Konza Company has collected the following cost and production data from their manufacturing operations over the past eight months.

(a) Using the high-low method ;

i. Estimate the fixed production costs,

ii. Estimate the variable production cost per unit,

(b) Establish a cost estimating function for the total production costs.

(c) Estimate the total cost of production for a period when the units produced equal;

(i) 6,500 units,

(ii) 9,250 units

Exercise 7-29 Departmental Cost Allocation [LO 7-3]

Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service department’s efforts (in percentages) to the other departments is:

The direct operating costs of the departments (including both variable and fixed costs) are:

Required:

1. Determine the total cost of P1 and P2 using the direct method.

2. Determine the total cost of P1 and P2 using the step method.

3. Determine the total cost of P1 and P2 using the reciprocal method.

Automatic Data Processing has a beta of 2.67 and the expected market return is 0.16. If Treasury bills are currently yielding 0.03 percent, find the cost of capital for Automatic Data Processing (round your answers).

none of the answers is correct

39.9%

27.5%

37.7%

34.1%

Calculate WACC given the following information (BT means before tax).

none of the answers is correct

17.53%

9.86%

20.10%

19.72%

Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $530,900 224,000 February 591,900 250,000 March 418,300 162,000 April 567,500 242,000 May 476,000 195,000 June 610,200 263,000 Determine the variable cost per gross-ton mile and the total fixed cost. Variable cost (Round to two decimal places.) $ per gross-ton mile Total fixed cost $

The table below has the costs for a specific period:

Required:

1. What is the total period cost?
2. What is the total direct product cost?
3. What is the total indirect product cost?
4. From the cost items listed in the table above, list one indirect product cost which varies with the level of output.
5. Under variable costing, what is the average unit product cost for the specific period? Consider that during this specific period 1,000 units of only one type of product were manufactured.
6. Under absorption costing, what is the average unit product cost for the specific period? Consider that during this specific period 1,000 units of only one type of product were manufactured.
7. What is the underlying difference and implication between variable and absorption costing product per unit?   

The following information provides the amount of cost incurred in August for the cost items indicated. During August, 8,100 units of the firm's single product were manufactured.

Required:

a. How much cost would you expect to be incurred for each of these items during September when 9,200 units of the product are planned for production? (Do not round intermediate calculations.)

Raw Materials =
Factory depreciation expense =
Direct labor =
Production Supervisor's Salary=
Computer rental expense =
Maintenance supplies used=
Total cost=

b-1. Calculate the average total cost per unit for the 8,100 units manufactored in August. (Do not round intermediate calculations. Rount your answer to 2 decimal places.) Average cost per unit =

b-2. It is meaningful to use the average total cost figure in part b-1 to predict the cost in subsequent months. True or False?

1. Assume the following cost data for XYZ industries, a firm that participates in a perfectly competitive market.  Use this data to answer the following questions.

1. Fill in the Total Cost and Marginal Cost data above.

2. If price is $56 then what level of output would maximize profit?  What would profit be?

3. If price is $41 then what level of output would maximize profit?  What would profit be?

4. If price is $32 then what level of output would maximize profit?  What would profit be?

5. Fill in the following information, and assume XYZ industries is the typical firm in the market:

Suppose that the production function is given by: ? = ?(?, ?) = ?(?)^1/3(?)^1/3

where ? > 0 is total factor productivity, ? indicates the amount of capital employed and ? the amount of labor employed. Wages are ? and the rental cost of capital is ?. Suppose that in the short run capital is fixed, i.e., ? = ?bar. Moreover, the firm must pay ??bar regardless of the production level

a) Solve the cost minimization problem. That is, determine the amount of capital and labor that THE firm employs in the short run. Hint: Capital is trivial because it is fixed.

b) Compute the short run cost function. Also indicate variable and a fixed cost, and compute average variable cost, marginal cost and average total cost.

c) Suppose that the price of ? is ?. Compute the level of output that maximizes the profits of the firm. Also compute the corresponding level of ?.

d)Explain how the supply curve of the firm is affected by the following variables: the wage rate ??, the rental cost of capital ?, the fixed capital ?bar, and total factor productivity ?. Hint: You only need to check if the quantity supplied at each price (that is, the supply curve) increases or decreases with each variable.

1. Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.

a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

The business maintains a perpetual inventory system, costing by the last-in, first-out method.

Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

The business maintains a perpetual inventory system, costing by the last-in, first-out method.

Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

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