SOLUTIONS MANUAL for Cost Analysis for Engineers and Scientists (Manufacturing and Production Engine

Chapter 2: Cost Analysis Fundamentals Answers to Review Questions R2.1. (Total variable cost, VC) = (Variable cost per unit, V)  (Output quantity, Q) TC = V × Q R2.2. The total variable costs vary in direct proportion to the production levels changes, but remain fixed in per unit.

Fixed costs remain constant regardless of production levels.

Mixed costs are partially fixed and partially variable.

R2.3. Prime cost is the sum of direct material and direct labor costs.

Conversion cost is the sum of direct labor and overheads incurred to convert raw material into finished goods.

R2.4. Manufacturing Unit Cost or Average Cost.

R2.5. Conversion costs.

R2.7. Book value of the old machine.

R2.8. Product costs are the manufacturing costs of products and cannot be expensed in the period they incur. Otherwise, if the product is not sold in the period they are produced, then when they sold in a later period, there would not be any cost to deduct from the revenues they generate.

Period costs are expenses a company incur to operate its business as a result of which they sell their products. The cost of goods sold is also a period cost and deducted from the revenues in the period the products are sold.

R2.9. RMI → WIP → FGI → COGS. R2.10. The cost of goods manufactured the costs of all the units that a company completes and transfers to the finished goods inventory during an accounting period, and these costs are the value of the finished goods inventory (an asset), which appear on the balance sheet of the company.

Whereas the cost of goods sold is the manufacturing cost the items sold during the fiscal period.