5-25

A customer has expressed interest in having CH build a moderate, 3,000 square-foot home on a vacant lot,
which does not have utilities. Based on the engineering estimates above, what will such a house cost to build?

Administrative costs+ Building costs+ Appliances=House cost build

Building costs per square foot (moderate) = $150
Building costs 3,000 square-foot home = $150 x 3,000 = $450,000

$ 20,000+ $ 450,000+ $ 25,000=$ 495,000

5-26
Rock City Museum (a not-for-profit) has approached Cray-Z for consulting services. The senior partner at Cray-Z
estimates that the work will require 20 partner-hours, 175 senior-hours, and 500 associate-hours. She estimates
miscellaneous costs to be $20,000. What is the estimated cost of the consulting job, based on these estimates?
Rock City Museum

Cray-Z Consultants
Partner cost (per hour)
Senior cost (per hour)
Associate cost (per hour)
Miscellaneous costs
Total consultant and miscellaneous
expense
G&A factor

$600

20 hours

$250

175 hours

$75

500 hours

0$

$20,000

$925
150

Total consultant and miscellaneous

expense
G&A factor

$
12,000
$
43,750
$
37,500
$
20,000
$
113,250
$

169,875
$
283,125

Total cost of the consulting job

5-28
a. Year 2 production is expected to be 195,000 billable hours. What are the estimated direct materials,
direct labor, variable overhead, and fixed overhead costs for year 2?
(a)
Cost Item
Direct Materials
Direct Labor
Variable
Overhead
Fixed Overhead
Total Costs

Total Overhead
Fixed Overhead
Variable
Overhead

Year 1 Cost
$
540,000
$
3,870,000
$
810,000
$
900,000
$
6,120,000

$
1,710,000
$
900,000
$
810,000

(b)
Cost
Change
110%
115%
100%
105%

(c)
Year 2 Cost at last year's
volume
$
594,000
$
4,450,500
$
810,000
$
945,000

Growth in volume

b. Determine the total costs per billable hour for year 1 and year 2.

(d)
Growth
volume
195,000
150,000
195,000
150,000
195,000
150,000

(e)
Year 2 Cost ( c
Xd)
$
772,200
$
5,785,650
$
1,053,000
$
1,228,500
$
8,839,350

in
/
/
/

Fixed

1.3

Costs per billable hour

Year 1=$ 6,120,000 150,000=$ 40.8

Year 2=$ 8,839,350 195,000=$ 45.33
5-31
Prepare a scattergraph based on the overhead and machine-hour data in Exercise 5-30

Overhead costs and machine hours

$600,000
$580,000
$560,000
$540,000
Overhead costs

$520,000
$500,000
$480,000
$460,000
6,000

6,500

7,000
Machine-hours

7,500

8,000

8,500

5-46
a. Estimate the monthly fixed costs and the unit variable cost per support call using the high-low estimation
method.
Support calls
Highest activity (month 5)
61
Lowest activity (month 1)
37
Cost at highest activityCost at lowest activity
Variable cost=
Highest activityLowest activity

Variable cost=

Call center cost

$720
$528

$ 720$ 528
=$ 8.00 per support call
6137

costs=Total costsVariable costs $ 720( $ 8.00 x 61 ) $ 232

The cost equation is:
Overhead costs = $232 + (8.00 per call x Support calls)
b. Draw a scattergraph relating call center costs to the number of support calls.

Call Center Cost related to the number of support calls

Call Center Cost

30

35

40

45

50

55

60

65

70

Suppor Calls

c. Considering your scattergraph, how much confidence do you have in your estimate from requirement
(a)?
6-33
The production supervisor estimates that the ending work in process is 60 percent complete on April 30.
Compute the costs of chocolate completed and the cost of the chocolate in work-in-process ending inventory as
of April 30.

