Chapter 25, Problem 4R

For each of the following items, identify which of the managementaccounting guidelines applies: cost–benefit approach, behavioral and technical considerations, ordifferent costs for different purposes.1. Analyzing whether to produce a component needed for the end product or to outsource it.2. Deciding whether to compensate the sales force by straight commission or by salary.3. Adding the cost of store operations to merchandise cost when deciding on product pricing, but onlyincluding the cost of freight and the merchandise itself when calculating cost of goods sold on theincome statement.4. Considering the desirability of purchasing new technology.5. Weighing the cost of increased inspection against the costs associated with customer returns of defectivegoods.6. Deciding whether to buy or lease an existing production facility to increase capacity.7. Estimating the loss of future business resulting from bad publicity related to an environmental disastercaused by a company’s factory in…

Consumer Focus is a marketing research firm that organizes focus groups for consumer￾product companies. A Consumer Focus Staff member attends each session to ensure that all the logistical aspects run smoothly”In light to the above statement, classify each of the following cost items as:a. Direct or Indirect (D or I) costs with respect to each individual focus group.b. Variable or Fixed (V or F) costs with respect to how the total costs of Consumer Focus change as the number of focus groups conducted changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the number of groups conducted.)You will have two answers (D or I; V or F) for each of the following items followed by a short interpretation note. Use the sample answer table and continue from Cost Item BCost ItemA. Payment to individual in each focus group to provide comments on new products.B. Annual subscription of Consumer Focus to Consumer Reports magazine.C.…

Consider the business application," filing excess capacity 'below cost'. As noted there, the determination of cost depends on the way in which cost of delivery services are allocated to different customers. Assume that USPS has to customers people who made first class letters and business that ship packages to customers. Management at USPS wants to understand how profitable each customer Group is. how would you recommend the costs of the USPS network (Trucks,buildings,carriers and so on)be allocated to these two customers to answer that question?