Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 12.17P
Problem 12.17
LO 6
High-low method A department of Alpha Co. incurred the following costs for the month of September. Variable costs, and the variable portion of mixed costs, are a function of the number of units of activity:
| Activity level in units | 5,000 |
| Variable costs | $10,000 |
| Fixed costs | 30,000 |
| Mixed costs | 20.000 |
| Total costs | $60,000 |
During October the activity level was 8,000 units, and the total costs incurred were $70,500.
Required:
- Calculate the variable costs, fixed costs, and mixed costs incurred during October.
- Use the high-low method to calculate the cost formula for mixed cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Exercises 4
Event Company produces a single product with the following
characteristics: price per unit, $30.00; variable material cost per
unit, $9.20; variable labor cost per unit, $4.40; variable overhead
cost per unit, $2.20; and fixed overhead cost per unit, $3.00.
Event Company's manufacturing fixed costs are $5 million, and
selling, general, and administration fixed costs are $1.5 million.
What dollar sales are required for Event Company to earn a
target profit of $600,000?
Exercises 5
The following information pertains to Torasic Company's
budgeted income statement for the month of June:
Sales (1,500 units at $300) $450,000
Variable cost
200,000
250,000
280,000
$(30,000)
Contribution margin
Fixed cost
Net loss
Required
a) Determine the company's breakeven point in both units and
dollars.
b) The sales manager believes that a $25,000 increase in the
monthly advertising expenses will result in a considerable
increase in sales. How much of an increase in sales must
result from…
15# Exercise 6-7 (Algo) Income reporting under
absorption costing and variable costing LO P2
Sims Company began operations on January 1. Its cost
and sales information for this year follow.
Direct materials
Direct labor
Variable overhead
Fixed overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
Units produced
Units sold
Sales price
$ 30
$ 50
$ 20
$8,800,000
$11
$4,250,000
110,000
80,000
$360
per unit
per unit
per unit
per year
per unit
per year
units
units
per unit
1. Prepare an income statement for the year using
variable costing.
2. Prepare an income statement for the year using
absorption costing.
Part 1
The total costs and output volume of Example Ltd for the preceding six months are given in the following table:
Month
Output volume
Total costs
October
85,000
685,000
November
80,000
700,000
December
75,000
715,000
January
65,000
655,000
February
55,000
640,000
March
75,000
730,000
Required:
Use the high-low method to express the cost function for the total monthly costs.
The output volume expected to be produced in April is 60,000 units. Estimate the total cost in April.
Explain whether you will use this cost function to predict the total costs for 82,000 units.
Chapter 12 Solutions
Accounting: What the Numbers Mean
Ch. 12 - Prob. 12.1MECh. 12 - Prob. 12.2MECh. 12 - Prob. 12.3MECh. 12 - Prob. 12.4MECh. 12 - Prob. 12.5MECh. 12 - Prob. 12.6MECh. 12 - Exercise 12.7 LO 3 Cost classifications For each...Ch. 12 - Exercise 12.8 LO 3 Cost classifications For each...Ch. 12 - Prob. 12.9ECh. 12 - Prob. 12.10E
Ch. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Exercise 12.15
LO 8, 9
Special promotion—effects...Ch. 12 - Prob. 12.16ECh. 12 - Problem 12.17 LO 6 High-low method A department of...Ch. 12 - Problem 12.18
LO 6
High-low method—missing amounts...Ch. 12 - Prob. 12.19PCh. 12 - Prob. 12.20PCh. 12 - Prob. 12.21PCh. 12 - Prob. 12.22PCh. 12 - Prob. 12.23PCh. 12 - Prob. 12.24PCh. 12 - Prob. 12.25PCh. 12 - Problem 12.26 LO 8. 9, 10, 11 CYP...Ch. 12 - Prob. 12.27PCh. 12 - Prob. 12.28PCh. 12 - Prob. 12.29CCh. 12 - Prob. 12.30CCh. 12 - Prob. 12.31CCh. 12 - Case 12.32 LO 12 Understanding the effects of...Ch. 12 - Prob. 12.33C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Q # 8 The estimated unit costs for a company operating at a production and sales level of 12,000 units are as follows: Cost Item Estimated Unit Cost (Rs.) Direct materials 32 Direct Labor 20 Variable factory overhead 15 Fixed factory overhead 6 Variable marketing 3 Fixed marketing 4 Required Identify the estimated conversion cost per unit. Identify the estimated prime cost per unit. Determine the estimated total variable cost per unit Compute the total cost that would be incurred during a month with a production level of 12,000 units and a sales level of 8,000 units.arrow_forwardQuestion 9.2 Vision Limited manufactures a product that has the following costs: Per unit Per year Direct materials $6.00 Direct labour 5.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $360,000 Variable SG&A expenses 5.00 Fixed SG&A expenses 120,000 The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year.The company has spent $600,000 on this product and expects a return on investment of 15%.Required:a) Calculate the markup on absorption cost.b) Compute the target selling price of the product using the absorption costing approach.arrow_forwardProblem 8-35 Variable-Costing and Absorption-Costing Income Statements (LO 8-2, 8-3, 8-4, 8-6) Great Outdoze Company manufactures sleeping bags, which sell for $66.30 each. The variable costs of production are as follows: Direct material $ 19.20 Direct labor 10.50 Variable manufacturing overhead 8.10 Budgeted fixed overhead in 20x1 was $140,700 and budgeted production was 21,000 sleeping bags. The year’s actual production was 21,000 units, of which 17,700 were sold. Variable selling and administrative costs were $1.40 per unit sold; fixed selling and administrative costs were $29,000. Required:1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.2-a. Prepare an operating income statement for the year using absorption costing.2-b. Prepare an operating income statement for the year using variable costing.3. Reconcile reported operating income under the two methods using the shortcut method. 1)…arrow_forward
