SURVEY OF ACCOUNTING-ACCESS
4th Edition
ISBN: 9780077631536
Author: Thomas Edmonds
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 23P
Problem 2-19A Context-sensitive nature of cost behavior classifications
Seattle Bank’s start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $96,000 per year. The three tellers combined can process up to 90,000 customer transactions per year. It a branch does not attain a volume of at least 60,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 90,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations.
Required
- a. What is the relevant range of activity for new branch banks?
- b. Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 60,000, 70,000, 80,000, or 90,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fixed or a variable cost? Round your figures to two decimal points.
- c. Determine the amount of teller cost in total and the average teller cost per branch for Seattle Bank, assuming that the start-up division operates 10, 15, 20, or 25 branches. In this case (the activity base is the number of branches), is the teller cost a fixed or a variable cost?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem 15-1
The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $2.6 million. The cost of goods sold is estimated to be 40 percent of sales, and corporate overhead would increase by $306,000, not including the cost of either acquiring or leasing office space. The corporation will have to invest $2.6 million in office furniture, office equipment, and other up-front costs associated with opening the new office before considering the costs of owning or leasing the office space.
A small office building could be purchased for sole use by the corporation at a total price of $5.7 million, of which $900,000 of the purchase price would represent land value, and $4.8 million would represent building value. The cost of the building would be depreciated over 39 years. The corporation is in a 21 percent tax bracket. An investor is willing to purchase the same building and lease it to the corporation for $630,000 per year…
Exercise 10-32 (Algo) Activity-Based Costing of Customers (LO 10-3, 4)
Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers can write checks and use a network of automated teller machines. RSB&T earns revenue by investing the money deposited; currently, it averages 5.50 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.50 percent on all deposits. A recent study classified the bank’s annual operating costs into four activities.
Activity
Cost Driver
Cost
Driver Volume
Using ATM
Number of uses
$
1,950,000
2,600,000
uses
Visiting branch
Number of visits
1,170,000
195,000
visits
Processing transaction
Number of transactions
8,580,000
104,000,000
transactions
Managing functions
Total deposits
7,800,000
$
487,500,000
in deposits
Total overhead
$
19,500,000
Data on two representative customers follow.
Customer A
Customer B
ATM uses
100
200…
Exercise 6-17 (Algo) Goodwill effect on ROI LO 9
Assume that fast-food restaurants generally provide an ROI of 16%, but that such a restaurant near a college campus has an ROI of 18% because its relatively large volume of business generates an above-average turnover (sales/assets). The replacement value of the restaurant’s plant and equipment is $200,000. If you were to invest that amount in a restaurant elsewhere in town, you could expect a 16% ROI.Required:a-1. Would you be willing to pay more than $200,000 for the restaurant near the campus?
multiple choice
Yes
No
a-2. What is the maximum price you would be willing to pay for the business? (Do not round intermediate calculations.)
b. If you purchased the restaurant near the campus for $225,000 and the fair value of the assets you acquired was $200,000, identify the account along with its balance, that is used to record the additional amount paid over the fair value of the assets.
Chapter 11 Solutions
SURVEY OF ACCOUNTING-ACCESS
Ch. 11 - 1.Define fixed cost and variable cost and give an...Ch. 11 - Prob. 2QCh. 11 - 3.Define the term operating leverage and explain...Ch. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - 6.If volume is increasing, would a company benefit...Ch. 11 - Explain the risk and rewards to a company that...Ch. 11 - 9.Are companies with predominately fixed cost...Ch. 11 - 10.How is the relevant range of activity related...Ch. 11 - Which cost structure has the greater risk?...
