Chapter03 Solutions Hansen Mowen Cost Behavior Sixth Edition

8/10/2019 Chapter03 Solutions Hansen Mowen Cost Behavior Sixth Edition

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CHAPTER 3COST BEHAVIOR

QUESTIONS FOR WRITING AND DISCUSSION

1. Knowledge of cost behavior allows amanager to assess changes in costs thatresult from changes in activity. This allows amanager to assess the effects of choicesthat change activity. For example, if excesscapacity exists, bids that minimally covervariable costs may be totally appropriate.Knowing what costs are variable and whatcosts are fixed can help a manager makebetter bids.

2. The longer the time period, the more likelythat a cost will be variable. The short run isa period of time for which at least one costis fixed. In the long run, all costs arevariable.

3. Resource spending is the cost of acuiringthe capacity to perform an activity, whereasresource usage is the amount of activityactually used. It is possible to use less of theactivity than what is supplied. !nly the costof the activity actually used should beassigned to products.

4. Flexible resources are those acuired fromoutside sources and do not involve anylong"term commitment for any givenamount of resource. Thus, the cost of theseresources increases as the demand for themincreases, and they are variable costs#varying in proportion to the associatedactivity driver$.

5. %ommitted resources are acuired by theuse of either explicit or implicit contracts toobtain a given uantity of resources,regardless of whether the uantity ofresources available is fully used or not. Formultiperiod commitments, the cost of theseresources essentially corresponds to

committed fixed expenses. !ther resourcesacuired in advance are short term innature, and they essentially correspond todiscretionary fixed expenses.

6. & variable cost increases in direct proportionto changes in activity usage. & '"unitincrease in activity usage produces anincrease in cost. & step"variable cost,however, increases only as activity usage

changes in small blocks or chunks. &nincrease in cost reuires an increase inseveral units of activity. (hen a step"variable cost changes over relatively narrowranges of activity, it may be moreconvenient to treat it as a variable cost.

7. )ixed costs are usually reported in total inthe accounting records. The amount of thecost that is fixed and the amount that isvariable are unknown and must beestimated.

8. & scattergraph allows a visual portrayal ofthe relationship between cost and activity. Itreveals to the investigator whether arelationship may exist and, if so, whether alinear function can be used to approximatethe relationship.

9. *ince the scatterplot method is notrestricted to the high and low points, it ispossible to select two points that betterrepresent the relationship between activityand costs, producing a better estimate offixed and variable costs.

10. &ssuming that a scattergraph reveals that alinear cost function is suitable, then themethod of least suares selects a line thatbest fits the data points. The method alsoprovides a measure of goodness of fit sothat the strength of the relationship betweencost and activity can be assessed.

11. The best"fitting line is the one that is+closest to the data points. This is usuallymea" sured by the line that has the smallestsum of suared deviations. -o, the best"fitting line may not explain much of the totalcost variability. There must be a strong

relationship as well.

12. If the variation in cost is not well explainedby activity usage #coefficient of determination is low$ as measured by asingle driver, then other explanatoryvariables may be needed in order to build agood cost formula.

13. The learning curve describes a situation inwhich the labor hours worked per unit

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decrease as the volume producedincreases. The rate of learning isdetermined empirically. In other words,managers use their knowledge of previoussimilar situations to estimate a likely rate oflearning.

14. If the mixed costs are immaterial, then themethod of decomposition is unimportant.Furthermore, sometimes managerial

udgment may be more useful for assigningcosts than the use of formal statisticalmethodology.

