Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 3, Problem 20E
A.
To determine
Calculate the cost per megawatt hour for the fossil fuel plant and wind farm of the Company ME.
B.
To determine
Explain the reason why the equivalent units for production do not used to find out cost per megawatt hour for generating electricity.
C.
To determine
State the advantages do the fossil fuel plant over the wind farm.
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Assume that a company manufactures numerous component parts, one of which is called Part A. The company's absorption costing system indicates that it costs $23.00 to make one unit of Part A as
shown below:
Direct materials
$ 10.00
Direct labor
6.00
Variable overhead
2.00
Fixed overhead
5.00
Total absorption cost per unit
$ 23.00
The company is trying to decide between two alternatives:
Alternative 1: Continue making 80,000 units of Part A per year using its existing equipment at the unit cost shown above. The equipment used to make this part does not wear out through use and it has
no resale value.
Alternative 2: Replace the existing equipment with a new piece of equipment that the company would rent for $150,000 per year. The new piece of equipment would be used to make 80,000 units per
year and it would reduce Part A's direct labor cost per unit by 20% and its variable overhead per unit by 30%. The direct materials cost per unit will remain constant.
What is the financial advantage…
Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,100 containers follows.
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs
Allocated facility-level costs
$ 5,700
6,800
3,900
8,100
27,200
One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each.
Required
a. Calculate the total relevant cost. Should Jordan continue to make the containers?
b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate
the total avoidable costs. Should Jordan continue to make the containers?
a. Total relevant cost
Should Jordan continue to make the containers?
b. Total avoidable cost
Should Jordan continue to make the containers?
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,300 containers follows.
Unit-level materials.
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each.
Required
a. Calculate the total relevant cost. Should Rundle continue to make the containers?
b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate
the total avoidable costs. Should Rundle continue to make the containers?
Answer is complete but not entirely correct.
$
a. Total relevant cost
a. Should Rundle continue to make the containers?
b. Total avoidable cost
b. Should Rundle continue to make the containers?
190.650,000
Yes
$24,180,000
$ 5,200
6,100
4,000
7,800…
Chapter 3 Solutions
Managerial Accounting
Ch. 3 - Which type of cost system, process or job order,...Ch. 3 - In job order cost accounting, the three elements...Ch. 3 - In a job order cost system, direct labor and...Ch. 3 - Why is the cost per equivalent unit often...Ch. 3 - What is the purpose for determining the cost per...Ch. 3 - Rameriz Company is a process manufacturer with two...Ch. 3 - What is the most important purpose of the cost of...Ch. 3 - How are cost of production reports used for...Ch. 3 - Job order versus process costing Which of the...Ch. 3 - Kraus Steel Company has two departments, Casting...
Ch. 3 - The Rolling Department of Kraus Steel Company had...Ch. 3 - The Rolling Department of Kraus Steel Company had...Ch. 3 - The cost of direct materials transferred into the...Ch. 3 - The costs per equivalent unit of direct materials...Ch. 3 - In October, the cost of materials transferred into...Ch. 3 - Prob. 8BECh. 3 - Entries for materials cost flows in a process cost...Ch. 3 - Flowchart of accounts related to service and...Ch. 3 - Radford Inc. manufactures a sugar product by a...Ch. 3 - The cost accountant for River Rock Beverage Co....Ch. 3 - The Converting Department of Worley Company had...Ch. 3 - Data for the two departments of Kimble Pierce...Ch. 3 - The following information concerns production in...Ch. 3 - a. Based upon the data in Exercise 17-7, determine...Ch. 3 - Equivalent units of production Kellogg Company...Ch. 3 - Costs per equivalent unit Georgia Products Inc....Ch. 3 - The charges to Work in ProcessAssembly Department...Ch. 3 - a. Based on the data in Exercise 17-11, determine...Ch. 3 - Errors in equivalent unit computation Napco...Ch. 3 - Cost per equivalent unit The following information...Ch. 3 - Costs per equivalent unit and production costs...Ch. 3 - Cost of production report The debits to Work in...Ch. 3 - Cost of Production report The Cutting Department...Ch. 3 - Prob. 18ECh. 3 - Prob. 19ECh. 3 - Prob. 20ECh. 3 - The Converting Department of Tender Soft Tissue...Ch. 3 - Units of production data for the two departments...Ch. 3 - The following information concerns production in...Ch. 3 - Prob. 24ECh. 3 - The following information concerns production in...Ch. 3 - Prob. 26ECh. 3 - Prepare a cost of production report for the...Ch. 3 - Entries for process cost system Port Ormond Carpet...Ch. 3 - Cost of production report Hana Coffee Company...Ch. 3 - Equivalent units and related costs; cost of...Ch. 3 - Work in process account data for two months; cost...Ch. 3 - Sunrise Coffee Company roasts and packs coffee...Ch. 3 - Entries for process cost system Preston Grover...Ch. 3 - Cost of production report Bavarian Chocolate...Ch. 3 - Equivalent units and related costs; cost of...Ch. 3 - Work in process account data for two months; cost...Ch. 3 - Blue Ribbon Flour Company manufactures flour by a...Ch. 3 - Dura-Conduit Corporation manufactures plastic...Ch. 3 - Analyzing process cost elements across product...Ch. 3 - Analyzing process cost elements over time Pix...Ch. 3 - Determining cost relationships Midst ate...Ch. 3 - Ethics in Action You are the Cookie division...Ch. 3 - Communications Jamarcus Bradshaw, plant manager of...Ch. 3 - Accounting for materials costs In papermaking...Ch. 3 - During December, Krause Chemical Company had the...Ch. 3 - Jones Corporation uses a first-in, first-out...Ch. 3 - Kimbeth Manufacturing uses a process cost system...Ch. 3 - A company is using process costing with the...
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