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Concept explainers
Identify activity bases
From the following list of activity bases for an automobile dealership, select the ba.se that would be most appropriate for each of these costs: (1) preparation costs (cleaning, oil, and gasoline costs) for each car received, (2) salespersons commission of 5% of the sales price for each car sold, and (3) administrative costs for ordering cars.
A. Number of cars sold
B. Dollar amount of cars ordered
C. Number of cars ordered
D. Number of cars on hand
E. Number of cars received
F. Dollar amount of cars sold
G. Dollar amount of cars received
H. Dollar amount of cars on hand
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Chapter 19 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- Identify activity bases From the following list of activity bases for an automobile dealership, select the base that would be most appropriate for each of these costs: (1) preparation costs (cleaning, oil, and gasoline costs) for each car received, (2) salespersons' commission of 6% of the sales price for each car sold, and (3) administrative costs for ordering cars. a. Dollar amount of cars on hand b.Dollar amount of cars ordered c. Dollar amount of cars received d.Dollar amount of cars sold e.Number of cars on hand f. Number of cars ordered g. Number of cars received h.Number of cars soldarrow_forwardMatch each of the following cost items with the value chain business function where you would expect the cost to be incurred: Cost Item 1. Labor time to repair products under warranty 2. Radio commercials 3. Labor costs of delivering customer orders 4. Testing of competitor's product 5. Direct manufacturing labor costs 6. Development of order tracking system for online sales 7. Design cost of new product brochures 8. Hours spent designing childproof bottles 9. Training costs for representatives to staff the customer call center 10. Installation of robotics equipment in manufacturing plant Business Functionarrow_forwardSolve the following: A company recently established a branch to sell its most popular fan. The company purchases these fans and stores them in a warehouse. The fans are then shipped from the warehouse to both the home office and the new branch, FOB destination. Home office management is responsible for setting the transfer price of the fans charged to the branch in a manner that will measure the long-run incremental cost of supplying the fans to the branch on a continuing basis. Per unit costs for the fans are P50.00 purchase price P2.50 shipping cost to warehouse P3.00 handling cost including P1.00 of allocated administrative overhead P3.50 shipping cost to branch paid by home office P1.25 shipping cost to home office The minimum transfer price that home office should charge the branch to meet its measurement objective is?arrow_forward
- Which of the following is a fixed cost in an automobile manufacturing plant? C. Sales commissions a. Administrative salaries b. Flectricity used by assembly-line machinas d. Windows for each car produced.arrow_forwardA company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950arrow_forwardCustomers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.arrow_forward
- Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. Marley's Manufacturing Income Statement Month ending August 31, 2019 Dept. A Dept. B Sales $22,000 $51,000 Cost of Goods Sold 10,560 26,520 Gross profit $11,440 $24,480 Utility expenses 1,000 3,200 Wages expense 5,500 10,200 Costs allocated from Corporate 2,200 15,000 Total expenses $8,700 $28,400 Operating Income/(loss) $ ? ? Operating income/(loss) % ? ? Which of these costs may need further…arrow_forwardClassify each cost as either a product cost or a period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory Indicate whether each period cost is a selling expense or an administrative expense. Costs a. Annual bonus paid to the chief financial officer of the company b. Annual fee to a celebrity to promote the aircraft c. Cost of electronic guidance system installed in the airplane cockpit d. Cost of the flight data recorder (the black box) for the airplane e. Cost of normal scrap from production of the airplane body f. Cost of small replicas of the airplane used to promote and market the airplane g. Cost of paving the headquarters employee parking lot h. Decals for cockpit door, the cost of which is immaterial to the cost of the final product 1. Depreciation on factory equipment j. Hourly wages for janitorial staff for the factory k. Hydraulic pumps used in the airplane's flight control system 1. Instrument panel installed in the…arrow_forwardWhich one of the following options can be used when allocating cafeteria costs? Select one: a. Number of square feet b. Appraised value of square footage c. Number of direct labor hours d. Number of employeesarrow_forward
- Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also classify each cost as either a period or a product cost. Cost Item Predicting Cost Behavior Preparing Financial Statements 1.Hamburger buns in a Wendy’s restaurant. 2.Advertising by a dental office. 3.Apples processed and canned by Del Monte. 4.Shipping canned apples from a Del Monte plant to customers. 5.Insurance on a Bausch & Lomb factory producing contact lenses. 6.Insurance on IBM’s corporate headquarters. 7.Salary of a supervisor overseeing production of printers at Hewlett-Packard. 8.Commissions paid to automobile salespersons. 9.Depreciation of factory lunchroom facilities at a General Electric plant. 10.Steering wheels installed in BMWs.arrow_forwardValue chain and classification of costs, computer company. Dell Computer incurs the following costs:a. Utility costs for the plant assembling the Latitude computer line of productsb. Distribution costs for shipping the Latitude line of products to a retail chainc. Payment to David Newbury Designs for design of the XPS 2-in-1 laptopd. Salary of computer scientist working on the next generation of serverse. Cost of Dell employees’ visit to a major customer to demonstrate Dell’s ability to interconnect withother computersf. Purchase of competitors’ products for testing against potential Dell productsg. Payment to business magazine for running Dell advertisementsh. Cost of cartridges purchased from outside supplier to be used with Dell printersarrow_forward1. Management of NCI currently allocates the kitchen and cleaning department costs based on the number of residents in each home. Determine the amount of service department costs assigned to each of the homes using this allocation base. 2. DHFS auditors believe the step method of allocation should be used by first assigning cleaning cost based on square feet, and then kitchen cost based on number of residence. Determine the amount of service department cost assigned to each of the homes using this allocation method. (Do not round percentages in your calculations)arrow_forward
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