Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 1, Problem 4E
Exercise 14-4 Cost classifications for a service company C2
Listed below are costs of providing and airline service. Classify each cost as (a) either variable (V) or fixed (F), and (b) either (D) or indirect (I). Consider the cost object to be a flight. Flight attendants and pilots are paid based on hours of flight time.
| Cost | Variable or Fixed | Direct or indirect |
| Advertising……………… | ||
| Beverages as and snacks……………… | ||
| Regional vico prosident salary………………. | ||
| Foul and used in planes……………….. | ||
| Flight attendant wages………… | ||
| Pilot wages……………….. | ||
| Aircraft maintenance manager salary…………… | ||
| Customer service salaries…………… |
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
EX 15-5 Concepts and terminology Obj. 1, 2, 4
From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences:
Advertising costs are usually viewed as (period, product) costs.
Feedback is often used to (improve, direct) operations.
Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses).
A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object).
The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory).
Factory overhead costs combined with direct labor costs are called (prime, conversion) costs.
The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor
EX 15-7 Classifying costs in a service company Obj. 2
A partial list of the costs for Wisconsin and Minnesota Railroad, a short hauler of freight,…
Question 2) Textbook Exercise 13-19: Target prices, target costs, cost management.
13-19 Target prices, target costs, activity-based costing. Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016:
For 2016, Snappy buys 250,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $4 per tile. Assume Snappy has no fixed costs and no inventories.
Required:
Calculate Snappy’s operating income for 2016.
For 2017, retailers are demanding a 5% discount off the 2016 price. Snappy’s suppliers are only willing to give a 4% discount. Snappy expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Snappy’s operating income for 2017.
Suppose further that Snappy decides to make changes in its ordering and…
3-55 Step and Mixed Costs and Cost Drivers\\n\\nRefer to Nike’s 10-K report in Appendix C and “Item 1. Business.” Nike’s contract manufacturers make the vast majority of Nike’s footwear. Assume these costs are variable to Nike. Nike’s largest fixed costs are associated with its distribution system. Consider one of Nike’s three distribution and customer service facilities in the United States. List several examples of step-fixed costs and mixed costs at these centers. For each of the following activities at a distribution center, list one plausible cost driver:\\n\\nReceiving activity\\n\\nUnpacking incoming cases of footwear\\n\\nPicking and packing cases of footwear for shipment to retail accounts\\n\\nProcessing orders from retail accounts\\n\\nProviding customer service to retail accounts\\n\\nProcessing order changes from retail accounts\\n
Chapter 1 Solutions
Managerial Accounting
Ch. 1 - Prob. 1MCQCh. 1 - What is Ella Company’s current ratio? a.0.69...Ch. 1 - What is Ella Company’s acid-test ratio? a.2.39...Ch. 1 - What is Ella Company’s debt ratio? a. 25.78% b....Ch. 1 - What is Ella Company’s equity ratio? a.25.78%...Ch. 1 - Describe the managerial accountant’s role in...Ch. 1 - Distinguish between managerial and financial...Ch. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Distinguish between (a) factory overhead and (b)...
Ch. 1 - Prob. 6DQCh. 1 - What product cost is both a prime cost and a...Ch. 1 - APPLE Assume that we tour Apple’s factory where it...Ch. 1 - Prob. 9DQCh. 1 - Prob. 10DQCh. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - Prob. 13DQCh. 1 - Prob. 14DQCh. 1 - Prob. 15DQCh. 1 - Prob. 16DQCh. 1 - Prob. 17DQCh. 1 - What are the three categories of manufacturing...Ch. 1 - List several examples of factory overhead.Ch. 1 - Prob. 20DQCh. 1 - GOOGLE Prepare a proper title for the annual...Ch. 1 - Prob. 22DQCh. 1 - Prob. 23DQCh. 1 - Prob. 24DQCh. 1 - Prob. 25DQCh. 1 - Prob. 1QSCh. 1 - Prob. 2QSCh. 1 - Fixed and variable costs C2 Listed below are...Ch. 1 - QS 14-4 Direct and indirect costs C2
Diez Company...Ch. 1 - Classifying product costs C2 Identify each of the...Ch. 1 - QS 14-6 Product and period costs C3
Identify each...Ch. 1 - Prob. 7QSCh. 1 - Prob. 8QSCh. 1 - Prob. 9QSCh. 1 - Prob. 10QSCh. 1 - Prob. 11QSCh. 1 - Prob. 12QSCh. 1 - Prob. 13QSCh. 1 - Prob. 14QSCh. 1 - Prob. 15QSCh. 1 - Prob. 16QSCh. 1 - Raw materials inventory management A1 Nestlé...Ch. 1 - Exercise 14-1 Sources of accounting information C1...Ch. 1 - Prob. 2ECh. 1 - Exercise 14-3 Cost classifications for a service...Ch. 1 - Exercise 14-4 Cost classifications for a service...Ch. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Exercise 14-9 Preparing financial statements for a...Ch. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Prob. 14ECh. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Exercise 14-17 Lean business practice C6 Many...Ch. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 1PSACh. 1 - Prob. 2PSACh. 1 - Prob. 3PSACh. 1 - Prob. 4PSACh. 1 - Prob. 5PSACh. 1 - Prob. 1PSBCh. 1 - Prob. 2PSBCh. 1 - Problem 14-3B Schedule of cost of goods...Ch. 1 - Problem 14-4B Ending inventory computation and...Ch. 1 - Prob. 5PSBCh. 1 - Prob. 1SPCh. 1 - Prob. 1AACh. 1 - Both Apple and Google (Alphabet) invest in...Ch. 1 - Samsung’s 2017 annual report discloses the...Ch. 1 - Prob. 1BTNCh. 1 - Prob. 2BTNCh. 1 - Prob. 3BTNCh. 1 - Prob. 4BTNCh. 1 - Prob. 5BTNCh. 1 - Prob. 6BTN
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
- Cost of quality and value-added/non-value-added reports for a service company A. Using the information in Exercise 17, identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. B. Prepare a cost of quality report. Assume that sales are 5,000,000. (Round percentages to one decimal place.) C. Prepare a value-added/non-value-added analysis. D. Interpret the information in (D) and (C).arrow_forwardActivity-based costing for a service company Wells Fargo insurance Services (WFIS) is an insurance brokerage company that classified insurance products as either easy or difficult. Easy and difficult products were defined as follows: Easy: Electronic claims, few inquiries, mature product Difficult: Paper claims, complex claims to process, many inquiries, a new product with complex options The company originally allocated processing and service expenses on the basis of revenue. Under this traditional allocation approach, the product profitability report revealed the following: Easy Product Difficult Product Total Revenue 600 400 1,000 Processing and service expenses 420 280 700 Income from operations 180 120 300 Operating income margin 30% 30% 30% WFIS decided to use activity-based costing to allocate the processing and service expenses. The following activity-based costing analysis of the same data illustrates a much different profit picture for the two types of products: Easy Product Difficult Product Total Revenue 600 400 1,000 Processing and service expenses 183 517 700 Income from operations 417 (117) 300 Operating income margin 70% (29%) 30% Explain why the activity-based profitability report reveals different information from the traditional sales allocation report. Source: Dan Patras and Kevin Clancy, ABC in the Service Industry: Product Line Profitability at Acordia, Inc. As Easy as ABC Newsletter, issue 12. Spring 1993arrow_forwardExercise 6-45 (Algo) Predetermined Overhead Rates and Product Profitability (LO 6-3, 4) Social Media, Inc. (SMI) has two services for users. Toot!, which connects tutors with students who are looking for tutoring services, and TiX, which can be used to buy, sell, or exchange event tickets. For the following year, SMI expects the following results. Toot! TiX Total Users 14,900 21,600 36,500 Revenues $ 1,950,000 $ 2,000,000 $ 3,950,000 Engineering hours 10,125 8,125 18,250 Engineering cost $ 830,625 $ 948,750 $ 1,779,375 Administrative costs $ 1,423,500 Required: a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the engineering hours to allocate administrative costs. b. Based on the rates computed in requirement (a), what is the profit for each service? Required A Compute the predetermined overhead rate used to apply administrative costs to the two services assuming…arrow_forward