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EERCISES

3!1

A"#$%$#& C'(# B)*+%$', D,$%),

+. -+"*$$/ V+,$+) -+"*$) *',(. A(()$/ V+,$+) U$#( ,'")". S)$/ /''( F$) U$#( ('. S)$/ /''( V+,$+) U$#( ('). -'%$/ /''( V+,$+) N), ' '%)(. S#',$/ /''( F$) S+,) ))#/. -'%$/ +#),$+( F$) N), ' '%)(*. ,+&$/ +#$)#( V+,$+) N), ' ,+&($. T,+(',#$/ "$)#( -$) -$)( ,$%)

:. R)+$,$/ #))#* V+,$+) N), ' $$/(;. S)##$/ )$)# -$) N), ' ()#(. F$$/ "+$( V+,$+) N), ' "+$(. -+$#+$$/ )$)# -$) -+$#)+") *',(. S)$/ ,'"#( V+,$+) N), ' "$,"+,('. P,"*+($/ /''( -$) N), ' ',),(

3!2

1. D,$%), ', '%),*)+ +"#$%$#&< N), ' ()+;),(

2. T'#+ '%),*)+ "'(# = >350?000 @ >2.2070?000 = >504?000

3. T'#+ $) '%),*)+ "'(# = >350?000

4. T'#+ %+,$+) '%),*)+ "'(# = >2.2070?000 = >154?000

5. U$# "'(# = >504?00070?000 = >7.20 ), $#

6. U$# $) "'(# = >350?00070?000 = >5.00 ), $#

7. U$# %+,$+) "'(# = >2.20 ), $#

8. +. + . 50?000 U$#( 100?000 U$#(

U$# "'(#+ >9.20 >5.70

U$# $) "'(# 7.00 3.50

U$# %+,$+) "'(#" 2.20 2.20

+>350?000 @ >2.2050?00050?000 >350?000 @ >2.20100?000100?000.>350?00050?000 >350?000100?000." G$%) $ "'(# ',+.

3!2 C'")

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T*) $# "'(# $",)+()( $ #*) $,(# "+() + )",)+()( $ #*) ()"'. T*$( $()"+() $) "'(#( +,) (,)+ '%), )), $#( $ #*) $,(# "+() + '%),',) $#( $ #*) ()"'. T*) $# %+,$+) "'(# (#+&( "'(#+#.

3!31. +. G,+* ' )$)# ),)"$+#$'592?5005 = >118?500T'#+ (++,$)( ', #)"*$"$+( = 5 K >15?000 = >75?000

T'#+ ,'")(($/ ,+#) = >16?500 @ >118?500 @ >75?000 @ >400?000100?000= >6.10 ), ,'

V+,$+) +"#$%$#& ,+#) = >400?000100?000 = >4.00 ), ,'

F$) +"#$%$#& ,+#) = >16?500 @ >118?500 @ >75?000100?000= >210?000100?000

= >2.10 ), ,'

3. A"#$%$#& +%+$+$$#& = A"#$%$#& (+/) @ U() +"#$%$#&F$ "++"$#& +%+$+) = F$ "++"$#& () @ U() $ "++"$#&

100?000 ,'( = 96?000 ,'( @ 4?000 ,'(

3!4 C'")

4. C'(# ' +"#$%$#& ($) = C'(# ' +"#$%$#& () @ C'(# ' () +"#$%$#&C'(# ' +"#$%$#& ($) = C'(# ' 96?000 ,'( @ C'(# ' 4?000 ,'(

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R+ -+#),$+( + P'),

010,000

20,00

0

30,000

/40,000

0 '0,000

10,000

50,000

20,000

F))# '#$/

C

'(

#

*eries

'


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>210?000 @ >4 K 96?000 = >6.10 K 96?000 @ >2.10 K 4?000>594?000 = >585?600 @ >8?400

Note: T*) ++&($( $( ,)(#,$"#) #' ,)(',")( +"$,) $ +%+") '(+/). O& #*$( #&) ' ,)(',") $ )%), *+%) +& () "++"$#&. I

#*$( "+()? #*) "++"$#& #' ,'")(( 100?000 ,'( ' $ +( +"$,)+"$$#$)(? )')? + )$)## '& 96?000 ,'( ),) +"#+&,'")(().

