East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows: Cost Amount Cost Behavior Activity Rate Labor costs for loading and unloading railcars $175,582 Variable $46.00 per railcar Fuel costs 460,226 Variable 12.40 per train-mile Train crew labor costs 267,228 Variable 7.20 per train-mile Switchyard labor costs 118,327 Variable 31.00 per railcar Track and equipment depreciation 194,400 Fixed Maintenance 129,600 Fixed $1,345,363 Operating statistics from the management information system reveal the following for April: Atlanta/Baltimore Baltimore/Pittsburgh Pittsburgh/Atlanta Total Number of train-miles 12,835 10,200 14,080 37,115 Number of railcars 425 2,160 1,232 3,817 Revenue per railcar $600 $275 $440 The management of East Coast Railroad Company improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged. Required: a. Prepare a contribution margin report for the Atlanta/Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place.* b. Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost was the same as April. If an amount is zero, enter "0".* *Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows: Cost Amount Cost Behavior Activity Rate Labor costs for loading and unloading railcars $175,582 Variable $46.00 per railcar Fuel costs 460,226 Variable 12.40 per train-mile Train crew labor costs 267,228 Variable 7.20 per train-mile Switchyard labor costs 118,327 Variable 31.00 per railcar Track and equipment depreciation 194,400 Fixed Maintenance 129,600 Fixed $1,345,363 Operating statistics from the management information system reveal the following for April: Atlanta/Baltimore Baltimore/Pittsburgh Pittsburgh/Atlanta Total Number of train-miles 12,835 10,200 14,080 37,115 Number of railcars 425 2,160 1,232 3,817 Revenue per railcar $600 $275 $440 The management of East Coast Railroad Company improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged. Required: a. Prepare a contribution margin report for the Atlanta/Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place.* b. Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost was the same as April. If an amount is zero, enter "0".* *Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 17E: Variable costing income statement for a service company East Coast Railroad Company transports...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows:
| Cost | Amount | Cost Behavior | Activity Rate |
| Labor costs for loading and unloading railcars | $175,582 | Variable | $46.00 per railcar |
| Fuel costs | 460,226 | Variable | 12.40 per train-mile |
| Train crew labor costs | 267,228 | Variable | 7.20 per train-mile |
| Switchyard labor costs | 118,327 | Variable | 31.00 per railcar |
| Track and equipment |
194,400 | Fixed | |
| Maintenance | 129,600 | Fixed | |
| $1,345,363 |
Operating statistics from the management information system reveal the following for April:
|
|
Atlanta/Baltimore
|
Baltimore/Pittsburgh
|
Pittsburgh/Atlanta
|
Total
|
| Number of train-miles | 12,835 | 10,200 | 14,080 | 37,115 |
| Number of railcars | 425 | 2,160 | 1,232 | 3,817 |
| Revenue per railcar | $600 | $275 | $440 |
The management of East Coast Railroad Company improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged.
| Required: | |||
| a. | Prepare a contribution margin report for the Atlanta/Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place.* | ||
| b. | Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost was the same as April. If an amount is zero, enter "0".*
|
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