Cost Allocation Concepts

Anonymous
timer Asked: Apr 29th, 2019
account_balance_wallet $20

Question Description

Complete Problems 6-37 and 7-38 in the textbook.

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Tutor Answer

Sarajem
School: UCLA

Attached.

Question 1
i. Straight-line depreciation - committed fixed cost
ii. Charitable contributions - discretionary fixed cost
iii. Mining labor/fringe benefits - variable cost. Mining cost changes as the tons of the ore changes. =$345,000/1500 = $230
=$598,000/2600 = $230 per ton
The variable cost for the mining labour/fridge benefits is $230 per ton

iv. Royalties - semi-variable cost
201000 = a + 2600x
135000 = a + 1500x
solving using simultaneous equations.
66000 = 1100x
x = $60 per ton
Fixed variable cost = $45,000
v. Trucking and hauling - step fixed cost

Question 2
When Expected 1650 tons
Depreciation
Mining/Fridge Benefits
Royalties
Fixed

$
$

25,000
379,500

$

45,000

Variable
Trucking and hauling

$
$

99,000
275,000

Total Cost

$

823,500

Question 3
Overhaul of 1500 tons in the company is not ...

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