3!5

1. +. G,+* ' $,)"# +', "'(#90?000 $ #*) 1?001 #' 1?500 ,+/). I,'"#$' $",)+()( & 400 $#( )# &)+,? #*) "'+& $ )) #' *$,)') +$#$'+ $,)"# +',), #*) ,'"#$' ,+/) $ ) )#)) 1?501 +2?000? $",)+($/ $,)"# +', "'(# & >30?000. T*$( $",)+() $ +"#$%$#& $,)$,) #*) *$,$/ ' ') ) +"*$$(#. S),%$($' "'(#( $ $",)+() &>45?000? +( + ) (),%$(', $ )) #' ) *$,).

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3!61.

L)(? #*),) +)+,( #' ) + $)+, ,)+#$'(*$.

2. J'< 700? >2?628H$/*< 3?100? >6?564

V= Y2! Y1X2!X1= >6?564 ! >2?6283?100 ! 700= >3?9362?400= >1.64 ), %$($#

F= >6?564 ! >1.643?100= >1?480

OR

F= >2?628 ! >1.64700= >1?480

Y= >1?480 @ >1.64X

3. Y= >1?480 @ >1.641?900= >1?480 @ >3?116= >4?596

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S"+##),/,+* ', T+$/ S),%$")(

0

',000

1,000

5,000

2,000

6,000

3,000

/7,000

0 ',00

0

1,00

0

5,00

0

2,00

0 N), ' #+$/ %$($#(

C'(

#


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3!71. R)/,)(($' '## ,' (,)+(*))# ,'/,+9?320 @ >5.14X1@ >2.06X2 @ >1.30X3

*),) Y = T'#+ "'(# ' ',), $$/

X1 = N), ' ',),(

X2 = N), ' "') ',),(

X3 = N), ' /$#,+) $#)(

2. Y= >9?320 @ >5.14300 @ >2.0665@ >1.30100= >11?126

3. T*) t%+) ', + 99M "'$)") $#),%+ + )/,))( ' ,))' ' 20 $(2.845 ()) E*$$# 310.

N'#) #*+# )/,))( ' ,))' $( 20 = 24 '(),%+#$'( ! 4 +,+)#),(

Y tS)>11?126 2.845>150>11?126 427 ,') #' )+,)(# *') ),>10?699 Y >11?553

4. I #*$( )+#$'? #*) $)))# %+,$+)( )+$ 92M ' #*) %+,$+$$#& $',), $$/ "'(#(. O%),+? #*) )+#$' +)+,( #' ) %),& ('. T*)"'$)") $#),%+ $( +,,' +# + *$/* )%) ' "'$)") + #*) "')$"$)#' )#),$+#$' $( *$/*.

H))+ "+ "'+,) #*) "'(# ' /$# ,+$/ + )#,+ >1.30 ), $#) #' #*),$") "*+,/) ' >2.50. I $# ' *) $(# #' "')#) +/+$(# '#*),($$+, "'+$)(? #*) ,$") ' /$# ,+$/ "' ) ,)").

3!9

1. ? ;$'+##*',(

2. +? (+)( ,)%))(

3. ;? ), ' +,#(4. ? ), ' +$,(

5. /? ), ' ",)$# *',(

6. "? ), ' ",)$# *',(

7. )? ), ' +$(

8. ? ), ' ',),(9. *? ), ' /'(

10. $? ), ' "(#'),(

11. ? +/) ' )$)#

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PROBJE-S

3!10

1. S"+##),/,+*

2. I '$#( 1 + 9 +,) "*'()26?000

V = Y2! Y1X2!X1= >26?000 ! >18?6001?700 ! 1?000= >10.57 ), ',), ,')

F= Y2! VX2= >26?000 ! >10.571?700= >8?031

Y= >8?031 @ >10.57X

3. H$/*< 1?700? >26?000J'< 700? >14?000

V = Y2! Y1X2!X1= >26?000 ! >14?0001?700 ! 700= >12 ), ',),

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S"+##),/,+* ' R)")$%$/ A"#$%$#&

