Q2-1
- Direct materials, direct labor, and manufacturing overhead
Q2-3
- Product costs are what cost to acquire or make the product while period costs are basically non-product costs. All selling and administrative expenses are period costs.
- Product costs are recorded as expenses as they get released from inventory and matched with sales revenue
Q2-7
- Variable costs are variable with respect to an ‘activity base’, which is a measure of whatever causes the incurrence of a variable cost
- Some of the examples of activity base are direct labour-hours, machine-hours, unit produced, and units sold.
Q2-8
- Although many costs are curvilinear, they can be approximated within a narrow band of activity known as the relevant range by a straight line.
- The relevant range refers to the range of activity where the assumption of strictly linear cost behaviour is reasonably valid.
E2-3
1. Period
2. Period
3. Product
4. Period
5. Period
6. Period
7. Product
8. Product
9. Period
10. Period
11. Period
12. Period
13. Period
14. Period
15. Product
E2-4
1.
2,000
2,100
2,200
Fixed cost
$1,200
$1,200
$1,200
Variable cost
440
462
482
Total cost
1,640
1,662
1,682
Avg. cost per cup of coffee served
.82
.79
.76
2. Average cost per cup of coffee served decreases with increasing number of cups because the fixed cost is spread over the total quantity – economies of scale
E2-7
1. Sunk
2. Differential
3. x
4. Differential
5.
