3-13

SOLUTION
Enter the appropriate terms in the shaded cells in columns D and F.
Enter "Flex" to indicate flexible, "Com" to indicate committed, "Short" to
indicate short-term, and "Long" top indicate long-term.

Resource
Material usage
Labor usage
Machine operating costs
Machine capacity
Purchasing
Inspection
Material handling

Flex or Com
Type
Flex
Flex
Flex
Com
Com
Com
Com

Term
Short
Short
Short
Long
Short
Short
Short

Enter the appropriate amounts in the shaded cells in columns D and F.

2)
Activity
Material usage
Labor usage
Machining
Purchasing
Inspection
Material handling

Fixed
Cost

$ 30,000
100,000
150,000
150,000
$430,000

Activity
Machining
Purchasing

Cost Management

$125,000

Total
Cost
$ 75,000
25,000
55,000
100,000
150,000
150,000
$555,000

(Cost) or
Savings
$ (75,000)
(25,000)
(55,000)
25,000

Effect on resource spending

Material usage
Labor usage
Machining
Purchasing
Inspection
Material handling
Outside purchase

3)

Variable
Cost
$ 75,000
25,000
25,000

(15,000)
190,000
$ 45,000
Cost of
Activity Supplied
$ 30,000
100,000

Cost of
Activity Used
$ 25,000
100,000

Cost of
Unused Activity
$ 5,000
-

Hansen and Mowen

Inspection
Material handling

150,000
150,000
$430,000

146,250
138,000
$409,250

3,750
12,000
$ 20,750

Note that materials and labor are flexible resources and have no unused capacity.

Cost Management

Hansen and Mowen