- Question 3 Part I Advent Corporation has implemented an Activity Based Costing System. The company wants to useABC on its two main products, V1 and V2, and three main activities as follows:ActivityCost Driver Overhead Amount Total Driver VolumeIssuing Purchase Orders # of Purchase Orders $ 150,000 50,000Reviewing Receiving Reports # of Receiving Reports $ 175,000 20,000Making Phone Calls # of Phone Calls $ 450,000 100,000During the year:Product V1 required 150 purchase orders; 150 receiving reports; and 200 phone calls.Product V2 required100 purchase orders; 400 receiving reports; and 350 phone calls. Required:a. Compute the pre-determined overhead rate for each cost pool. b. Compute the total manufacturing overhead cost for Product V1 and Product V2.arrow_forward14. Customer life-cycle costs: Select one: a. Are the replacement costs of using a product or service. b. Are the costs to the customer of buying and using a product until it is replaced. c. Are the same as the selling life-cycle prices. d. Focus on marketing costs. e. Are the costs the selling company incurs to satisfy the customer.arrow_forwardCommunication The controller of New Wave Sounds Inc. prepared the following product profitability report for management, using activity-based costing methods for allocating both the factory overhead and the marketing expenses. As such, the controller has confidence in the accuracy of this report. Home Theater Speakers Wireless Speakers Wireless Headphones Total Sales 1,500,000 1,200,000 900,000 3,600,000 Cost of goods sold 1,050,000 720,000 810,000 2,580,000 Gross profit 450,000 480,000 90,000 1,020,000 Marketing expenses 600,000 120,000 72,000 792,000 Income from operations (150,000) 360,000 18,000 228,000 In addition, the controller interviewed the vice president of marketing, who provided the following insight into the company's three products: The home theater speakers are an older product that is highly recognized in the marketplace. The wireless speakers are a new product that was just recently bunched. The wireless headphones are a new technology that has no competition in the marketplace, and it is hoped that they will become an important future addition to the companys product portfolio. Initial indications are that the product is well received by customers. The controller believes that the manufacturing costs for all three products are in line with expectations. Based on the information provided: 1. Calculate the ratio of gross profit to sales and the ratio of income from operations to sales for each product. 2. Write a brief (one page) memo using the product profitability report and the calculations in (1) to make recommendations to management with respect to strategies for the three products.arrow_forward
- Activity-based costing for a service company Safely First Insurance Company tarries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report: Safety First Insurance Company Product Profitability Report For the Year Ended December 31 Auto Workers Compensation Homeowners Premium revenue 5,750,000 6,240,000 8,160,000 Estimated claims 4,312,500 4,680,000 6,120,000 Underwriting income 1,437,500 1,560,000 2,040,000 Underwriting income as a percent of premium revenue 25% 25% 25% Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could he assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Activity Rates New policy processing 120 per new policy Cancellation processing 175 per cancellation Claim audits 320 per claim audit Claim disbursements processing 104 per disbursement Premium collection processing 24 per premium collected Activity-base usage data for each line of insurance were retrieved from the corporate records as follows: Auto Workers Compensation Homeowners Number of new policies 1,320 1,500 4,080 Number of canceled policies 480 240 2,160 Number of audited claims 385 120 960 Number of claim disbursements 480 216 840 Number of premiums collected 8,400 1,800 15,000 A. Complete the product profitability report through the administrative activities. Determine the income from operations as a percent of premium revenue, rounded to the nearest whole percent. B. Interpret the report.arrow_forwardEvaluating selling and administrative cost allocations Gordon Gecco Furniture Company has two major product lines with the following characteristics: Commercial office furniture: Few large orders, little advertising support, shipments in full truckloads, and low handling complexity Home office furniture: Many small orders, large advertising support, shipments in partial truckloads, and high handling complexity The company produced the following profitability report for management: The selling and administrative expenses are allocated to the products on the basis of relative sales dollars. Evaluate the accuracy of this report and recommend an alternative approach.arrow_forwardVariable costs and activity bases in decision making The owner of Warwick Printing, a printing company, is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: One Color Two Color Three Color Four Color Total Number of banners 212 274 616 698 1,800 Each color on the banner must be printed one at a time. Thus, for example, a four color banner will need to be run through the printing operation four separate times. The total production volume last year was 800 banners, as follows: One Color Two Color Three Color Total Number of banners 180 240 380 800 As you can see, the four-color banner is a new product offering for the upcoming year. The owner believes that the expected 1,000-unit increase in volume from last year means that direct labor expenses should increase by 125% (1,000 800). What do you think?arrow_forward
