1-19.

Value Chain and Classification of Costs

Apple, Inc. incurs many types of costs in its operations
Required
For each cost in the following table, identify the stage in the value chain where this
cost is incurred:
Research and Development: Programmer costs for a new operating system
Distribution: Costs to ship computers to customers
Customer Service: Call center costs for support calls
Design: Salaries for employees working on new product designs
Marketing: Costs to purchase advertising at university stores
Production: Costs of memory chips to make computers

1-22
What revenues and costs are probably differential for the decision to discontinue
City Divisions operations? What will be the effect on Bettys profits if the division is
eliminated?
1-27
Match the financial management title in the first column with the major
responsibility in the second column of the following table:
CFO: Signs off on financial statements
Treasurer: Determines where to invest cash balances
Controller: Maintains accounting records
Internal auditor: Ensures procurement rules are followed
Cost accountant: Evaluates costs products
1-30
a. Does Dewi have an ethical responsibility to take a course of action?
b. Of the three possible courses of action, which are appropriate and which are
inappropriate?

1-33
a. Prepare a report of the differential costs and revenues if the express service
is added.
CAMPUS PACKAGE DELIVERY
Annual Income Statement
(a) Before
(b) After
Expansion
Expansion
Sales
$
$
Revenue
304,000
404,000
Cost
Vehicle
$
$
leases
120,000
127,500
$
$
Labor
96,000
144,000
$
$
Utilities
16,000
24,000
$
$
Rent
32,000
38,400
$
$
Other costs 16,000
19,200
Manager's
$
$
salary
48,000
48,000
$
$
Total Costs
328,000
401,100
Operating
$
$
profit
(24,000)
2,900
b. Should management start the express service?
Yes, the manager should start the express service
c. Are there factors beyond the differential costs and revenues that
management should consider?
No, because only differential costs and revenues affect the decision, others
factors are irrelevant.
1-35
a. What are the differential costs that would be incurred as a result of taking the
contract?
b. If the contract will pay $90,000, should B-You accept it?
c. What consideration, other than costs, do you think are necessary before
making this decision?
1-37

a. Prepare a statement like the one in Exhibit 1.5 that compares the budgeted
and actual costs for September.
CARMEN'S COOKIES
Retail Responsibility Center
Budgeted versus Actual Costs
For the Month Ending September 30
Actual
Budget
Difference
Food
Flour
Eggs
Chocolate
Nuts
Other
Total food
Labor
Manager
Other
Total labor
Utilities
Rent
Total cookie costs
Number of cookies
sold

$
2,700
$
6,500
$
2,100
$
2,300
$
2,700
$
16,300

$
2,520
$
6,240
$
2,400
$
2,400
$
2,640
$
16,200

$
180
$
260
$
(300)
$
(100)
$
60
$
100

$
3,500
$
1,850
$
5,350
$
2,200
$
5,000
$
28,850

$
3,500
$
1,875
$
5,375
$
1,890
$
5,000
$
28,465

$
$
(25)
$
(25)
$
310
$
$
385

38400

38400

b. Suppose that you have limited time to determine why actual costs are not the
same as budgeted costs. Which three cost items would you investigate to see
why actual and budgeted costs are different? Why would you choose those
three costs?
I would investigate why the cost of flour, eggs and utilities because these three are
higher than what was budgeted. So because these items, we end the month of
September with a higher total cookie cost than what we expected.
1-39

Fill in the blank cells.

QUINCE PRODUCTS
Projected Income Statement
For One Month
Status
%
Quo:
Increase Alternativ
Single
(Decreas e: Two
Product
e)
Products
Sales
revenue
Cost
Material
Labor
Rent
Depreciati
on
Utilities
Other
Total costs
Operating
profit

Differen
ce

10000

30%

13,000

3,000

2000
2500
1800

40%
20%
0%

2800
3000
1800

800
500
0

400
200
700
7600

25%
25%
50%

500
250
1050
9,400

100
50
350
1,800

2400

50%

3600

1200

2-22 Basic Concepts

For each of the following statements, indicate whether it is true, false, or uncertain.
Explain why. Give examples in your answer.
a. A cost is something used up to produce revenues in a particular accounting
period.
b. The cost of direct materials is fixed per unit but variable in total.
c. Variable costs are direct costs; only fixed costs are indirect costs.

