Home Entertainment Center (HEC) operates a large store in San Francisco. The store has both a video section and a music (compact disks and tapes) section. HEC reports revenues for the video section separately from the music section. Classify each cost item (A-H) as follows: a. Direct or indirect (D or I) costs with respect to the total number of videos sold. b. Variable or fixed (V or F) costs with respect to how the total costs of the video section change as the total number of videos sold changes. (Uf in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of videos sold.) You will have two answers (D or I and V or F) for each of the following items in the table below: Cost Item D or I V or F A. Annual retainer paid to a video distributor B. Electricity costs of the HEC store (single bill covers entire store) C. Costs of videos purchased for sale to customers D. Subscription to Video Trends magazine E. Leasing of computer software used for financial budgeting at the HEC store F. Cost of popcorn provided free to all customers of the HEC store G. Earthquake insurance policy for the HEC store H. Freight-in costs of videos purchased by HEC

Home Entertainment Center (HEC) operates a large store in San Francisco. The store has both a video section and a music (compact disks and tapes) section. HEC reports revenues for the video section separately from the music section. Classify each cost item (A-H) as follows: a. Direct or indirect (D or I) costs with respect to the total number of videos sold. b. Variable or fixed (V or F) costs with respect to how the total costs of the video section change as the total number of videos sold changes. (Uf in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of videos sold.) You will have two answers (D or I and V or F) for each of the following items in the table below: Cost Item D or I V or F A. Annual retainer paid to a video distributor B. Electricity costs of the HEC store (single bill covers entire store) C. Costs of videos purchased for sale to customers D. Subscription to Video Trends magazine E. Leasing of computer software used for financial budgeting at the HEC store F. Cost of popcorn provided free to all customers of the HEC store G. Earthquake insurance policy for the HEC store H. Freight-in costs of videos purchased by HEC

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 14E: Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving...

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Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price): Required: 1. Prepare a cost report for the year ending 20x1 that shows value-added costs, non-value-added costs, and total costs for each activity. 2. Explain why expediting products and storing goods are non-value-added activities. 3. What if receiving cost is a step-fixed cost with each step being 1,500 orders whereas assembly cost is a variable cost? What is the implication for reducing the cost of waste for each activity?
The Evendale Store is one of many stores owned and operated by the company. The Apparel Department is one of many departments at the Evendale Store. The central warehouse serves all of the company’s stores. Required: 1. What is the total amount of the costs listed above that are direct costs of the Apparel Department? 2. What is the total amount of the costs listed above that are direct costs of the Evendale Store? 3. What is the total amount of the Apparel Department’s direct costs that are also variable costs with respect to total departmental sales?
Mierlo-Hout manufactures two types of video cameras, RC1 and RC2. The costs for the products are shown herebelow: RC1 RC2 Units sold 800 2,200 Unit sales price $200 $350 variable cost per unit Raw material Labor $60 $45 $90 $66 Total fixed costs = $40,000 Required: Compute the contribution margin per unit for each of RC1 and RC2. Assuming the fixed costs are allocated based on the units produced. Compute the selling price per unit of each type in order to achieve a profit margin of 40%. Assume that Mierlo-Hout has a maximum working labor capacity of 5,000 labor hours. Labour hours are paid at a rate of $30 per hour. Which of the two products RC1 or RC2 is most profitable for the company? Show all your calculationsin in a clear and organized manner.
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Essential College Supplies (ECS) is a store on the campus on a large Midwestern university. The store has both an apparel section (t-shirts with the school logo) and a convenience section. ECS reports revenues for the apparel section separately from the convenience section. Requirement Classify each cost item (A-H) as follows: a. Direct or indirect (D or I) costs of the total number of t-shirts sold. b. Variable or fixed (V or F) costs of how the total costs of the apparel section change as the total number of t-shirts sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of t-shirts sold.) Requirement a. Classify each cost item (A-H) as direct or indirect (D or I) costs of the total number of t-shirts sold. Cost Item D or I A. Annual fee for licensing the school logo B. Cost of store manager's salary C.…
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) Olson Corporation, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers. Instructions a. 1. What criteria should be used to determine which of Olson’s costs are inventoriable? 2. Are Olson’s administrative costs inventoriable? Defend your answer. b. 1. Olson uses LIFO and the lower-of-cost-or-market rule for its wholesale inventories. What are the theoretical arguments for that rule? 2. The replacement cost of the inventories is below the net realizable value less a normal profit margin, which, in turn, is below the original cost. What amount should be used to value the inventories? Why? c. Assume instead that Olson calculates the estimated cost of its ending inventories held for sale at retail using the conventional retail inventory method. How would Olson treat the beginning inventories and net markdowns in calculating the cost ratio used to determine its ending inventories? Why?
Assume you are the warehouse manager for Vinnies Vinyls, a multi-location business specializing in vinyl records. Vinniess operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to Vinnies stores. The manager of the West store has some concerns relating to the stores financial performance and has asked for your help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. (Hint: it may be helpful to perform a vertical analysis.)
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