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B BUS 373 Cost Accounting

Homework 1: Reflection Exercise on Day 1


Your firm produces the following machines:
Model
Mark 5
Mark 7
Mark 15

Life
Cost
5 years $10,000
7 years $15,000
15 years $25,000

Task 1
What would it cost you to produce the following machines (show any relevant computations):

Model
Mark 3
Mark 9
Mark 27

Doogar

Life
3 years
9 years
27 years

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Expected
Cost

Spring 2014

B BUS 373 Cost Accounting


Homework 1: Reflection Exercise on Day 1
Task 2
Identify all of the assumptions you made to accomplish Task 1.
These could include
a) Conceptual assumptions
b) Formulas or equations that capture the essence of your cost function
c) Statistical techniques you used (interpolation, extrapolation)

Link the ideas you have listed above to topics covered in previous Managerial Accounting classes.
Did have to think about any or all of the following Cost Taxonomies (fill in the blanks):
F _ _ _ _ or V _ _ _ _ _ _ _,

D _ _ _ _ _ or I _ _ _ _ _ _ _,

M _ _ _ _ _ _ _ , O _ _ _ _ _ _ _ or L _ _ _ _ _

Did you have to think carefully about Cost Behavior?


Continuous or Discontinuous?

Linear, non-linear (Concave? Convex?)

Other (specify) ___________________________________


How did you map the various cost taxonomies to Product costs?
Some key constructs commonly used in mapping costs to products include (complete the blanks):
Cost P _ _ _ _

Cost Allocation B _ _ _ _

Cost D _ _ _ _ _ _

Did you use (either formally or informally) any of these ideas in coming up with product costs?

Doogar

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Spring 2014

B BUS 373 Cost Accounting


Homework 1: Reflection Exercise on Day 1
Task 3
How would you price these machines assuming
i.
ii.

Your firm already produces the Mark 5, Mark 7 and Mark 15 and you are proposing to introduce
the three models you have costed as part of Task 1 as a product expansion into a new market.
Your firm already produces all six models.

Task 4
Identify all of the information you would need to accomplish task 3.
Would you need different information for Part i vs. part ii? Why or why not?

Doogar

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Spring 2014

B BUS 373 Cost Accounting


Homework 1: Reflection Exercise on Day 1
Task 5
What disciplines must you need to know/understand in order to accomplish these tasks well?

Discipline
Product Design

Level of Understanding
G (Good), F (Fair), L(Little to none)

Importance
Rank

Engineering
Manufacturing
Marketing
Psychology
Strategy
Economics
Mathematics
Statistics
Accounting
Add more .

Task 6 Identify areas where this review has revealed to you soft spots in your recall/understanding of
the basic concepts & tools you have learned in your previous managerial accounting class(es). Identify
action(s) you propose to undertake to address these soft spots.

Doogar

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Spring 2014