Cost Accounting Assignment 2

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Suppose that you have been given a summer job at Fairwings Avionics, a company that manufactures sophisticated radar sets for commercial aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan. Required: Classify each cost listed below as either a product cost or a period cost for purposes of preparing the financial statements for the bank. The cost of the memory chips used in a radar set. Factory heating costs. Factory equipment maintenance costs. Training costs for new administrative employees. The cost of the solder that is used in assembling the radar sets. The travel costs of the company's salespersons. Wages and salaries of factory security personnel. The cost of air-conditioning executive offices. Wages and salaries in the department that handles billing customers. Depreciation on the equipment in the fitness room used by factory workers. Telephone expenses incurred by factory management. The costs of shipping completed radar sets to customers. The wages of the workers who assemble the radar sets. The president's salary. Health insurance premiums for factory personnel.

Product Period Period Period Product Period Period Period Period Period Period Period Product Period Product

Fixed Cost Variable Cost Total Cost Average cost per cup of coffee served

$ $ $ $

Cups of Coffee Served in a Week 1800 1900 2000 1,100.00 $ 1,100.00 $ 1,100.00 468.00 $ 494.00 $ 520.00 1,568.00 $ 1,594.00 $ 1,620.00 0.87 $ 0.84 $ 0.81

The average cost per cup of coffee descreases over time. This happens because the variable cost doesn't increase as quickly

doesn't increase as quickly as the number of cups served, therefore the average cost of a cup of coffee decreases.

decreases.

Month January February March April May June July August September October November December

Occupancy-Days 2604 2856 3534 1440 540 1116 3162 3608 1260 186 1080 2046

Electrical Costs $ 6,257.00 $ 6,550.00 $ 7,986.00 $ 4,022.00 $ 2,289.00 $ 3,591.00 $ 7,264.00 $ 8,111.00 $ 3,707.00 $ 1,712.00 $ 3,321.00 $ 5,196.00

Variable Cost Fixed Cost

2 Another factor that might cause the v

$

1.87 $1,364

or that might cause the variable cost to vary, besides the number of occupancy-days, is unseasonable weather.

Cost Ex. Room service beverages 1 The salary of the head chef 2 The salary of the head chef 3 Room cleaning supplies 4 Flowers for the reception desk 5 The wages of the doorman 6 Room cleaning supplies Fire insurance on the hotel 7 building 8 Towels used in the gym

Cost Object A particular hotel guest The hotel's restaurant A particular restaurant customer A particular hotel guest A particular hotel guest A particular hotel guest The housecleaning department The hotel's gym The hotel's gym

Cost Type Direct Cost Indirect Cost X X X X X X X X X

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