Gen Combo Fundamentals Of Cost Accounting; Connect Access Card
6th Edition
ISBN: 9781260848700
Author: William N. Lanen Professor, Shannon Anderson Associate Professor, Michael W Maher
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 1, Problem 40P
Cost Data for Managerial Purposes
You have been asked by two of your friends, Marco and Jenna, to settle a (friendly) argument they are having about splitting the cost of a road trip during Spring Break. They will take Jenna’s car and they have agreed to “share the cost” of the drive. Based on current fuel prices and the mileage of Jenna’s car, the fuel cost is roughly $0.20 per mile. Marco says he should pay about $0.13 per mile for the fuel, plus a small amount ($0.03) for other variable costs (such as routine maintenance). Jenna says that he should pay 50 percent of $0.56, which is the current rate the Internal Revenue Service (IRS) allows for the use of a personal car. In addition to fuel and routine maintenance, the IRS rate is designed to cover “wear and tear” on the car. Marco argues that the wear and tear would occur whether he went on the trip or not.
Required
- a. What would you recommend Marco pay Jenna per mile for sharing the car? Explain briefly.
- b. Would your answer to Requirement (a) change depending on whether or not Jenna was going to take the trip, whether or not Marco went along? Explain briefly.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Ethics and pricing. Instyle Interior Designs has been requested to prepare a bid to decorate four model homes for a new development. Winning the bid would be a big boost for sales representative Jim Doogan, who works entirely on commission. Sara Groom, the cost accountant for Instyle, prepares the bid based on the following cost information:
Based on the company policy of pricing at 120% of full cost, Groom gives Doogan a figure of $165,600 to submit for the job. Doogan is very concerned. He tells Groom that at that price, Instyle has no chance of winning the job. He confides in her that he spent $600 of company funds to take the developer to a basketball playoff game where the developer disclosed that a bid of $156,000 would win the job. He hadn’t planned to tell Groom because he was confident that the bid she developed would be below that amount. Doogan reasons that the $600 he spent will be wasted if Instyle doesn’t capitalize on this valuable information. In any case, the company…
Ethics and a Cost-Volume-Profit Application
Danna Lumus, the marketing manager for a division that produces a variety of paper products, is considering the divisional manager's request for a sales forecast for a new line of paper napkins. The divisional manager has been gathering data so that he can choose between two different production processes. The first processwould have a variable cost of $10 per case produced and total fixed cost of $100,000. The second process would have a variable cost of $6 per case and total fixed cost of $200,000. The selling pricewould be $30 per case. Danna had just completed a marketing analysis that projects annual sales of 30,000 cases.
Danna is reluctant to report the 30,000 forecast to the divisional manager. She knows that the first process would be labor intensive, whereas the second would be largely automated with little labor and no requirement for an additional production supervisor. If the first process is chosen, Jerry Johnson, a good friend,…
Estimating costs based on behavior patterns Terry estimates that the costs of insurance, license, and depreciation to operate his car total $430 per month and that the gas, oil, and maintenance costs are 80 cents per mile. Terry also estimates that, on average, he drives his car 2,000 miles per month.
Required:a. How much cost would Terry expect to incur during July if he drove the car 2,342 miles?b. Would it be meaningful for Terry to calculate an estimated average cost per mile for a typical 2,000-mile month? Explain your answer.