0

6,000

'0,000

'6,000

10,000

16,000

/50,000

0 600

',000

',600

1,000

N), ' ,"*+() ',),(

C'(#


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F = Y2! VX2= >26?000 ! >121?700= >5?600

Y= >5?600 @ >12X

4. R)/,)(($' '## ,' (,)+(*))#2?079 ,')

Y = >3?618 @ >14.67 1?200= >21?222

T*(? #*) 95M "'$)") $#),%+ $( "'#) +( ''(21?222 2.306>2?079

>16?428 Y >26?016

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3!11

1. S"+##),/,+*

L)(? #*) ,)+#$'(*$ )#)) +"*$) *',( + '), "'(# +)+,( #' )$)+,. H')%),? #*) '(),%+#$' ', +,#), 1 +& ) + '#$),.

2. H$/*< 30?000? >42?500

J'< 18?000? >31?400

V = Y2! Y1X2!X1= >42?500 ! >31?40030?000 ! 18?000= >0.925

F = Y2! VX2= >42?500 ! >0.92530?000

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S"+##),/,+4* '7 P'G), A"#$%$#&

0

'0,000

10,000

50,000

20,000

/60,000

0 '0,000 10,000 50,000 20,000

-+"*$.) *'2,(


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= >14?750

Y = >14?750 @ >0.925X

3. R)/,)(($' '## ,' (,)+(*))#26?000? *$"* +)+,( #' ) + '#$),2.512?800= >9?527

2. R)/,)(($' '## ,' (,)+(*))#? ), ' +$"+#$'( +( %+,$+)2.612?800 @ >13.7190= >10?035

5. S)= >50 ,')

T*(? #*) 99M "'$)") $#),%+ $( "'#) +( ''(10?035 3.707>50 >9?850 Y >10?220

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3131. E+#$' 2< S#= >1?000?000 @ >0.00001"#

E+#$' 4< S#= >600?000 @ >10N#!1@ >0.000002"#@ >0.000003"#!1

2. T' ',)"+(# 2010 (+)( +() ' 2009 (+)(? E+#$' 1 (# ) ()500?000 @ >1.10S#!1

S2010 = >500?000 @ >1.10>1?500?000= >2?150?000

3. E+#$' 2 ,)$,)( + ',)"+(# ' /,'(( ')(#$" ,'"#. E+#$' 3 ()(#*) +"#+ /,'(( ')(#$" ,'"# ', #*) +(# &)+, +? #*),)',)? $('(),%+).

4. A%+#+/)(< U($/ #*) *$/*)(# R2? #*) ')(# (#++, ),,',? + #*)

)+#$' $%'%)( #*,)) %+,$+)(. A ',) +"",+#) ',)"+(# (*' ) #*)'#"').

D$(+%+#+/)(< -',) "')$#& $ "'#$/ #*) ',+.

3!14

1.C+#$%) C+#$%) C+#$%) I$%$+ U$#

N), A%),+/) T$)T$) ', #*

' U$#( ), U$# $ H',( J+', H',( 1 23 = 1 K 2 4

1 1?000 1?000 1?0002 800 0.8 K 1?000 1?600 6004 640 0.8 K 800 2?560 4548 512 0.8 K 640 4?096 355

16 409.6 6?553.6 280.632 327.7 10?486.4 223.4

2.

1 $# 2 $#( 4 $#( 8 $#( 16 $#( 32 $#(D$,)"# +#),$+( >10?500 > 21?000 > 42?000 > 84?000 >168?000 > 336?000C'%),($' "'(# 70?000 112?000 179?200 286?720 458?787 734?076T'#+ %+,$+) "'(# >80?500 >133?000 >221?200 >370?720 >626?787 >1?070?076

U$#( 1 2 4 8 16 32U$# %+,$+) "'(# > 80?500 > 66?500 > 55?300 > 46?340 > 39?174 > 33?440

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Chapter03 Solutions Hansen Mowen Cost Behavior Sixth Edition

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