- Problem 15: Variable and Fixed Cost Byron Corporation has three costs: A, which is variable; B which is fixed; and C, which is semi-variable. The company uses the high-low method and extracted the following data from its accounting records: At 360,000 hours of activity, Cost A totaled P5,220,000 At 280,000 hours, the low point during the period, Cost C totaled 2,996,000; at 400,000 hours, the high point, Cost C's fixed portion amounted to P1.75 per hour. At 320,000 hours of activity, the sum of Costs A, B and C amounted to P16,324,000. Required: 1. Compute the variable portion (total) of Cost C at 280,000 hours of activity. 2. Compute Cost C (total) at 320,000 hours of activity. 3. Compute the Cost B (total) at 320,000 hours of activity.arrow_forward4 The Keystone Company has three divisions: A, B, and C. Assume the following data for Division A for March: Sales $1,200,000 Variable expenses $600,000 Traceable fixed costs $120,000 Allocated common fixed costs $60,000 Average operating assets Minimum required return $2,000,000 15% How much is Division A's residual inco me?arrow_forwardActivity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loud-speakers. The factory overhead incurred is as follows: Indirect labor 400,400 Cutting Department 198,800 Finishing Department 114,800 Total 714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Setup 138,600 Number of setup Quality Control 261,800 Number of inspections Total 400,400 The activity-base usage quantities and units produced for the two products follow: Number o Setup Number of Inspections Direct Labor HoursSubassembly Direct Labor HoursFinal Assembly Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis _70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Instructions 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 5420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. 4. Determine the total and per-unit cost assigned to each product under activity-based costing. 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.arrow_forward
- Variable costing income statement and contribution margin analysis for a service company The actual and planned data for Underwater University for the Fall term were as follows: Actual Planned Enrollment 4,500 4,125 Tuition per credit hour 120 135 Credit hours 60,450 43,200 Registration, records, and marketing cost per enrolled student 275 275 Instructional costs per credit hour 64 60 Depreciation on classrooms and equipment 825,600 825,600 Registration, records, and marketing costs vary by the number of enrolled .students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. A. Prepare a variable costing income statement showing the contribution margin and income from operations for the Fall term. B. Prepare a contribution margin analysis report comparing planned with actual performance for the Fall term.arrow_forwardVariable costs and activity bases in decision making The owner of Dawg Prints, a printing company, is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: Each color on the banner must be printed one at a time. Thus, for example, a four-color banner will need to be run through the printing operation four separate times. The total production volume last year was 600 banners, as shown below. The four-color banner is a new product offering for the upcoming year. The owner believes that the expected 600-unit increase in volume from last year means that direct labor expenses should increase by 100% (600 + 600). What do you think?arrow_forward(Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30 minutes per unit. The budgeted conversion costs for the manufacturing cell are 2,700,000 per year. The total labor minutes available are 600,000. During the year, the cell was able to produce 1.5 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). 3. CONCEPTUAL CONNECTION Discuss how this approach to assigning conversion costs can improve delivery time performance.arrow_forward
- Refer to Exercise 8.27. At the end of the year, Meliore, Inc., actually produced 310,000 units of the standard model and 115,000 of the deluxe model. The actual overhead costs incurred were: Required: Prepare a performance report for the period. In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Required: 1. Prepare an overhead budget for the expected activity level for the coming year. 2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products) and a budget for production that is 20 percent lower than expected.arrow_forwardAppendix Absorption costing income statement On June 30, the end of the first month of operations, Tudor Manufacturing Co. prepared the following income statement, based on the variable existing concept: Sales (420,000 units) 7,450,000 Variable cost of goods sold: Variable cost of goods manufactured (500,000 units x 14 per unit) 7,000,000 Less ending inventory (80,000 units x 14 per unit) 1,120,000 Variable cost of goods sold 5,880,000 Manufacturing margin 1,570,000 Variable selling and administrative expenses 80,000 Contribution margin 1,490,000 Fixed costs: Fixed manufacturing costs 160,000 Fixed selling and administrative expenses 75,000 235,000 Income from operations 1,255,000 a. Prepare an absorption costing income statement. b. Reconcile the variable costing income from operations of 1,255,000 with the absorption costing income from operations determined in (a).arrow_forwardHart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and C. The labor-hour requirements, by department, are as follows: During the next production period the labor-hours available are 450 in department A, 350 in department B, and 50 in department C. The profit contributions per unit are 25 for product 1, 28 for product 2, and 30 for product 3. a. Formulate a linear programming model for maximizing total profit contribution. b. Solve the linear program formulated in part (a). How much of each product should be produced, and what is the projected total profit contribution? c. After evaluating the solution obtained in part (b), one of the production supervisors noted that production setup costs had not been taken into account. She noted that setup costs are 400 for product 1, 550 for product 2, and 600 for product 3. If the solution developed in part (b) is to be used, what is the total profit contribution after taking into account the setup costs? d. Management realized that the optimal product mix, taking setup costs into account, might be different from the one recommended in part (b). Formulate a mixed-integer linear program that takes setup costs provided in part (c) into account. Management also stated that we should not consider making more than 175 units of product 1, 150 units of product 2, or 140 units of product 3. e. Solve the mixed-integer linear program formulated in part (d). How much of each product should be produced and what is the projected total profit contribution? Compare this profit contribution to that obtained in part (c).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY