Introduction To Managerial Accounting Chapter 3 Solutions

711 words - 3 pages

Problem 3-1 (LO2 CC10, 11) (30 minutes)
1. a) Change in cost:
Monthly operating costs at 90% occupancy (high level of activity):
450 beds × 90% = 405 beds;
405 beds × 30 days × $29 per bed-day | $352,350 |
Monthly operating costs at 60% occupancy (low level, given) |  326,700 |
Change in cost | $ 25,650 |

Change in activity: | |
90% occupancy (450 beds × 90% × 30 days) | 12,150 |
60% occupancy (450 beds × 60% × 30 days) |  8,100 |
Change in activity |  4,050 |

| b) | Monthly operating costs at 90% occupancy (above) | $352,350 |
| | Less variable costs
405 beds × 30 days × $6.333 per bed-day |   76,950 |
| | Fixed operating costs per month | ...view middle of the document...

476X.

Problem 3-5 (LO1 CC1, 2, 3, 6) (30 minutes)
1.
a. | 3 | c. | 11 | e. | 4 | g. | 2 | i. | 9 |
b. | 6 | d. | 1 | f. | 10 | h. | 7 | | |

2. Without knowledge of the underlying cost behaviour patterns, it would be difficult if not impossible for a manager to properly analyze the firm’s cost structure. The reason is that all costs don’t behave in the same way. One cost might move in one direction as a result of a particular action, and another cost might move in an opposite direction. Unless the behaviour pattern of each cost is clearly understood, the impact of a firm’s activities on its costs will not be known until after the activity has occurred.

Problem 3-9 (LO2 CC10, 11, 12, 13, 14) (90 minutes)

1. High-low estimate using production units:
Production Overhead
(Units) Costs
Highest (month 8) 105,000 $ 2,056,000
Lowest (month 6) 50,000 $ 1,825,000

Variable cost estimate =
Cost at highest activity - Cost at lowest activity
Highest activity - Lowest activity

= $2,056,000 - $1,825,000
105,000 units - 50,000 units

= $231,000
55,000 units
= $4.20 per unit
...

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