Ch. 11 - 14.The president of Bright Corporation tells you...Ch. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Moore Entertainment sells souvenir T-shirts at...Ch. 11 - Prob. 12ECh. 11 - Prepare an income statement using the contribution...Ch. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Problem 2-19A Context-sensitive nature of cost...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 1ATCCh. 11 - Prob. 2ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATC
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
- 3-37 Uncertainty and expected costs. Kindmart is an international retail store. Kindmart’s managers areconsidering implementing a new business-to-business (B2B) information system for processing merchandiseorders. The current system costs Kindmart $2,000,000 per month and $55 per order. Kindmart has twooptions, a partially automated B2B and a fully automated B2B system. The partially automated B2B systemwill have a fixed cost of $6,000,000 per month and a variable cost of $45 per order. The fully automated B2Bsystem has a fixed cost of $14,000,000 per month and a variable cost of $25 per order.Based on data from the past two years, Kindmart has determined the following distribution onmonthly orders:Monthly Number of Orders - Probability300,000 - 0.25500,000 - 0.45700,000 - 0.301. Prepare a table showing the cost of each plan for each quantity of monthly orders.2. What is the expected cost of each plan?3. In addition to the information system’s costs, what other factors should Kindmart…arrow_forwardQuestion 3: An organization wants to prepare an aggregate plan for its manufacturing facility. The relevant information is shown as follows: Production time: 1 hour per unit Beginning inventory: 500 units Average labor cost: $10 per hour Safety stock: 50% of monthly demand Workweek: 5 days, Shift length: 8 hours Shortage cost: $20 per unit per month Days per month: 20 work days/month Carrying cost: $5 per unit per monthManagement prefers to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. Develop an aggregate plan that will meet the demand and other conditions of the problemarrow_forwardCase 7-65 Cost-Volume-Profit with Multiple Products, Sales Mix Changes, Changes in Fixed and Variable Costs Objective 1, 4 Artistic Woodcrafting Inc. began several years ago as a one-person, cabinet-making operation. Employees were added as the business expanded. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for the entire year. Unfortunately, the cabinet business in the region where Artistic is located is highly competitive. More than 200 cabinet shops are all competing for the same business. Artistic currently offers two different quality grades of cabinets: Grade I and Grade II, with Grade I being the higher quality. The average unit selling prices, unit variable costs, and direct fixed costs are as follows: Unit Price Unit Variable Cost Direct Fixed Cost Grade I $3,400 $2,686 $95,000 Grade II 1,600 1,328 95,000 Common…arrow_forward
- Exercise 3 The Bremer Co. manufactures cordless telephones Bremer is planning to implement a JIT production system, which requires annual tooling costs of $150,000. Bremer estimates that the following annual benefits would arise from JIT production. a. Average inventory will decline by $700,000 from $900,000 to $200,00 b. Insurance, space, materials handling, and setup costs, which currently total $200,00 would decline by 30% c. The emphasis on quality inherent in JIT system would reduce rework costs by 20% Bremer currently incurs $350,000 on rework. d. Better quality would eneble Bremer to raise the prices of its products by $3 per unit. Bremer sells $30,000 unit each year. Bremer required rate of return on inventory investment is 12% per year Required: Claculate the net benefit or cost to the Bremer Corporation From implementing a JIT production system. What other nonfinancial and qualitative factors should Brmeer Consider before deciding on whether it should implement a JIT…arrow_forwardQUESTION NO 3: The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b. Average inventory would decline by 80% from the current level of $1,000,000. c. Insurance, space, materials-handling, and setup costs, which currently total $400,000 annually, would decline by 20%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 25%. The Knot currently incurs $160,000 in annual rework costs. e. Improved product quality under JIT production would enable The Knot to raise the price of its product by $2 per unit. The Knot sells 100,000 units each year. The Knot’s required rate of return on inventory investment is 15% per year. 1. Calculate the net benefit or cost to The Knot if it adopts JIT production at the Spartanburg plant. 