Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 30

Resources Used versus Resources Supplied

Tri-State Mill uses a special sander to finish lumber. Data on the sander and its usage follow:

	Cost Driver Rate	Cost Driver Volume
Resources used
Energy&	$ 0.90 per machine-hour	6,000 machine-hours
Repairs&	$16.00 per job	600 jobs
Resources supplied&
Energy&	$ 6,900
Repairs&	12,000

Required

Compute unused resource capacity in energy and repairs for Tri-State Mill.

Step 1 of 4

Cost accounting system

This is a system designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.

Unused resource capacity

This is difference of resources supplied and resources used. Information about unused resource capacity is very important for cost management. It helps managers to explore the options of saving costs by improving and changing the production process.