Production:
Pounds
Precentage complete

Total

Completed

WIP April 30

20,000

19,000
100%

1,000
60%

19,600

Equivalent pounds
Costs:
Materials
Conversion costs
Total cost incurred
Cost per equivalent pound
Cost assigned to product

19,000

600

$64,600

$2,040

$29,700
$36,940
$66,640
$3.40
$66,640

$3.40 = $66,640 19,600 equivalent units

$64,600 = 19,000 equivalent units x $3.40
$2,040 = 600 equivalent units x $3.40

6-34
Compute the predetermined overhead rate assuming that Tiger Furnishings uses direct labor-hours to allocate
overhead costs.

Units produced
Machine-hours
Direct labor-hours
Direct materials costs
Direct labor costs
Manufacturing overhead costs
Total costs

Basic
1,000
4,000
3,000

Dominator
250
2,000
2,000

Total
1,250
6,000
5,000

$
10,000
$
64,500

$
3,750
$
35,500

$
13,750
$
100,000
$
174,100
$
287,850

Overhead Rate:
Total overhead
Direct labor-hours
Overhead Rate =

174,100
5,000
$
34.82

6-39
S. Lee Enterprises uses operation costing and assigns conversion costs based on the number of units
assembled. Compute the cost of each model assembled in August.
SL1
1,300
$900
$1,170,000

Number assembled
Materials cost per tractor
Costs
Other costs:
Direct labor
Supplies
Other overhead
Total operation cost

SL2
1,800
$1,400
$2,520,000

$3,690,000
$
$
$
$

Conversion cost per unit ($4,030,000 3,100 units) = $1,300

Operation cost
(@$1,300 per unit)
Material cost
Total cost
Number of units
Unit cost

Total
3,100

$
$
$
$

1,690,000
1,170,000
2,860,000
1300
2,200

$
$
$
$

2,340,000
2,520,000
4,860,000
1800
2,700

1,200,000
480,000
2,350,000
4,030,000

6-41
Refer to the data in Exercise 6-34. Compute the individual product cost per unit assuming that Tiger Furnishings
uses direct labor costs to allocate overhead to the products.
Basic
1,000
4,000
3,000

Units produced
Machine-hours
Direct labor-hours
Direct materials costs
Direct labor costs
Manufacturing overhead costs
Total costs
Overhead Rate:
Total overhead
Direct labor cost

$
$

$
$

3,750
35,500

Total
1,250
6,000
5,000
$
$
$
$

13,750
100,000
174,100
287,850

Dominator
$
3,750
$
35,500

$
$

Total
13,750
100,000

$
$

$
$

174,100
287,850

$ 174,100
$ 100,000
174.1%

Overhead Rate =

Direct materials costs

Direct labor costs
Manufacturing Overhead
(@174.1% of Direct labor cost)
Total Costs
Units produced
Unit cost

10,000
64,500

Dominator
250
2,000
2,000

$
$

Basic
10,000
64,500

$ 112,295
$ 186,795
1,000
$ 186.79

61,806
101,056
250
404.22

6-44
a. Compute the predetermined overhead rates assuming that Mets Products uses machine-hours to allocate
machine-related overhead costs and materials costs to allocate materials-related overhead costs.
Account

Machine-hours related

Materials related

$6,000

Utilities

$4,200

Supplies
$13,200

Machine depreciation and maintenance

$4,800

Purchasing and storing materials

$5,100

Miscellaneous

$24,300
1,800

Total overhead
Total machine hours

$9,000
$20,000

Total materials cost

$13.50

Overhead rate

45%

b. Compute the total costs of production and the costs per unit for each of the two products for October.

Machine hours used

Direct materials costs
Direct labor costs
Manufacturing overhead costs
Machine-hour related overhead
Materials-related overhead
Total cost
Units produced

Baseball Caps
1,000
$
$

12,000
4,000

$
$
$

9,000
3,600
28,600
10,000

T-Shirts
800
$
$

Total
1,800

8,000
2,400

$ 20,000
$ 6,400

$ 7,200
$ 2,400
$ 20,000
5,000

$ 16,200
$ 6,000
$ 48,600
$ 15,000

Cost per unit

$9,000 = 1,000 machine hours x $9 per machine hour
$7,200 = 800 machine hours x $9 per machine hour
$3,600 = $12,000 materials cost x 30%
$2,400 = $8,000 materials cost x 30%

2.86

4.00