Betty's Holiday Styles has been busy in the month of November! It seems Betty's marketing efforts have paid off, as she has answere many calls to help decorate homes for the upcoming holidays. The company carries an inventory of decorative items in its store and then installs them in creative and fun ways. The MOH costs are fairly low, since the company has just a small space to hold the

Betty's Holiday Styles has been busy in the month of November! It seems Betty's marketing efforts have paid off, as she has answere many calls to help decorate homes for the upcoming holidays. The company carries an inventory of decorative items in its store and then installs them in creative and fun ways. The MOH costs are fairly low, since the company has just a small space to hold the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.55 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 12,500 hundred square feet Travel to jobs Miles driven 241,500 miles Job support Number of jobs 2,000 jobs Other (organization-sustaining costs and idle…
Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.30 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 9,500 hundred square feet Travel to jobs Miles driven 292,000 miles Job support Number of jobs 2,000 jobs Other (organization-sustaining costs and idle…
Horton Manufacturing Incorporated produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow: Month Maintenance Costs Machine Hours $ 2,695 2,740 2,790 2,890 2,925 3,025 2,935 1 2 3 4 56789012 10 11 2,975 2,850 2,640 2,660 2,960 Maintenance cost 1,620 1,730 1,745 1,795 1,790 1,890 1,810 1,845 1,835 1,480 1,690 1,495 Required: 1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (uni variable cost)" to 4 decimal places. Enter the "slope…
displaying at a craft fair, a representative of a mail order catalog company wants to put your product in the catalog. It will pay you $40 and mark up the product to $55 for the catalog. It estimates that your market share could be substantial and should be dependent only on your production output. You decide to quit your real job and devote all your time to making wreaths, but you want to match your current $50,000 salary. You really don’t want to work more than 40 hours per week in actual wreath manufacturing (assume all paperwork, material purchasing, and such takes place beyond those 40 hours). You want four weeks a year for vacation, holidays, and sick days or personal days. Taking into consideration time constraints, the price you will get from the catalog company, and your revised costs, does this make sense? Assume each wreath has $5 costs and takes one hour to construct.
Jimmy’s Suit House (JSH) rents out designer apparel to customers who want to wear formal suits on special events but are unwilling to purchase them. For example, a customer can rent a $1,000 suit for $25 per day for a 10-day rental period. To rent a suit, a customer visits the JSH website, which shows the available suits and their rental prices. The number of webpage views is surprisingly large, but not everyone finally rents. Many leave the website because of not finding the suits they like. On average, JSH sees the demand of 200 rental orders per day. To ensure that enough customers find suits, JSH keeps 1,600 suits in their Rental-Ready Inventory, including different styles and sizes. This number must be substantial due to the variety of suits JSH keeps and the policy that JSH ships two suits (same style in two different sizes) to satisfy a customer’s request for one suit. When taking a rental order, JSH requires that a customer specify two sizes for the requested suit—the most…
Wawa, Inc., a startup footwear company, currently sells just one type of sneakers, Tribe. As Wawa's marketing vice- president in charge of its anniversary sales of its Tribe sneakers, you were given a marketing budget of $2.5 million for the upcoming sale for one 30-second direct-response internet ad. The ad provides the website address that will allow Wawa's to track when a hit has resulted from people seeing this particular ad. You get 1.7 million hits on that website. Is this good? How many Tribe sneakers did you eventually sell as a result? Did the ad pay for itself or not? Could you have done better by spending your money on some other form of advertising Let's say that of the 1.7 million visitors to your site, 0.005 percent ordered the Tribe sneakers by visiting your website. You, of course, created a special Web address just for this commercial, so you could accurately evaluate how many responses and orders this one ad produced. Let's also say that the price the Tribe sneakers…
Example 1: Jacque de Paris, a high — fashion women's dress manufacturer, is planning to market a new Cocktail dress for the coming season. Jacque de Paris supplies retailers in Europe and the United states. Four yards of material are required to lay out the dress pattern. Some material remains after culling, which can be sold us remnants. The leftover material could also be used to manufacture a matching cape and handbag. However, if the leftover material is to be used for the cape and handbag, more care will be required in the cutting, which will increase the cutting costs. The company expects to sell 1,250 dresses if no matching cape or handbag is available. Market research reveals that dress sales will be 20% higher if a matching cape and handbag are available. The market research indicates that the cape and handbag will not be sold individually, but only as accessories with the dress. The various combinations of dresses, capes, and handbags that are expected to be sold by retailers…
Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 376,000 233,600 149, 230 $ (6,830) 44 Inch $ 578,600 287,680 227,464 $ 63,456 54 Inch $ 356,400 165,500 140, 806 $ 50,094 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your…
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Rundle Woodcraft Company manufactures "antique" wooden cabinets to house modern televisions. The Company began operations in January of last year. Sidney Myrick, the owner, asks for your assistance. He believes that he needs to better understand the cost of the cabinets for pricing purposes. You have collected the following data concerning actual production over the past year: Number of Cabinets Month January February 3,640 March 1,990 April 670 May 1,570 EN June 1,340 July 1,170 August 1,720 September 2,320 October 2,940 November 3,320 December 320 Produced Total Cost 880 $21,400 32,500 29,400 18,400 28,900 27,200 25,900 31,900 32,900 31,100 32,800 9,260 Required a. To understand the department's cost behavior, you decide to plot the points on graph paper and sketch a total cost line. (1) Enter the number of units and their costs in increasing order. b. Using the high-low method, compute the total cost equation for the preceding data. (1) Compute the variable cost per unit. (2)…