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RCA Solutions Mod1
RCA Solutions Mod1
PROBLEM 1
Note: Many correct answers are possible.
A. The cost of each alternative (make vs. buy) would be needed along
with information about suppliers that pertains to reliability and product
quality (e.g., testimonials from a supplier's current customers that cite
any problems with on-time deliveries, product stockouts, or abnormally
high spoilage rates of purchased goods). Given the company is
currently making the part, what would happen to the facilities if the
firm begins to purchase from outside suppliers? Could the facilities be
subleased, used for other profitable products, or downsized (with
equipment being sold)? What would happen to existing employees—
would there be any layoffs and how much would the company save?
PROBLEM 2
A. Cost centers and profit centers are different types of responsibility
units within an organization. With a cost center, a manager is held
accountable for the amount of cost incurred; in contrast, with a profit
center, managers are evaluated on the amount of profit generated,
namely, revenues minus expenses.
B. The number of service requests is likely to drop because users will now
be charged for services provided. In cases where services are free,
users sometimes use and abuse the privilege.
PROBLEM 3
A. Direct costs are logically and practically related (i.e., easily traceable)
to a particular cost object. An indirect cost, on the other hand, is not.
Whether a cost is direct or indirect depends on the cost object under
consideration. A cost may be easily traceable to a company, for
example, but not easily traced to a department of that firm.
PROBLEM 4
A. PC, V
B. MOH, F
C. MOH, F
D. DL, V
E. MOH, V
F. DM, V
G. PC, F
H. PC, F
I. MOH, F
PROBLEM 5
PROBLEM 6
D. 1. No change. Direct labor is a variable cost, and the cost per unit will remain
constant.
PROBLEM 7
1. Prime cost = P185,000 + P245,000 =
P430,000
2. Conversion costs = P245,000 + P125,000 + P155,000 =
P525,000
3. Inventoriable costs = P430,000 + P125,000 + P155,000 =
P710,000
4. Period costs = P160,000 + P145,000 =
P305,000
PROBLEM 8
Product costs are costs that relate to the manufacturing process and
consist of direct materials, direct labor, and manufacturing overhead.
Simply stated, these are costs incurred to make a product.
Product costs are attached to the units produced (i.e., work in process)
and, thus, inventoried on the balance sheet. These costs are later charged
to finished goods when the goods are completed. Another transfer occurs
when the finished units are sold, with the costs now transferred to cost of
goods sold on the income statement.
PROBLEM 9
The doctor's observations are incorrect, as gasoline is a variable cost and
insurance is a fixed cost. Gasoline cost will increase with the number of
miles driven, whereas insurance outlays will remain the same. The doctor
seems to have confused the "total" perspective, as defined by
accountants, with the notion of per-unit cost behavior.
PROBLEM 10
PROBLEM 11
A. Marginal cost
B. Sunk cost
C. Average cost
D. Opportunity cost
E. Differential cost
F. Out-of-pocket cost
PROBLEM 12
1. Direct 6. Direct
2. Indirect 7. Direct
3. Direct 8. Indirect
4. Direct 9. Direct
5. Direct 10.Direct
PROBLEM 13
1. Manufacturing 6. Manufacturing
2. Selling 7. Administrative
3. Manufacturing 8. Selling
4. Selling 9. Administrative
5. Administrative 10.Selling
PROBLEM 14
1. Variable Product Direct
2. Variable Product Direct
3. Fixed Product Indirect
4. Variable Product Direct
5. Fixed Product Indirect
6. Fixed Period Indirect
7. Fixed Period Indirect
8. Variable Period Direct
9. Fixed Product Indirect
10.Fixed Period Indirect
PROBLEM 15
1. Fixed Period
2. Fixed Inventoriable
3. Variable Inventoriable
4. Variable Inventoriable
5. Fixed Inventoriable
6. Variable Period
7. Variable Inventoriable
8. Fixed Inventoriable
9. Fixed Period
10. Fixed Inventoriable
PROBLEM 16
A. Responsibility accounting refers to the various concepts and tools that
are used within an organization to evaluate the performance of people
and various sub-units (such as divisions and departments). Managers
are appointed to oversee these sub-units and held accountable for
items under their control.
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