Identify each cost as fixed or variable in relation

Record Players have variety of costs are incurred in production. Cost Description Variable Fixed Wood used for the base where the turntable sits
Fire insurance on the factory building
Depreciation on office equipment in the marketing department
Wages of factory security guards
Freight costs to customers
Utility costs incurred in factory
Tung oil used to finish wood for base
Wages of employees who apply tung oil to base
Wages of workers who perform quality control inspections
Travel expenses for sales staff to attend South by Southwest (SXSW)
in Austin, TX
Maintenance costs of factory machines
Cost accountant's salary
Property taxes paid on corporate headquarters
Depreciation on factory machinery
Diamond-tipped stylus (the needle)
Salary of factory assembly supervisor 

Required: 1. Identify each cost as fixed or variable in relation to each record player produced.
2. Identify each cost as a period or product (table) cost.
3. For product costs only, identify each cost as DM, DL, or MOH. Period Product DM DL MOH Regency is a cruise ship company. It currently has six ships and plans to add two more. It offers luxury
passenger cruises in the Caribbean, Alaska, and the Far East. Management is currently addressing what
to do with an existing ship, the S.S. Princess, when she is replaced by a new ship.
The S.S. Princess is now sailing the Caribbean and will be replaced next year. The S.S. Princess might
be moved to the Mediterranean for a new 7-day Greek island tour. A 7-day cruise would depart Athens
Sunday night, stop at four ports before returning to Athens Sunday morning, and prepare for a new
cruise that afternoon. The S.S. Princess can carry as many as 1,000 passengers. The data below
summarize the operating costs for this 7-day cruise.
Estimated Operating Costs for 7-day Greek Island Cruise
Description
Variable Costs*
Fixed Costs**
Labor
75,000
100,000
Food
236,000
45,200
Fuel
180,000
Port fees and services
103,000
Marketing, advertising, promotion
255,000
Supplies
31,000
65,000
Totals
342,000
748,200
* Based on 950 passengers
** Fixed costs per weekly cruise. REQUIRED:
1. Assuming the seven-day Greek cruise can be priced at an average of $1,520, calculate the break-even
number of passengers per cruise using the data provided.
2. Passengers purchase beverages, souvenirs, and services while on the ship. The ship makes money on
the purchases. If the ship line has a margin of 50% on all such onboard purchases, how much would the
average passenger have to purchase for the break-even point to be 900 passengers? Moana Nursery is a mail-order nursery dedicated to growing, selling, and shipping
beautiful cherry trees. Moana offers two distinctive types of cherry trees: Yoshino and
Kwanzan. Revenue and cost data for each tree type (for the most recent year) are as
follows: Quantity sold
Selling price per tree
Variable cost per tree Yoshino
800
$90
$50 Kwanzan
1,600
$100
$50 Moana's fixed costs for the most recent year were $75,600.

REQUIRED:
1. How many cherry trees must Moana Nursery sell in a year to break even?
2. As the current product mix, how many Yoshino trees must Moana sell in a year
to earn a profit of $50,000?
3. Assume that Moana Nursery's product mix changes to 50% Yoshino and 50% Kwanzan.
How does this information change your answer to (1)? Tigger Shoe Company makes and sells a variety of leather shoes for children. For its current mix
of different models and sizes, the average selling price and costs per pair of shoes are as follows:
Item
Price
Costs:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling costs
Fixed overhead
Total costs Amount
$20
$6
4
2
2
3
$17 Shoes are manufactured in batch sizes of 100 pairs. Each batch requires 5 machine hours to
manufacture. The plant has a total capacity of 4,000 machine hours per month, but the current
monthly production consumes only about 80% of capacity.
A discount store has approached Tigger Shoe to buy 10,000 pairs of shoes next month. It has
requested that the shoes bear its own private label. Embossing the private label will cost Tigger
an additional $1 per pair. However, no variable selling costs will be incurred for fulfilling this
special order.
REQUIRED:
Determine the minimum (floor) price that Tigger Shoes should charge for this order.
What other considerations are relevant in this decision? Hint: Think about capacity. The Children's Store is on Fifth Avenue in Chicago. It has a magic department near
the main door. Management is considering dropping the magic department, which
has consistently shown an operating loss. The predicted income statements, in
thousands of dollars, are shown below.
The $300,000 of magic department fixed expenses include the compensation of
employees of $120,000. These employees will be terminated if the magic
department is abandoned. All of the magic department's equipment is fully
depreciated, so none of the $300,000 pertains to such items. Furthermore,
disposal values of equipment will be exactly offset by the costs of removal and
remodeling.
If the magic department is dropped, the manager will use the vacated space for
either more general merchandise or more electronic products. The expansion of
general merchandise would not entail hiring any additional salaried help, but
more electronic products would require an additional person at an annual cost of
$30,000. The manager thinks that sales of general merchandise would increase by
$250,000; electronic products by $200,000. The manager's modest predictions are
partially based on the fact that she thinks the magic department has helped lure
customers to the store and, thus, improved overall sales. If the magic department
is closed, that lure would be gone. Sales
Variable expenses
Contribution margin
Fixed expenses*
Operating income (loss) Total
$6,000
4,090
$1,910
1,100
$810 General
Merchandise
$5,000
3,500
$1,500
750
$750 Electronic
Magic
Products
Department
$400
$600
200
390
$200
$210
50
300
$150
($90) * Includes compensation, depreciation, property taxes, insurance, etc.
REQUIRED: Should the magic department be closed? Explain, showing
computations. Clean and Brite manufactures three different models of swimming pool cleaners (AR1, AR2,
and BR1). These are sophisticated computer-controlled, programmed cleaners that scrub and
vacuum the pool's bottom, and steps and provide supplemental filtration of pool water. The
three models differ in their capacity and programmability.
Clean and Brite uses an absorption costing system that absorbs manufacturing overhead to
the three models based on direct labor hours. The single plantwide manufacturing overhead
rate is predetermined before the beginning of the fiscal year using a flexible manufacturing
overhead budget. Variable manufacturing overhead is budgeted to be $3.00 per direct
labor hour, and fixed manufacturing overhead is budgeted to be $1,397,500. Direct labor
is budgeted at $25 per DLH. The following table summarizes the budgeted and actual
results of operation for the year:
Models
AR1
AR2
BR1
Actual number of units produced
5,100
3,900
2,200
Actual DL hours per unit
3.1
4.2
5.9
Budgeted wholesale price
$550
$750
$1,050
Budgeted DL hours per scrubber
3
4
6
Budgeted direct materials
$95
$125
$175
Budgeted production (units)
5,000
4,000
2,000
Budgeted DL cost (@$25 per DL hour)
$75
$100
$150
REQUIRED:
1. Calculate the firmwide overhead rate at the beginning of the year (round to two decimals).
2. A batch of 100 units of model AR2 is produced using 405 direct labor hours. How much
overhead is absorbed by this batch of 100 model AR2s?
3. Actual overhead incurred during the year was $1,520,500. Calculate the amount of over- or
underabsorbed overhead for the year.
4. Clean and Brite writes off any over/underabsorbed to cost of good sold. What is the effect
of writing off the over/underabsorbed overhead calculated in (3) on net income? In other
words, does net income increase or decrease after the writeoff?