# Managerial Accounting - 71171

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Discussion Question 1_01

Instructions

Chapters 2 and 3 introduce you to basic cost behavior, cost-volume relationships, and ways to measure cost behavior. Based on these readings, perform the following. (25 points) (A 1½-page response is required.)

1. Complete a solution set for Fundamental Assignment Material - Exercise 2-A1, "Cost-Volume-Profits and Vending Machines" (p. 66). Be sure to show or explain how you arrive at each answer.
2. Complete the Cognitive Exercises 3-25, 3-26, 3-27, and 3-28 (p. 113).

3-25 Mixed Costs And The Sales Force

Wysocki Company Pays Its Sales Force A Fixed Salary Plus A 5 Commission On All Sales Explain Why Sales Force Costs Would Be Considered A Mixed Cost

3-26 Committed and Discretionary fixed costs in manufacturing

Among the fixed cost of Howarth company are depreciation and research and development (R&D).  Using these two costs as examples, explain the difference between committed and discretionary fixed costs.

3-27 Cost Functions and Decision Making

Why is it important that decision makers in corporation know the cost function for producing the companies’ products?

3-28 Statistical Analysis and Cost Functions

What advantages does using regression analysis have over the visual-fit method for determining costs functions?

Discussion Question 1_02

Instructions

Chapter 3 presents more basic cost accounting concepts and applications. Based upon the readings from Chapter 3, answer the following. (25 points) (A 1-page response is required.)

1. Complete a solution set for Fundamental Assignment Material Exercise 3-A1, "Types of Cost Behavior" only (p. 110).
2. Complete a solution set for Fundamental Assignment Material Exercise 3-A3, "Division of Mixed Costs into Variable and Fixed Components” (p. 111). Be sure to show how you arrive at all numerical figures and provide justification or rationale for your recommendations.

3-A1 - Types of Cost Behavior

Identify the following planned costs as (a) purely variable costs, (b) discretionary fixed costs, (c) committed fixed costs, (d) mixed costs, or (e) step costs. For purely variable costs and mixed costs, indicate the most likely cost driver.

1. Total repairs and maintenance of a university classroom building.

2. Sales commissions based on revenue dollars. Payments to be made to advertising salespersons employed by radio station WCCO, Minneapolis.

3. Jet fuel costs of Southwest Airlines.

4. Total costs of renting trucks by the city of Nashville. Charge is a lump sum of \$300 per month plus \$.20 per mile.

5. Straight-line depreciation on desks in the office of an attorney.

6. Advertising costs, a lump sum, planned by ABC, Inc.

7. Rental payment by the Internal Revenue Service on a five-year lease for office space in a private office building.

8. Advertising allowance granted to wholesalers by 7-up Bottling on a per-case basis.

9 Compensation of lawyers employed internally by Microsoft.

10. Crew supervisor in Lands' End Inc mail-order house. A new supervisor is added for every 12 workers employed.

11. Public relations employee compensation to be paid by Microsoft.

Discussion Question 2_04

Instructions

Chapter 4 covers the direct and indirect product costs in the manufacturing sector. A key concept is the relationship between product and period costs, as illustrated in Exhibit 4-3 (p. 137). Focus also on the presentation of inventory on the income statement of a manufacturer, as shown in Exhibit 4-4 (p. 139).

Chapter 4 also introduces the concepts and application underlying activity-based costing (ABC), including activity analysis, resources, cost pools, and cost drivers. Chapter 4 prepares you to complete Case 4-49 (pp. 173-174). This case requires you to list the activities, resources, and cost drivers and to analyze cost behavior for a manufacturing company. (25 points) (A 1-page response is required.)

Cases 4-49 IDENTIFYING ACTIVITIES, RESOURCES, AND COST DRIVERS IN MANUFACTURING.

Extrusion Plastics is a multinational, diversified organization. One of its manufacturing divisions,Northeast Plastics Division, has become less profitable due to increased competition. The division produces three major lines of plastic products within its single plant. Product Line A is high-volume, simple pieces produced in large batches. Product Line B is medium-volume, more complex pieces. Product Line C is low-volume, small-order, highly complex pieces.

