Week 3 Assignment from Textbook

Satisfactory Essays

Week 1 Assignment from Textbook: Chapter 20, 21 & 22
Esther Tate
July 19, 2015
Theresa Pekron

Exercise 20.1 – Accounting Terminology
Listed below are nine technical accounting terms introduced in this chapter:
Variable costs
Relevant range
Contribution margin
Break-even point
Fixed costs
Semi variable costs
Economics of scale
Sales mix
Unit contribution margin

Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the accounting term described, or answer “None” if the statement does not correctly describe any of the terms.

a. The level of sales at which revenue exactly equals costs and expenses. Break-even point.
b. Costs remain unchanged despite …show more content…

Whereas a sunk cost is an outlay that has been irrevocably incurred at some time in the past; sunk costs cannot be changed no matter what course of action is taken and are irrelevant for purposes of decision making involving the future. Sunk costs related to either remodeling of the store that would need to be taken into consideration include original costs of the current store (decorations, paint, shelves, displays, carpet) and designs that will need to be replaced or removed during either remodeling or closing.

Exercise 21.6 – Incremental Analysis: Make or Buy Decision
The cost to Swank Company of manufacturing 15,000 units of a particular part is $135,000, of which $60,000 is fixed and $75,000 is variable. The company can buy the part from an outside supplier for $6 per unit. Fixed costs will remain the same regardless of Swank’s decision. Should the company buy the part or continue to manufacture it? Prepare a comparative schedule in the format illustrated in Exhibit 21-6.

It would be more beneficial for the company to manufacture the part rather than buy it from an outside provider. The Comparative Schedule below demonstrates why:

Make the Part
Buy the Part
Incremental Analysis
Manufacturing costs:


$155,000 Fixed Manufacturing Overhead...

Purchase price of part

(2,000 * $8)…………………………

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