Partial Listing Of Costs Incurred At Suebelle Corporation

Partial Listing Of Costs Incurred At Suebelle Corporation

Question 11a Partial Listing Of Costs Incurred At Suebelle Corporation

QUESTION 11 A partial listing of costs incurred at SueBelle Corporation during October appears below: Direct Materials$195,000Utilities, Factory$9,000Sales Commission$75,000Administrative Salaries$113,000Indirect Labor$30,000Advertising$119,000Depreciation of Production Equipment$28,000Direct Labor$105,000Depreciation of Administrative Equipment$44,000 Based on the information provided, answer the following questions: What is the total amount of product cost listed above? Show your work. What is the total amount of period cost listed above? Show your work. There is not a word length requirement for this question; however, you must show your work.

QUESTION 12 Bell Corporation reports that at an activity level of 8,700 units, its total variable cost is $653,109, and its total fixed cost is $658,416. Required: For the activity level of 8,800 units, assume this level is within the relevant range. Compute: the total variable cost, the total fixed cost, the total cost, the average variable cost per unit, the average fixed cost per unit, and the average total cost per unit. There is not a word length requirement for this question; however, you must show your work. QUESTION 13 Cosgrove Company, Inc. is a wholesaler that distributes a single product.

The company's revenues and expenses for the last three months are given below: Cosgrove Company Traditional Format Income Statement For the Three Months Ended June 30 April May June Sales in Units 3,000 3,7504,500 Sales Revenue420,000525,000630,000Cost of Goods Sold168,000210,000252,000Gross Margin252,000315,000378,000Selling and Administrative Expenses: Shipping Expense44,00050,00056,000 Advertising Expense70,00070,00070,000 Salaries and Commissions107,000125,000143,000 Insurance Expense9,0009,0009,000 Depreciation Expense42,00042,00042,000Total Selling and Administrative Expenses272,000296,000320,000Net Operating Income (Loss)$(20,000)$19,000$58,000 Required: Identify the fixed and variable costs associated with Cosgrove.

Calculate the average costs per month. There is not a word length requirement for this question; however, you must show your work. As a managerial accountant, you would have the opportunity to work for company that classifies itself as either service, merchandising, or manufacturing. Based on what you have learned from this unit, and based on your personal preferences, identify which type of company for which you would prefer to work as a managerial accountant. Be sure to provide specific reasoning to support your answer.

Your response must be at least 200 words in length. QUESTION 15 Based on your reading in this unit, explain how sunk costs create a barrier to entry into the market place. Your response must be at least 200 words in length.

Paper For Above instruction

The financial calculations and conceptual explanations required by this assignment revolve around understanding costs in managerial accounting, analyzing cost behavior at different activity levels, and examining the strategic implications of sunk costs in market entry. This paper addresses each of these aspects systematically, providing detailed work calculations, economic reasoning, and personal reflections to offer a comprehensive response to the questions posed.

Question 11a: Analysis of Costs at SueBelle Corporation

To determine the total product and period costs from the provided data, it is essential to understand the classifications of these costs. Product costs include direct materials, direct labor, and manufacturing overhead—costs that are directly related to the production process and are capitalized as inventory until sold. Period costs include selling, general, and administrative expenses that are expensed in the period incurred.

From the list, the direct materials ($195,000), direct labor ($105,000), depreciation of production equipment ($28,000), utilities for the factory ($9,000), and indirect labor ($30,000) qualify as product costs. Including these, the total product costs are calculated as:

• Direct Materials: $195,000
• Direct Labor: $105,000
• Manufacturing Overheads (Utilities, factory; Depreciation of production equipment; Indirect labor): $9,000 + $28,000 + $30,000 = $67,000

Thus, the total product costs sum up to:

$195,000 + $105,000 + $67,000 = $367,000

Similarly, period costs encompass administrative salaries ($113,000), advertising ($119,000), depreciation of administrative equipment ($44,000), and sales commissions ($75,000). These total to:

$113,000 + $119,000 + $44,000 + $75,000 = $351,000

Question 12: Cost Behavior and Analysis for Bell Corporation

Given the total costs at 8,700 units (variable: $653,109; fixed: $658,416), the assumptions within the relevant range allow us to infer that the total fixed cost remains constant at $658,416 regardless of the activity level. The variable cost per unit can be calculated by dividing the total variable cost by the number of units:

Variable cost per unit = $653,109 / 8,700 ≈ $75.09

For 8,800 units, the total variable cost is:

$75.09 × 8,800 ≈ $661,512

The total fixed cost remains unchanged at $658,416. The total cost at 8,800 units is then:

Total cost = Fixed costs + Variable costs = $658,416 + $661,512 ≈ $1,319,928

The average costs per unit are computed as:

• Average variable cost per unit: $75.09 (constant)
• Average fixed cost per unit: $658,416 / 8,800 ≈ $74.84
• Average total cost per unit: Total cost / units = $1,319,928 / 8,800 ≈ $150.00

Question 13: Cost Analysis and Personal Preferences in Managerial Accounting

Cosgrove Company's financial data reveal variable and fixed costs that influence profitability analysis. Variable costs include costs that vary directly with sales volume—such as the cost of goods sold and shipping expenses—while fixed costs include salaries, insurance, and depreciation, which remain constant across periods.

For example, Cost of Goods Sold (COGS) at $168,000 in June, with sales of 4,500 units, implies a variable cost per unit of:

$168,000 / 4,500 = $37.33

Similarly, shipping expenses of $56,000 in June are also variable per unit, computed as:

$56,000 / 4,500 ≈ $12.44

In contrast, administrative salaries and depreciation expenses are fixed, totaling $151,000 ($107,000 + $42,000). The monthly average costs and their implications for managerial decision-making can be analyzed to optimize profitability and resource allocation.

When choosing a company for employment as a managerial accountant, I prefer working for a manufacturing firm. Manufacturing companies provide a complex yet engaging environment where cost analysis, process improvement, and product costing are crucial. The integration of direct and indirect costs offers a rich landscape of managerial accounting practices, encouraging strategic decision-making and operational efficiency. Furthermore, manufacturing settings often require sophisticated cost systems and efforts to optimize production processes—areas that align with my skills and interests, offering ongoing professional development and rewarding problem-solving opportunities.

Question 15: Sunk Costs as Barriers to Market Entry

Sunk costs are non-recoverable expenses that have already been incurred and cannot be recovered regardless of future decisions. These costs create significant barriers to entry in the marketplace because they influence potential entrants’ perceptions of risk and financial viability. When a firm considers entering an industry, the presence of substantial sunk costs, such as high startup investments in technology, infrastructure, or branding, can deter new competitors from entering due to fear of initial losses and difficulty in recouping the money invested.

For example, industries like manufacturing or technology often require massive capital expenditures—factories, equipment, research and development—before any sales occur. These investments are sunk costs; once spent, they cannot be recovered if the firm fails or chooses to exit the market. Such costs can discourage new entrants who fear the possibility of not recovering their investments, especially if the market is already saturated or dominated by established players with significant economies of scale.

Furthermore, sunk costs can lead to a consolidation in industry, as existing firms may be reluctant to lose their initial investments by losing market share. This situation enhances the economic power of incumbents and creates a high entry barrier. Moreover, the commitment of large sunk costs can also influence pricing strategies, as existing firms may engage in predatory pricing to deter new competitors from entering or expanding in the market.

Overall, sunk costs impact market dynamics by increasing the initial financial risk and discouraging potential new competitors, thereby reducing competition and innovation. This protection of market incumbents through sunk costs can lead to less competitive markets, potentially resulting in higher prices and lower choices for consumers. Understanding the role of sunk costs is crucial for strategic planning, both for firms contemplating entry and for policymakers aiming to foster competitive markets.

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