Chapter 1 Solutions
Gen Combo Fundamentals Of Cost Accounting; Connect Access Card
Ch. 1 - Explain why it is important to consider the...Ch. 1 - Explain the differences between financial...Ch. 1 - Place the letter of the appropriate accounting...Ch. 1 - Distinguish among the value chain, the supply...Ch. 1 - Who are the customers of cost accounting?Ch. 1 - How can cost accounting information together with...Ch. 1 - Prob. 7RQCh. 1 - Does the passage of Sarbanes-Oxley mean that codes...Ch. 1 - Prob. 9CADQCh. 1 - Prob. 10CADQ
Ch. 1 - Prob. 11CADQCh. 1 - Its not the job of accounting to determine...Ch. 1 - Prob. 13CADQCh. 1 - How would cost accounting information help...Ch. 1 - Airlines are well known for using complex pricing...Ch. 1 - Hostess Brands makes a variety of baked goods just...Ch. 1 - What potential conflicts might arise between...Ch. 1 - Refer to the Business Application discussion of...Ch. 1 - Prob. 19CADQCh. 1 - Why does a cost accountant need to be familiar...Ch. 1 - Will studying cost accounting increase the chances...Ch. 1 - Prob. 22CADQCh. 1 - Value Chain and Classification of Costs Apple...Ch. 1 - Pfizer Inc., a pharmaceutical firm, incurs many...Ch. 1 - Tesla, Inc., incurs many types of costs in its...Ch. 1 - Prob. 26ECh. 1 - Accounting Systems McDonalds is a major company in...Ch. 1 - Accounting Systems Ford Motor Company manufactures...Ch. 1 - Cost Data for Managerial Purposes As an analyst at...Ch. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Refer to the information in Exercise 1-31. The...Ch. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Trends in Cost Accounting Required For each cost...Ch. 1 - Prob. 35ECh. 1 - Prob. 36ECh. 1 - Refer to the information in Exercise 1-32. Jon...Ch. 1 - Prob. 38PCh. 1 - Cost Data for Managerial Purposes Imperial Devices...Ch. 1 - Cost Data for Managerial Purposes You have been...Ch. 1 - Prob. 41PCh. 1 - Cost Data for Managerial Purposes Campus Package...Ch. 1 - Cost Data for Managerial Purposes KC Services...Ch. 1 - Cost Data for Managerial Purposes B-You is a...Ch. 1 - Cost Data for Managerial Purposes Toms Tax...Ch. 1 - Gilman’s Café is a popular restaurant in a local...Ch. 1 - Prob. 47PCh. 1 - Prob. 48PCh. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Cost Data for Managerial PurposesFinding Unknowns...Ch. 1 - Prob. 51PCh. 1 - Prob. 52PCh. 1 - Prob. 53ICCh. 1 - Miller Cereals is a small milling company that...Ch. 1 - Before Miller Cereals can introduce the new...Ch. 1 - The following story is true except that all names...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- As manager of the St. Cloud Theatre Company, you have decided that concession sales will support themselves. The following table provides the information you have been able to put together thus far: Item Selling Price Variable Cost % of Revenue Soft Drink $1.25 $0.65 26 Wine $2.00 $0.90 24 Coffee $1.50 $0.40 30 Candy $1.20 $0.25 20 Last year's manager, Scott Ellis, has advised you to be sure to add 10% of variable cost as a waste allowance for all categories. You estimate labor cost to be $250.00 (5 booths with 2 people each). Even if nothing is sold, your labor cost will be $250.00, so you decide to consider this a fixed cost. Booth rental, which is a contractual cost at $60.00 for each booth per night, is also a fixed cost. a) Based on the information available, the per night break-even point in…arrow_forwardCommon costs. Tate Inc. and Booth Inc. are two small manufacturing companies that are considering leasing a cutting machine together. If Tate rents the machine on its own, it will cost $26,000. If Booth rents the machine alone, it will cost $14,000. If they rent the machine together, the cost will decrease to $36,000.arrow_forwardDifferential Costing As pointed out earlier in Heres the Real Kicker, Kicker changed banks a couple of years ago because the loan officer at its bank moved out of state. Kicker saw that as an opportunity to take bids for its banking business and to fine-tune the banking services it was using. This problem uses that situation as the underlying scenario but uses three banks: FirstBank, Community Bank, and RegionalOne Bank. A set of representative data was presented to each bank for the purpose of preparing a bid. The data are as follows: Checking accounts needed: 6 Checks per month: 2,000 Foreign debits/credits on checking accounts per month: 200 Deposits per month: 300 Returned checks: 25 per month Credit card charges per month: 4,000 Wire transfers per month: 100, of which 60 are to foreign bank accounts Monthly credit needs (line of credit availability and cost): 100,000 average monthly usage These are overall totals for the six accounts during a month. Internet banking services? Knowledgeable loan officer? Responsiveness of bank? FirstBank Bid: Checking accounts: 5 monthly maintenance fee per