Exercise 1 (Total cost and unit cost)

Requirement 1
4,000/ 500 8

Requirement 2
4,000/2,000 2

Requirement 3
Any of the requirements because the management will pay for the same amount for
the party. But, if the manager consider the unit cost per peron requirement 2 will be the
best choice.

Exercise 2

Requirement 1
(a) 60,000/ 200 300
(b) 60,000/250 240
(c) 60,000/300 200

Requirement 2
The unit costs computed in part 1 is of no relevance since 15 flights have already been
booked and the charge is fixed per flight.
Units costs per passenger will not make any difference to the total air flight costs to be
paid.
Exercise 3 ( Classificationof cost, merchandising sector)

Requirement 1 and 2
Cost D or I V or F
Annual retainer paid to video distributor D F
Electricity cost of EEC store (single bill covers entire store) I F
Cost of video purchased for sale to customers D V
Subscription
Leasing to Videosoftware
of computer trend magazine
used for financial budgeting at EEC D F
store I F

I V
Cost of popcorn provided free to all customers of EEC
Earthquake insurance policy for EEC store D F
Freight-in cost of video purchased by EEC D V
Exercise 4 (Classification of cost, prime and conversion cost)

Requirement 1 (in thousand)

a. Direct Materials 430
Direct Manufacturing Labor 110
Subcontracting 120
Prime costs 660

b. Direct Manufacturing Labor 110

Subcontracting costs 120

Manufacturing Overhead 340
Conversion costs 570

Requirement 2
a. Direct Materials 430
Direct Manufacturing Labor 110
Subcontracting 120
Fringe benefit on direct manufacturing labor 40
Production setup 60
Prime cost 760

b. Direct Materials 430

Direct Manufacturing Labor 110
Subcontracting 120
Fringe benefit on direct manufacturing labor 40
Production setup 60
Other manufacturing overhead 240,000
Conversion Cost 240,760

Requirement 3
Number of setups
Number of direct manufacturing laborers
Exercise 5 (Cost of goodsmanufactured and cost)
(in thousand)
Direct Material used 87,000
Direct manfacturing labour 34,000
Manufacturing Overhead
Property tax on Plant building 3,000
Plant utilities 17,000
Depreciation on Plant Building 9,000
Depreciation on Plant Equipment 11,000

Plant repairs and maintainance 16,000

Indirect manfacturing labour 23,000
Indirect Material used 11,000
Miscellaneous Plant overhaed 4,000 94,000
Total Manufacturing Cost 215,000
Work in process- beg 20,000
Work in process- end (26,000)
Cost of Goods Manfactured 209,000
Finished Goods Inventory- beg. 27,000
Finished Goods Inventory- end. (34,000)
Cost of Goods Sold 202,000
Exercise 6 (Cost of Good sold Manufactured)

Requirement 1
Cost of Direct Material Used
Direct Material Inventory- beg 22,000
Add: Direct Material purchase 75,000
Less: Direct Material Inventory- end. (26,000) 71,000
Direct Labour Cost 25,000
Manufacturing Cost

Depreciation expense-plant. Building and equipment 11,000

Plant Insurance 9,000
Indirect labor 15,000
Repairs and maintenance-plant 4,000 39,000

Add: Work in Process- beg. 21,000

Less: Work in Process- end. (20,000)
Cost of goods manufactured 136,000

Requirement 2
Revenue 300,000
Less: Cost of goods sold
Finished goods inventory- beg. 18,000
Add: Cost of goods manufactured 136,000
Total goods available for sale 154,000
Less: Finished goods inventory- end. (23,000) (131,000)
Gross Margin 169,000
Less: Operating Expenses
Marketing, distribution, and customer-service costs 93,000
General and administrative costs 29,000 (122,000)
Net Profit 47,000
Exercise 7 (Finding unknown balances)
A. Revenue 32,000
Less: Gross Margin (11,300)
Cost of good sold (Case 1) 20,700

B. Opening Finished Goods 4,000

Direct material used 8,000
Direct manufacturing Labour 3,000
Indirect Maufacturing Cost 7,000

Less: Cost of goods sold (20,700)

Finished goods inventory- end. (Case 1) 1,300

C. Revenue 31,800
Less: Cost of goods sold (20,000)
Gross margin (Case 2) 11,800

D. Cost of goods sold 20,000

Finished Goods-end 5,300
Less: Finished Goods- beg (4,000)
Direct material used (12,000)
Direct manufacturing Labor (5,000)
Indirect manufacturing cost (Case 2) 4,300