Module 3 homework assignment chapters 3 & 4 e2-39 (book/static) in

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Module 3 Homework Assignment

Chapters 3 & 4


E2-39 (book/static)

In practice, there is often a tendency to simplify approximations of cost-behavior patterns, even though the “true” underlying behavior is not simple. 


Cost of machining labor that tends to decrease as workers gain experience


Price of an increasingly scarce raw material as the quantity used increases


Guaranteed annual wage plan, whereby workers get paid for 40 hours of work per week even at zero or low levels of production that require working only a few hours weekly


Water bill, which entails a flat fee for the first 10,000 gallons used and then an increasing unit cost for every additional 10,000 gallons used


Availability of quantity discounts, where the cost per unit falls as each price break is reached


Depreciation of office equipment


Cost of sheet steel for a manufacturer of farm implements


Salaries of supervisors, where one supervisor is added for every 12 phone solicitors


Natural gas bill consisting of a fixed component, plus a constant variable cost per thousand cubic feet after a specified number of cubic feet are used

E4-37 (book/static)Chapter 4, p. 131

Classify each of the following as direct or indirect with respect to traceability to product and as variable or fixed with respect to whether the costs fluctuate in total as volume of production changes over wide ranges. Explain your classifications.

1. The cost of components that are assembled into a final product.

2. The cost of supplies consumed when maintenance is performed on machines.

3. The wages of machine operators who work on only one product.

4. The cost of training mechanics who service processing machinery.


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E4-40 (similar to)


Amando Plastics Company makes just two product lines, plastic casings for pens and plastic casings for cell phones. 

Based on new information, management has adjusted the percentages that apply to the first stage of the ABC system as shown below. 



Indirect Resource

Percent of Resource Used In

Plant and Machinery

Engineers and CAD Equipment

Processing activity



Production support activity




The company has implemented an Activity-Based Cost allocation system.

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