account 0.10 foreign debit/credit 0.50 earned for each deposit 3 per returned check Credit card fees: 0.50 per item Wire transfers: 15 to domestic bank accounts, 50 to foreign bank accounts Line of credit: Yes, this amount is available, interest charged at prime plus 2%, subject to a 6% minimum interest rate Internet banking services? Yes, full online banking available: 15 one-time setup fee for each account 20 monthly fee for software module The loan officer assigned to the potential Kicker account had 10 years of experience with medium to large business banking and showed an understanding of the audio industry. Community Bank Bid: Checking accounts: No fees for the accounts, and no credits earned on deposits 2.00 per returned check Credit card fees: 0.50 per item, 7 per batch processed. Only manual processing was available, and Kicker estimated 20 batches per month Wire transfers: 30 per wire transfer Line of credit: Yes, this amount is available: interest charged at prime plus 2% subject to a 7% minimum interest rate Internet banking services? Not currently, but within the next 6 months The loan officer assigned to the potential Kicker account had 4 years of experience with medium to large business banking, none of which pertained to the audio industry. RegionalOne Bank Bid: Checking accounts: 5 monthly maintenance fee per account to be waived for Kicker 0.20 foreign debit/credit 0.30 earned for each deposit 3.80 per returned check Credit card fees: 0.50 per item Wire transfers: 10 to domestic bank accounts, 55 to foreign bank accounts Line of credit: Yes, this amount is available: interest charged at prime plus 2% subject to a 6.5% minimum interest rate Internet banking services? Yes, full online banking available: one-time setup fee for each account waived for Kicker 20 monthly fee for software module The loan officer assigned to the potential Kicker account had 2 years of experience with large business banking. Another branch of the bank had expertise in the audio industry and would be willing to help as needed. This bank was the first one to submit a bid. Required: 1. Calculate the predicted monthly cost of banking with each bank. Round answers to the nearest dollar. 2. CONCEPTUAL CONNECTION Suppose Kicker felt that full online Internet banking was critical. How would that affect your analysis from Requirement 1? How would you incorporate the subjective factors (e.g., experience, access to expertise)?arrow_forward
- Identifying Fixed, Variable, Mixed, and Step Costs Consider each of the following independent situations: a. A computer service agreement in which a company pays 150 per month and 15 per hour of technical time b. Fuel cost of the companys fleet of motor vehicles c. The cost of beer for a bar d. The cost of computer printers and copiers at your college e. Rent for a dental office f. The salary of a receptionist in a law firm g. The wages of counter help in a fast-food restaurant h. The salaries of dental hygienists in a three-dentist office. One hygienist can take care of 120 cleanings per month. i. Electricity cost which includes a 15 per month billing charge and an additional amount depending on the number of kilowatt-hours used Required: 1. For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost. (Hint: First, consider what the driver or output measure is. If additional assumptions are necessary to support your cost type decision, be sure to write them down.) Example: Raw materials used in productionVariable cost 2. CONCEPTUAL CONNECTION Change your assumption(s) for each situation so that the cost type changes to a different cost type. List the new cost type and the changed assumption(s) that gave rise to it. Example: Raw materials used in production. Changed assumptionthe materials are difficult to obtain, and a years worth must be contracted for in advance. Now, this is a fixed cost. (This is the case with diamond sales by DeBeers Inc. to its sightholders. See the following website for information: www.keyguide.net/sightholders/.)arrow_forwardColin OShea has a carpentry shop that employs 4 carpenters. Colin received an order for 1,000 coffee tables. The coffee tables have a round table top and four decorative legs. An offer for $500 per table was received. Colin found an unfinished round table top that he could buy for $50 each. A. Using this quantitative cost data to make the table top, should Colin buy the table top or make it? B. What qualitative factors would be included in your decision. B. Can the vendor make it to the same quality standards? Can it be completed on time? Is there idle capacity in the factory that could be used?arrow_forwardEthics 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?arrow_forward