- Activity-based costing for a service company Safely First Insurance Company tarries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report: Safety First Insurance Company Product Profitability Report For the Year Ended December 31 Auto Workers Compensation Homeowners Premium revenue 5,750,000 6,240,000 8,160,000 Estimated claims 4,312,500 4,680,000 6,120,000 Underwriting income 1,437,500 1,560,000 2,040,000 Underwriting income as a percent of premium revenue 25% 25% 25% Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could he assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Activity Rates New policy processing 120 per new policy Cancellation processing 175 per cancellation Claim audits 320 per claim audit Claim disbursements processing 104 per disbursement Premium collection processing 24 per premium collected Activity-base usage data for each line of insurance were retrieved from the corporate records as follows: Auto Workers Compensation Homeowners Number of new policies 1,320 1,500 4,080 Number of canceled policies 480 240 2,160 Number of audited claims 385 120 960 Number of claim disbursements 480 216 840 Number of premiums collected 8,400 1,800 15,000 A. Complete the product profitability report through the administrative activities. Determine the income from operations as a percent of premium revenue, rounded to the nearest whole percent. B. Interpret the report.arrow_forwardIdentifying activity bases in an activity-based cost system Select Foods Inc. uses activity-based costing to determine product costs. For each activity listed in the left column, match an appropriate activity base from the right column. You may use items in the activity-base list more than once or not at all. Activity Activity Base Accounting reports Engineering change orders Customer return processing Kilowatt hours used Electric power Number of accounting reports Human resources Number of customers Inventory control Number of customer orders Invoice and collecting Number of customer returns Machine depreciation Number of employees Materials handling Number of inspections Order shipping Number of inventory transactions Payroll Number of machine hours Production control Number of material moves Production setup Number of payroll checks processed Purchasing Number of production orders Quality control Number of purchase orders Sales order processing Number of sales orders Number of setupsarrow_forwardConstruct and interpret a product profitability report, allocating selling and administrative expenses Naper Inc. manufactures power equipment. Naper has two primary productsgenerators and air compressors. The following report was prepared by the controller for Napers senior marketing management for the year ended December 31: Generators Air Compressors Total Revenue 4,200,000 3,000,000 7,200,000 Cost of goods sold 2,940,000 2,100,000 5,040,000 Gross profit 1,260,000 900,000 2,160,000 Selling and administrative expenses 610,000 Income from operations 1,550,000 The marketing management team was concerned that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verify this, the controller was asked to prepare a complete product profitability report, using activity-based costing. The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale customer service. The controller was able to determine the activity base and activity rate for each activity, as follows: Activity Activity Base Activity Rate Sales order processing Sales orders 65 per sales order Post-sale customer service Service requests 200 per customer service request The controller determined the following activity-base usage information about each product: Generators Air Compressors Number of sales orders 3,000 4,000 Number of service requests 225 550 A. Determine the activity cost of each product for sales order processing and post-sale customer service activities. B. Use the information in (A) to prepare a complete product profitability report dated for the year ended December 31. Compute the gross profit to sales and the income from operations to sales percentages for each product. (Round to two decimal places.) C. Interpret the product profitability report. How should management respond to the report?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsFinanceISBN:9781337552127Author:Ulric J. Gelinas, Richard B. Dull, Patrick Wheeler, Mary Callahan HillPublisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Finance
ISBN:9781337552127
Author:Ulric J. Gelinas, Richard B. Dull, Patrick Wheeler, Mary Callahan Hill
Publisher:Cengage Learning
Markup and Markdown; Author: GreggU;https://www.youtube.com/watch?v=EFtodgI46UM;License: Standard Youtube License