BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

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 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

To determine

Cost Behavior: It refers to the method in which a cost changes with respect to the changes in its related activities. This method helps the management in estimating costs for decision making and predict future profits.

Activity Base: The activities that cause the cost to vary accordingly are known as activity base.

To select: the activity base that would be most appropriate for each of the given costs.

Explanation

1.

Preparation cost is incurred on each car received for making the automobile ready to operate. Thus, the preparation cost would change with the change in the activity base of number of cars received.

2.

The salespersons get a commission for selling the car sold. As such, the salespersons would receive a 5% commission on the sales price for each car sold...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

How are the four areas of operations control interrelated?

Foundations of Business (MindTap Course List)

What are the two main causes of market failure? Give an example of each.

Principles of Microeconomics (MindTap Course List)

COST OF COMMON EQUITY The Bouchard Companys EPS was 6 50 in 2014, up from 4 42 in 2009. The company pays out 40...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Give three examples of important trade-offs that you face in your life.

Principles of Macroeconomics (MindTap Course List)

What is meant by double-loop feedback?

Cornerstones of Cost Management (Cornerstones Series)