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# Managerial Accounting Week 1 Essay

573 words - 3 pages

Chapter 1: Exercise 1-14 Opportunity Costs

Given:

Incremental revenue per day \$2,500
Less incremental costs:
Labor \$700
Parts 500
Transportation 100
Office Staff 200 \$1,500

Net \$1,000

Opportunity Cost is \$1,000 per day.
\$52,000 for 52 days

Rent and depreciation are not included in the calculation of the opportunity cost. This is because these costs are not incremental. Rent and depreciation will be incurred whether or not Ken decides to stay open on Saturday.

Problem 1-2 Incremental Analysis

a.) The variable costs are as follows:

Production 25,000 Jars of Salsa
Ingredient cost \$20,000
Labor cost 12,000
Total \$32,000

So, if total variable cost is 32,000 divide it by 25,000 jars of salsa to get \$1.28 per jar of salsa. Thus, the ...view middle of the document...

Problem 1-4 Performance Reports

a.) \$75,000 / \$700,000 = 0.107 or 10.7%
\$80,000 / \$350,000 = 0.228 or 22.8%
\$ 8,000 / \$ 70,000 = 0.114 or 11.4%

Sales exceeded the budget by 10.7%. The cost of merchandise increased by 22.8% and salaries increased by only 11.4%. Therefore, the investigation should focus on cost of merchandise since a 22.8% increase is incommensurate with the increase in sales.

b.) Electricity is not a controllable cost for the managers of sporting goods. Including it on a performance report for sporting goods would not be useful.

Chapter 2: Exercise 2-9 Recording Labor Cost in Job-Order Costing

a.) Job 201
110 hrs. x \$10/hr. \$1,100
90 hrs. x \$21/hr. 1,890
40 hrs. x \$12/hr. 480
----------
Total \$3,470

Job 202
50 hrs. x \$20/hr. \$1,000

Job 203
70 hrs. x \$18/hr. \$1,260

b.)

Exercise 2-12 Allocating Manufacturing Overhead to Jobs

b.) Cost of Job 253

\$25/DLH x 150 hrs = \$3,750
\$1.60 x \$12/hr x 150 hrs = \$2,880
\$50 x 150 hrs = \$7500
\$1.25 x \$3,000 = \$3,750

Problem 2-1 Cost of Goods Manufactured, Cost of Goods Sold, and Income

a.)

b.)

Problem 2-6 Job Costs Using Different Overhead Rates

a.) Overhead rate based on direct labor cost:

* \$200,000 Ăˇ \$300,000 labor cost = \$0.67 per labor dollar

* Overhead rate based on direct labor hours:
\$200,000 Ăˇ 25,000 hours = \$8.00 per labor hour

* Overhead rate based on machine hours:
\$200,000 Ăˇ 8,000 machine hours = \$25 per machine

b.)

c.) I would say that the allocation based on machine hours is reasonable given that depreciation on equipment accounts for 75% of applied overhead costs. But it should be kept in mind that the applied overhead portion of the job cost is not an incremental cost.

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