Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Solutions to exercises
9.12
Identifying variable, fixed- and mixed-cost functions.
(15 min)
1
See Solution Exhibit 9.12.
2
Contract 1: y = €50 Contract 2: y = €30 + €0.20 × D Contract 3: y = €1 × D where D is the number of kilometres travelled in the day.
3

Contract Cost
function
1 Fixed
2 Mixed
3 Variable
Solution Exhibit 9.12
Plots of car rental contracts offered by Bellingwolde.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
9.13
Matching graphs with descriptions of cost behaviour.
(20 min)
1 (
1)
2 (
7) A step-function cost rather than a fixed cost.
3 (
11)
4 (
2)
5 (
9)
6 (
12)
7 (
3)
8 (
9)
9.14
Account analysis method.
(20 min)
1
Variable costs Car wash labour
€240,000 Soap, cloth and supplies
32,000 Water
28,000 Power to move conveyor belt
72,000 Total variable costs
€372,000
Fixed costs Depreciation
€64,000 Supervision
30,000 Cashier
16,000 Total fixed costs
€110,000
2
Variable costs per carper car Total costs estimated for 90,000 cars = €110,000 + (€4.65
× 90,000) = €528,500.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
3
Average cost in 2010 =
372, 000 110, 000 482, 000 80, 000 80, 000
=

+ €

= €6.025 Average cost in 2011 =
528,500 90, 000

= €5.87 Some students may assume that power costs of running the continuously moving conveyor belt is a fixed cost. In this case the variable costs in 2010 will be €300,000 and the fixed costs be €182,000. The variable costs per car in 2010 = €300,000 ÷ 80,000 cars = €3.75 per car. Total costs for 90,000 cars in 2011 = €182,000 + (€3.75 × 90,000) = €519,500. The average cost of washing a car in 2011 = €519,500 ÷ 90,000 = €5.77.

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