Bret's Restaurant and Pie Shop needs help defining the costs for his business. He also wants to know which costs are relevant or irrelevant to his decision. Identify each cost as relevant or irrelevant. Then identify the type of cost (sunk, fixed, variable, or opportunity).
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- Frank Pepe’s Restaurant and Pie Shop needs help defining the costs for his business. Frank also wants to know which costs are relevant or irrelevant to his decision making. Identify each cost as relevant or irrelevant. Then identify the type of cost (sunk, fixed, variable, or opportunity). Cost Relevant or irrelevant sunk, fixed, variable, or opportunity Rent baker wages franks culinary school tuition Berries for pies paiting dining area last year franks decision not to attend graduate schoolYou are the owner of your own company. You want to employ new workers and also buy a delivery van. Finally, you decide to employ new workers instead of buying a deliver van. Which economic concept is implicit in the above statement? Economic cost Accounting cost Opportunity cost Marginal costConsider McDonald’s for a moment and list an example of each of the following costs that would be incurred by a McDonald’s restaurant: (a) a fixed cost, (b) variable cost, and (c) mixed cost. Please be specific and explain why each is a good fit in that category. (Note: For the variable cost on your list, please identify the activity base (driver))
- a. Prepare a schedule to show the differential costs per cookie. b. Should mel continue to buy the cookies?What benefits and drawbacks are there for a business that uses a Standard/Traditional Costing model? What benefits and drawback are there for a business that uses an Activity Based Costing (ABC) model? If you owned a small manufacturing business with relatively high volume and multiple product lines, would you implement an ABC model? Why? As you get ready to reflect on these questions, don't forget that the best answers are attempts to apply the concept to a small business and explore how a standard/traditional costing or activity-based costing system would/could be used. What are the benefits and the risks - or how could you adapt it to get the best of both? Don't forget that, when you draw a blank on a question (or any part of it), take a quick look at the concept on the internet or in the Post Online Library. There will be some great inspiration there that will help you out AND lend some different perspective on the matter! (Don't forget to cite anything that you use!)Required information Skip to question [The following information applies to the questions displayed below.] Zenon Computer competes at the retail level on the basis of customer service. It has invested significant resources in its customer service department. Recently, the company has installed a traditional activity-based costing (ABC) system to provide better cost information for pricing, decision making, and customer profitability analysis. Most of the costs of running the customer service department are considered committed (i.e., short-term fixed) costs (principally, personnel and equipment costs). The budgeted cost for the upcoming period is $832,000. Activity analysis, recently conducted when the ABC system was implemented, revealed the following information: Activities Percentage of Employee Time Estimated (Budgeted) Cost Driver Quantity Handling customer orders 75% 8,320 customer orders Processing customer complaints 10 416 customer complaints Conducting customer credit checks…
- Cost Behavior, High-Low Method, Pricing Decision Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firms founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide basic accounting services for small businesses located in the barrio. He wants to price the services at cost. Since the clinic is brand new, it has no experience to go on. Carlos decided to operate the clinic for 2 months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of 25, half the amount charged by Fonseca, Ruiz, and Dunn for professional services. The accounting services clinic opened on January 1. During January, the clinic had 120 hours of professional service. During February, the activity was 150 hours. Costs for these two levels of activity usage are as follows: Required: 1. Classify each cost as fixed, variable, or mixed, using hours of professional service as the activity driver. 2. Use the high-low method to separate the mixed costs into their fixed and variable components. (Note: Round variable rates to two decimal places and fixed amounts to the nearest dollar.) 3. Luz Mondragon, the chief paraprofessional of the clinic, has estimated that the clinic will average 140 professional hours per month. If the clinic is to be operated as a nonprofit organization, how much will it need to charge per professional hour ? How much of this charge is variable? How much is fixed? (Note: Round answers to two decimal places.) 4. CONCEPTUAL CONNECTION Suppose the accounting center averages 170 professional hours per month. How much would need to be charged per hour for the center to cover its costs ? Explain why the per-hour charge decreased as the activity output increased. (Note: Round answers to two decimal places.)Ethics in Action Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielles first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis and determined a present value index of 0.75. The plant manager, Jerrod Moore, is very intent on purchasing the warehouse because he believes that more storage space is needed. Jerrod asks Danielle into his office and the following conversation takes place: Jerrod: Danielle, youre new here, arent you? Danielle: Yes, I am. Jerrod: Well, Danielle, Im not at all pleased with the capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I dont get it, where am I going to place our output? Danielle: Well, we need to get product into our customers hands. Jerrod: I agree, and we need a warehouse to do that. Danielle: My analysis does not support constructing a new warehouse. The numbers dont lie; the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse does not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse. Jerrod: The headquarters people will not allow me to build the warehouse if the numbers dont add up. You know as well as I that many assumptions go into your net present value analysis. Why dont you relax some of your assumptions so that the financial savings will offset the cost? Danielle: Im willing to discuss my assumptions with you. Maybe I overlooked something. Jerrod: Good. Heres what I want you to do. I see in your analysis that you dont project greater sales as a result of the warehouse. It seems to me that if we can store more goods, then we will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think youll see that the numbers will work out. Why dont you work it through and come back with a new analysis. Im really counting on you on this one. Lets get off to a good start together and see if we can get this project accepted. What is your advice to Danielle?Stan is opening a coffee shop next to Big State University. He knows that controlling his costs will be important to the success of the shop. He will not be able to work all the hours the shop is open, so the employees will need some guidelines to perform their jobs correctly. After talking to an accounting professor, he decides he needs a standard cost system for his shop. Describe the process Stan should follow in setting his standards for materials and labor.
- Assign the customer-related activity costs to each customer type using activity rates. Now calculate the profitability of each customer category. As a manager, how would you use this information? Emery Company sells small machine parts to heavy equipment manufacturers for an average price of 1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plants manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customers specifications have been met Inspection takes essentially the same time regardless of the type of part being produced. Emerys Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year): Required: 1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type. Calculate the profitability of each customer type. Discuss the problems with this measure of customer profitability.Problem 4-14 (Algo) Compute and Use Activity Rates to Determine the Costs of Serving Customers [LO4-2, LO4-3, LO4-4] Gino’s Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities: Activity Cost Pool Activity Measure Serving a party of diners Number of parties served Serving a diner Number of diners served Serving drinks Number of drinks ordered A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served. Data concerning these activities are shown below: Serving a Party Serving a Diner Serving Drinks…Q. Radhuni, a traditional bangla restaurant, incurs the following costs: a. Salaries of the food specialists who create new Biriyani for the restaurant chainb. Cost of “to-go” bags requested by customers who could not finish their meals in therestaurantRequired: Just Classify each of the cost items (a,b) as one of the business functions of the value chain