2-27 Basic Concepts

Give the amount for each of the following (one unit = one test)
a. Variable production cost per unit: $44

$ 100,000

Cost + $ 340,000Variable Cost

=$ 44
1,000 Units per month
b. Variable cost per unit: $340
c. Full cost per unit.

d.
e.
f.
g.

Full absorption cost per unit.

Prime cost per unit.
Conversion cost per unit.
Contribution margin per unit.

$ 600$ 340=$ 260

h. Gross margin per unit.
i. Suppose the number of units decreases to 800 test per month, which is
within the relevant range. Which parts of (a) through (h) will change? For
each amount that will change, give the new amount for a volume of 800
tests.
2-30
a. How would you recommend Star allocate the common costs between drinks
and pastries?
b. You are the assistant manager and have been working with Star on the
allocation problem. What should you do?
2-31
Find the following by completing a cost of goods sold statement.
a. Cost of direct materials purchased during the year.

$ 59,800+ $ 44,200=$ 104,000$ 48,100=$ 55,900

b. Cost of goods manufactured during the year.

$ 68,900+$ 18,200=$ 87,100$ 15,600=$ 71,500

c. Total manufacturing costs incurred during the year.

$ 71,500+ $ 71,500=$ 143,000$ 67,730=$ 75,270

2-34
Find the following by completing a cost of goods sold statement.
a. Marketing and administrative costs.

$ 4,050,000 Gross Margin$ 1,525,000Operating Profit=$ 2,525,000

b. Cost of services sold.

$ 8,500,000 Revenues$ 4,050,000 Gross Margin=$ 4,450,000

2-37 Basic Concepts
The following data refer to one year. Fill in the blanks
a.

$ 43,800+ $ 12,300=$ 56,100$ 48,300=$ 7,800

b.

$ 163,350+ $ 11,400=$ 174,750$ 8,100=$ 166,650

c.

$ 166,650$ 41,400$ 43,800=$ 81,450

d.

$ 168,150COGS+ $ 147,750 Gross Margin=$ 315,900

2-38
The following data refer to one year. Fill in the blanks
a.

$ 127,000+ $ 5,000=$ 132,000$ 130,000=$ 2,000

b.

$ 31,000+ $ 13,500=$ 44,500$ 16,000=$ 28,500

c.

$ 130,000+ $ 32,000=$ 162,000$ 35,500=$ 126,500

d.

$ 127,000$ 91,000=$ 36,000

2-50
Compute for the month of July
a. Total prime costs

$ 12,000+ $ 160,000=$ 172,000$ 10,000=$ 162,000+ $ 128,000=$ 290,000

b. Total conversion costs

$ 128,000+ $ 168,000=$ 296,000

c.

Total manufacturing costs

$ 162,000+ $ 128,000+ $ 168,000=$ 458,000

d. Cost of goods manufactured

$ 458,000+ $ 6,000=$ 464,000$ 4,000=$ 460,000

e. Cost of goods sold

$ 460,000+ $ 36,000=$ 496,000$ 48,000=$ 448,000

2-51
Compute for the month of June:
a. Direct materials used, June.

$ 147,000$ 60,000=$ 87,000

b. Direct materials inventory, June 1.

$ 87,000+$ 15,000=$ 102,000$ 84,000=$ 18,000

c.

Conversion costs, June.

$ 267,000$ 87,000=$ 180,000

d. Work-in-process inventory, June 30.

$ 267,000+ $ 9,000=$ 276,000$ 270,000=$ 6,000

e. Manufacturing overhead, June.

$ 267,000$ 147,000=$ 120,000

f.

Finished goods inventory, June 1.

$ 212,000+ $ 72,000=$ 284,000$ 270,000=$ 14,000

2-55
Prepare an income statement with a supporting cost of goods sold statement.
2-58
a. Allocate the cost of the library to the two programs (undergraduate and graduate).

2-60
Find the following:
a. Cost of goods sold.

b. Direct materials used.

$ 612,320$ 270,400=$ 341,920$ 225,000=$ 116,920

c.

Purchases of direct materials

$ 116,920+ $ 2,088=$ 119,008$ 2,520=$ 116,448

d. Sales revenue.

Chapter 1: 1-19, 1-22, 1-27, 1-30, 1-33, 1-35, 1-37, 1-39

Chapter 2: 2-22, 2-27, 2-30, 2-31, 2-34, 2-37, 2-38, 2-50, 2-51, 2-55, 2-58a, 2-60