Advanced Cost Accounting Week 4 Problem Set Two

December 24, 2016 Accounting

Problem 8.42
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Cost of units completed and transferred $31740
Cost of remaining inventory
DM $2856
CC $1998
Total Cost of WIP $4854
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Problem 12.35
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=200:300 or 2:3
Break even sales volume Medium quality bikes =3number of high quality bikes/2
Total costs=((Fixed costs + medium quality bikes)(Invoice cost for medium quality bikes + sales commission)) + (high quality bikes (invoice costs for high quality bikes +sales commission))
=(80000+(3number of high quality bikes/2))(375+.2700)+ (3number of high quality bikes/2)(235+.2500)
=80000+772.5(3number of high quality bikes/2)+335(3number of high quality bikes/2)
=80000+1107.5(3number of high quality bikes/2)
Total revenue = (medium quality bikes)(sales price for medium quality bikes) + (high quality bikes)(sales price for high quality bikes)
80000+1107.5(3number of high quality bikes/2)=(3x/2)(500) + 700(80000+1107.5(3number of high quality bikes/2)
(750+700)(3number of high quality bikes/2)=1450(3number of high quality bikes/2)
Medium quality bikes =80000/(1450-1107.5)=233.58
Break even for high quality bikes = 234
Break even for medium quality bikes = 351
TNI=50000 Total Revenue = 1450(3number of high quality bikes/2)
Total Cost=80000+1107.5(3number of high quality bikes/2)
Therefore TR-TC=TNI
(1450(3number of high quality bikes/2)) ??“ (80000+1107.5(3number of high quality bikes/2))=50000
1450(3number of high quality bikes/2) ??“ 1107.5(3number of high quality bikes/2)=130000
342.5(3number of high quality bikes/2)=130000
3number of high quality bikes/2=379.56
Number of high quality bikes=380
Number of medium bikes sold to make a profit of $50000=3*380/2=570
Should the market for high quality bikes drop 20%, Ken would sell 80%(200)=160 high quality bikes. Problem 12.55
The internal or floor space constraint is limited due to factors such as inventory placement and accessibility. Customers who are unable to easily find and access items are more likely to go elsewhere to buy their items. Even though University Bookstore controls the market, it is not the only retailer. Being that there are other options University Bookstore would best benefit from stocking its textbooks up front and visible during the time where students are mostly buying their books. The market share or external constraint can be overcame by offering better book prices and more University apparel and merchandise. The University Bookstore only has the advantage of market share because of its proximity to campus and its University-licensed products, offering more of these items will help them gain market share over the competitors. It would also be prudent to have these items in front of the store during busy periods to advertise their availability. A student shopping for apparel may purchase books at the store if they are convenient when shopping and vise versa.
The Theory of Constraints should pose a concern for Tammy and her manager. According to Hilton, et al. (2006) ???[a]ny operation whether commercial or non-profit needs to constantly analyze their business practices to maximize sales.??? (p432).
To effectively manage the bookstore and eliminate the effect of the constraints the bookstore must concentrate on the marketing of books and university-licensed apparel to students and alumni. This would include offering textbooks at a lower price and offering a higher buy back price to keep students coming in the store. It is also important to draw new customers in and keep current customers by offering new and seasonal university items. This will also give the bookstore one time clientele such as those attending a football game. By turning over inventory frequently people will stay interested.

Hilton, R.W., Maher, M.W., & Selto, F. H. (2006). Cost Management: Strategies for Business
Decisions (3rd ed.). , New York: The McGraw-Hill Companies.

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