2. What nonfinancial and qualitative factors…arrow_forwardProblem 14-46 (Algo) Equipment Replacement and Performance Measures (LO 14-2) Oscar Clemente is the manager of Forbes Division of Pitt, Inc., a manufacturer of biotech products. Forbes Division, which has $3.5 million in assets, manufactures a special testing device. At the beginning of the current year, Forbes invested $3.5 million in automated equipment for test machine assembly. The division's expected income statement at the beginning of the year was as follows. Sales revenue $ 15,600,000 Operating costs Variable 2,000,000 Fixed (all cash) 7,100,000 Depreciation New equipment 1,490,000 Other 1,200,000 Division operating profit $ 3,810,000 A sales representative from LSI Machine Company approached Oscar in October. LSI has for $7.6 million a new assembly machine that offers significant improvements over the equipment Oscar bought at the beginning of the year. The new equipment would expand division output by 10…arrow_forward
- Exercise 14-25 (Algo) Compute RI and ROI (LO 14-2, 3) The Campus Division of All-States Bank has assets of $2,000 million. During the past year, the division had profits of $235 million. All-States Bank has a cost of capital of 6 percent. Ignore taxes. Required: a. Compute the divisional ROI for the Campus Division. (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) b. Compute the divisional RI for the Campus Division. (Enter your answer in dollars, not in millions.)arrow_forwardQuestion 1 Pacific Telemet Ltd. manufactures a high end smart phone with dual sim cards that is popular with business executives who travel overseas frequently. Related financial data for this product for the last year is as follows:Sales 12,000 unitsSelling price $460 per unitVariable manufacturing cost $184 per unitFixed manufacturing costs $360,000 Variable selling and administrative costs $36 per unit Fixed selling and administrative costs $600,000.The CEO is under pressure from the Board of Directors to increase the profitability of the phones and has asked executives from different departments for suggestions. Three managers have responded with the following ideas:a) The production manager, David Groate, suggests making improvements to the quality of the product. These quality improvements would increase the variable costs by $36 per unit. This would be accompanied by a $60,000 national advertising campaign which he expects would boost sales volume by 30%.b) The sales manager,…arrow_forwardQUESTION 4 You have been recently promoted to the divisional manager of Hadi Ltd (“the Company”), a company with 25 branches around the country. As a profit center, your division performance, is assessed by the head office on a monthly basis. The head office expects the controllable profit of your division to be at least 35% of sales. The following figures are related to your division for the month of June 2021: Direct materials £50,000 Direct labour £40,000 Variable overheads £30,000 Sales £200,000 Depreciation £14,000 Fixed overheads excluding depreciation £25,000 Head office cost allocation…arrow_forward
- Question 5.2 Xplornet Ltd. is an internet service provider. The company had 14,000,000 subscribers in 2021, and employed 18 customer service representatives. During 2021 each customer service representative worked 7 1/2 hours per day for 236 days at a fixed annual salary of $42,000. The company received 110,000 telephone calls from its customers in 2021 that lasted fifteen minutes on average. Required Calculate the cost of unused customer service capacity in 2021 with the assumption that customer service costs are engineered costs.arrow_forwardQUESTION 25 The following data are available for the Eastern Division of Meyers Products, Inc. The company makes and sells a single product. Unit selling price of product $40 Unit variable expense of product $24 Total fixed expenses $560,000 Average operating assets: $3,000,000 How many units must the division sell each year to have an ROI of 16%? A. 65,000 B. 240,000 C. 52,000 D. 80,000 E. 1,300,000arrow_forwardItem 3 Item 3 10 points Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 40 per unit Direct labor $ 60 per unit Overhead costs Variable $ 30 per unit Fixed $ 7,000,000 (per year) Selling and administrative costs for the year Variable $ 770,000 Fixed $ 4,250,000 Production and sales for the year Units produced 100,000 units Units sold 70,000 units Sales price per unit $ 350 per unit 1. Prepare an income statement for the year using variable costing.2. Prepare an income statement for the year using absorption costing.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Foreign Exchange Risks; Author: Kaplan UK;https://www.youtube.com/watch?v=ne1dYl3WifM;License: Standard Youtube License