- The accounting department at the corporate office has provided you with some historical cost data. Economy rentals cost $17.10 per day while luxury vehicles cost $25.12 per day. Regardless of vehicle type, a rental contract requires $8.90 for reconditioning. Additional vehicles can be delivered from the regional hub at a cost of $35/vehicle, on top of the costs above. Do you have any concerns about using this accounting data to set prices? Hint: Consider the difference between average and marginal cost. In addition to answering the questions above, provide pricing recommendations for economy vehicles for the next four weeks.arrow_forwardQuestion 3 Assume that HASF furniture Inc., as described, currently purchases the chair cushions for its lawn set from an outside vendor for $30 per set. Modern Furniture’s chief operations officer wants an analysis of the comparative costs of manufacturing these cushions to determine whether bringing the manufacturing in-house would save the firm money. Additional information shows that if Modern furniture’s were to manufacture the cushions, the materials cost would be $16 and the labor cost would be $10 per set and that it would have to purchase cutting and sewing equipment, which would add $25,000 to annual fixed costs. NOTE: No need to enter comma between numbers Required Computation for 10,000 units What amount should have been inccrued if company produce 10,000 units What amount should have been inccrued if company purhcase 10,000 units from outside What amount company save if company make 10,000 cushionsarrow_forwardCost-plus, target pricing, working backward. The new CEO of Rusty Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markup percentage on full cost for this product. The new CEO has a plan to reduce fixed costs by $225,000 and variable costs by $0.30 per unit while continuing to produce and sell 500,000 units. Using the same markup percentage as in requirement 1, calculate the new selling price. Assume the CEO institutes the changes in requirement 2 including the new selling price. However, the reduction in variable cost has resulted in lower product quality resulting in 5% fewer units being sold compared with before the change. Calculate operating income (loss). What concerns, if any, other than the quality problem described in requirement 3, do you see in implementing the…arrow_forward
- As manager of the St. Cloud Theatre Company,you have decided that concession sales will support themselves.The following table provides the information you have been ableto put together thus far:ITEM SELLING PRICE VARIABLE COST % OF REVENUESoft drink $1.00 $.65 25Wine 1.75 .95 25Coffee 1.00 .30 30Candy 1.00 .30 20Last year’s manager, Jim Freeland, has advised you to be sureto add 10% of variable cost as a waste allowance for all categories.You estimate labor cost to be $250.00 (5 booths with 2 peopleeach). Even if nothing is sold, your labor cost will be $250.00, soyou decide to consider this a fixed cost. Booth rental, which is acontractual cost at $50.00 for each booth per night, is also a fixedcost.a) What is the break-even volume per evening performance?b) How much wine would you expect to sell each evening at thebreak-even point?arrow_forwardUsing sensitivity analysis Mi Tierra Driving School charges $680 per student to prepare and administer written and driving tests. Variables costs of $408 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of $63,920 include the training facility and fleet of cars. Requirements For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided: Breakeven point with no change in information. Decrease sales price to $544 per student. Decrease variable costs to $340 per strident Decrease fixed costs to $53,040. 2. Compare the impact of changes in the sales price, variable costs and fixed costs on the contribution margin per unit and the breakeven point in units.arrow_forwardA furniture company manufactures desks and chairs. Each desk uses four units of wood, and each chair uses three units of wood. A desk contributes $250 to profit, and a chair contributes $145. Marketing restrictions require that the number of chairs produced be at least four times the number of desks produced. There are 2,000 units of wood available. Use Solver to maximize the company's profit. a. What is the optimized company's profit? Use SolverTable to see what happens to the decision variables and the total profit when the availability of wood varies from 1,000 to 3,000 in 100-unit increments. Based on your findings, how much would the company be willing to pay for each extra unit of wood over its current 2,000 units? How much profit would the company lose if it lost any of its current 2,000 units? Round the answer to a whole dollar amount.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Elements of cost | Direct and Indirect: Material, Labor, & Expenses; Author: Educationleaves;https://www.youtube.com/watch?v=UFBaj6AHjHQ;License: Standard youtube license