Currently, the division allocates indirect manufacturing costs based on

direct labour. The vp manufacturing is uncomfortable using the traditional cost

figures. He thinks the company is under-pricing the more complex products. He

decides to conduct an activity-based costing analysis of the business.

Interviews were conducted with the key managers in order to identify

activities, resources, cost drivers, and their interrelationships.

Interviewee: production manager

Q1: What activities are carried out in your area?

A1: All products are manufactured using three similar, complex, and expensive molding

machines. Each molding machine can be used in the production of the three product

lines. Each setup takes about the same time irrespective of the product.

Q2: Who works in your area?

A2: Last year, we employed thirty machine operators, two maintenance mechanics, and

two supervisors.

Q3: How are the operators used in the molding process?

A3: It requires nine operators to support a machine during the actual production process.

Q4: What do the maintenance mechanics do?

A4: Their primary function is to perform machine setups. However, they were also

required to provide machine maintenance during the molding process.

Q5: Where do the supervisors spend their time?

A5: They provide supervision for the machine operators and the maintenance mechanics.

For the most part, the supervisors appear to spend the same amount of time with each

of the employees that they supervise.

Q6: What other resources are used to support manufacturing?

A6: The molding machines use energy during the molding process and during the setups.

We put meters on the molding machines to get a better understanding of their energy

consumption. We discovered that for each hour that a machine ran, it used 6.3 kilowatts

of energy. The machines also require consumable shop suppliers (e.g., lubricants,

hoses, etc.). We have found a direct correlation between the amount of suppliers

used and the actual processing time.

Q7: How is the building used, and what costs are associated with it?

A7: We have a 100,000-square-metre building. The total rent and insurance costs for theyear were \$675,000. These costs are allocated to production, sales, and administration

based on square metres.

Required

1. Identified the activities, resources, and cost drivers for the division.

2. For each resource identified in requirement 1, indicate its cost behaviour with

respect to the activities it supports (assume a planning period of 1 month).

Discussion Question 2_05

Instructions

Complete Problem 4-42 Activity-Based Costing and Activity-Based Management, Automotive Supplier (pp. 168-170). (25 points) (A 1-page response is required.)

Discussion Question 3_07

Job Costing at Dell Computer

Job Costing at Dell Computer

Paper instructions:

Job Costing at Dell Computer

Instructions

Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question. Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information. Your Discussion Question responses should be both grammatically and mechanically correct and formatted in the same fashion as the questions themselves. In addition, you must appropriately cite all resources used in your responses and document them in a bibliography using APA style.

The Enriquez Machine Parts Company Case in Chapter 13 (pp. 530-539) illustrates the use of a job-order costing system. Review the sources documents, the flow of costs (Exhibit 13-2, p. 531), the analysis of transactions, and the accounting for factory overhead, including budgeted overhead application rates and the disposition of under- and over-applied overhead for an understanding of a job-order costing system.

The Assignment

Complete Problem 13-37 listed below on the job-costing system at Dell Computer. Supplement the requirements for this problem by visiting Dell Computer’s Web site (www.dellcomputers.com) for additional information about this company’s products and cost management system to help you respond to the questions. In addition, answer the question “What is a “job” at Dell Computer?” (25 points) (A 1½-page response is required.)

Problem 13-37 Job Costing at Dell Computer

Dell Computer Corporation’s manufacturing process at its Austin, Texas facility consists of assembly, functional testing, and quality control of the company’s computer systems. The company’s build-to-order manufacturing process is designed to allow the company to quickly produce customized computer systems. For example, the company contracts with various suppliers to manufacture reconfigured base Latitude notebook computers and then Dell customizes these systems for shipment to customers. Quality control is maintained through the testing of components, parts, and sub-assemblies at various stages in the manufacturing process.

The Required Assignment:

Describe how Dell might set up a job-costing system to determine the costs of its computers. What is a “job” to Dell? How might the costs of components, assembly, testing, and quality control be allocated to each “job”?

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