Caramanzana, Camille C

BSM41
Assignment # 1
Case 3-52
1) Materials Usage
($94 x 20,000 units)
Direct Labor
($16 x 20,000 units)
Overhead
($80 x 20,000 units)
Selling
($7 x 20,000 units)
Total Variable Cost
# of units produced
Total unit variable cost

$
$
$
$
$
$

1,880,000.00
320,000.00
1,600,000.00
140,000.00
3,940,000.00
20,000.00
197.00

Garner Company should accept the order because the variable cost would result to $15
income per unit.

2)

3)

Coefficient Determination is important because it asses how well a model be useful for the
future outcomes. It also test the reliablity of the cost formulas. In all formulas, the overhead
activity has the lowest coefficient determination this may be a problem because only
56% of variability on overhead is explained by direct labor hours. This has bearing to the
requirement 1 because if the percentage is low it would effect the variability of the overhead
cost. The management should indentify the possible drivers in order to have immediate
action about this.

Materials Usage
($94 x 20,000 units)
Direct Labor
($16 x 20,000 units)
Overhead
X1 Labor
($85 x 20,000 units)
X2 Setups
($5000 x 12 units)
X3 Engr. Hrs
($300 x 600 units)
Selling
($7 x 20,000 units)
Total Variable Cost
# of units produced
Total unit variable cost

$
$

1,880,000.00
320,000.00

$
$
$
$
$
$
$

1,700,000.00
60,000.00
180,000.00
140,000.00
4,280,000.00
20,000.00
214.00

In this case, Garner Company should not accept the order because the variable cost would
result to $2 lose.
The other infromation I would like to have is the Step Cost Behavior because it displays the
the level output in advance. Through this, you can make sound decision because
you can easily monitor and handle the unecessary situations in case there are special orders.

July 14, 2015

MGNT ACTG 1

Mr. Sancho Castro

e overhead

he overhead

displays the

cial orders.