20 T/F E x 3/14/2010 A1 E.N. 21 T/F E x 3/14/2010 C2 E.N. 22 T/F E x 3/14/2010 E1 E.N. 23 T/F E x 3/14/2010 G2 E.N. 24 T/F E x 3/14/2010 J1 E.N. 25 T/F E x 3/14/2010 L2 E.N. 26 T/F M x 4/6/97C E.N. 27 T/F H x 4/6/97D E.N. 28 T/F H x 4/6/97E E.N. 29 T/F E x 8/e:ATB2-9 David Keyes 30 Conceptual M/C H x x x 8/e: ATB2-13 Keyes 31 Conceptual M/C M x x 5/e: 2-58 Authors 32 Conceptual M/C M x x 5/e: 2-27 Authors 33 Conceptual M/C M x 5/e: 2-70 Authors 34 Conceptual M/C M x 4/e: 50 Authors 35 Conceptual M/C E x 3/e: 2-MC8 Authors 36 Conceptual M/C E x 3/e: 2-MC7 Authors 37 Conceptual M/C M x x 8/e: ATB2-14 Keyes 38 Conceptual M/C E x 4/e: 43 Authors 39 Conceptual M/C E x 4/e: 84 Authors 40 Conceptual M/C M x 4/e: 44 Authors 41 Conceptual M/C E x 3/e: 2-MC6 Authors 42 Conceptual M/C E x LD9e:CH02Q13 Larry Deppe
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $441,000 or a new model 240 machine costing $387,000 to replace a machine that was purchased 7 years ago for $429,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. making the decision to buy the model 240 machine rather than the model 370 machine, the sunk cost was: making the decision to buy the model 240 machine rather than the model 370 machine, the differential cost was: making the decision to invest in the 240 machine, the opportunity cost was: Temblador Corporation purchased a machine 7 ago for $319,000 when it launched product E26T. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $323,000 or by a new model 230 machine costing $285,000. Management has decided to buy the model 230 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product E26T. Management also considered, but rejected, the alternative of dropping product E26T and not replacing the old machine. If that were done, the $285,000 invested in the new machine could instead have been invested in a project that would have returned a total of $386,000.
Direct materials cost per unit = Change in cost ÷ Change in activity = ($281,600 - $246,400) ÷ (8,000 - 7,000 units) = $35,200 ÷ 1,000 units = $35.20 per unit Direct labor cost per unit = Change in cost ÷ Change in activity = ($400,800 - $350,700) ÷ (8,000 units - 7,000 units) = $50,100 ÷ 1,000 units = $50.10 per unit Variable manufacturing overhead cost per unit = Change in cost ÷ Change in activity = ($872,000 - $860,300) ÷ (8,000 units - 7,000 units) = $11,700 ÷ 1,000 units = $11.70 per unit Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $872,000 - 8,000 units × $11.70 per unit = $872,000 - $93,600 = $778,400 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Learning Objective: 02-03 Understand cost behavior patterns including variable costs; fixed costs; and mixed costs. Learning Objective: 02-04 Analyze a mixed cost using a scattergraph plot and the high-low method. Level: 2 Medium 68. Haras Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $141.30 per unit. The best estimate of the total variable cost per unit is: