wood used in the production of furniture.
    2. Fuel used in delivery trucks.
    3. Straight-line depreciation on factory building.
    4. Screw used in the production of furniture.
    5. Sales staff salaries.
    6. Sales commissions.
    7. Property taxes.
    8. Insurance on buildings.
    9. Hourly wages of furniture craftsmen.
    10. Salaries of factory supervisors.
    11. Utilities expense.
    12. Telephone bill.

    Instructions
    Identify the costs above as variable, fixed, or mixed.

    PNIR
    BAC1054 – PRINCIPLES OF MANAGEMENT ACCOUNTING
    CLASS EXERCISE
    TOPIC 3: COST BEHAVIOUR ANALYSIS

    5. The controller of Dousmann Industries has collected the following monthly expense
    data for use in analyzing the cost behavior of maintenance costs.

    Month Total Maintenance Costs Total Machine Hours


    January RM2,750 3,500
    February 3,000 4,000
    March 3,600 6,000
    April 4,500 7,900
    May 3,200 5,000
    June 5,000 8,000

    Instructions
    a) Determine the fixed- and variable-cost components using high-low method.
    b) Prepare a graph showing the behavior of maintenance costs, and identify the
    fixed- and variable-cost elements. Use 2,000-hour increments and RM1,000 cost
    increments.

    PNIR

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