Fundamentals of Cost Accounting
6th Edition
ISBN: 9781260708783
Author: LANEN, William
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 31E
To determine
Identify the revenues and costs which are probably differential for the decision to drop the BBA program. Explain the effect on Company S’s profits if the BBA program is dropped. Also, identify whether there are any other information required before recommending the dropping of the BBA program.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The University has a graduate school of business. The Vice-President of Finance of the University says he will not allow a class to run unless it has six students. Only three students sign up for the class. The VP states the professor can run the class at half pay. The school is not near its capacity. Evaluate this using the principles of management and cost accounting.
Frank Corporation evaluates its managers based on return on investment (ROI). Hazel B and Sarah D, managers of the electronics and housewares departments respectively, have recently suffered from declining profits in their departments. Over lunch, they discuss the problem, and how they could improve performance. Most of the discussion centers around ways to increase sales. Near the end of the lunch period, however, Sarah remarks that there are two components to consider, and that they have considered only one. She wonders whether there is some way to reduce investment, and by decreasing the denominator of the ROI fraction, to improve the final result.
Back at work, Hazel continues to mull over Sarah's remarks. She decides to pursue the matter further, and before the end of the quarter she has sold quite a bit of older equipment and replaced it with equipment obtained with a short-term lease. Her performance, measured by ROI, is markedly improved, although sales continue to be…
Break-even analysis is an important tool for managing any business, including colleges and universities.
Instructions
1. Identify three areas where break-even analysis might be used at your college or university.
2. For each area, identify the revenues, variable costs, and fixed costs.
Chapter 1 Solutions
Fundamentals of Cost Accounting
Ch. 1 - Explain why it is important to consider the...Ch. 1 - Explain the differences between financial...Ch. 1 - Place the letter of the appropriate accounting...Ch. 1 - Distinguish among the value chain, the supply...Ch. 1 - Who are the customers of cost accounting?Ch. 1 - How can cost accounting information together with...Ch. 1 - Prob. 7RQCh. 1 - Does the passage of Sarbanes-Oxley mean that codes...Ch. 1 - Prob. 9CADQCh. 1 - Prob. 10CADQ
Ch. 1 - Prob. 11CADQCh. 1 - Its not the job of accounting to determine...Ch. 1 - Prob. 13CADQCh. 1 - How would cost accounting information help...Ch. 1 - Airlines are well known for using complex pricing...Ch. 1 - Hostess Brands makes a variety of baked goods just...Ch. 1 - What potential conflicts might arise between...Ch. 1 - Refer to the Business Application discussion of...Ch. 1 - Prob. 19CADQCh. 1 - Why does a cost accountant need to be familiar...Ch. 1 - Will studying cost accounting increase the chances...Ch. 1 - Prob. 22CADQCh. 1 - Value Chain and Classification of Costs Apple...Ch. 1 - Pfizer Inc., a pharmaceutical firm, incurs many...Ch. 1 - Tesla, Inc., incurs many types of costs in its...Ch. 1 - Prob. 26ECh. 1 - Accounting Systems McDonalds is a major company in...Ch. 1 - Accounting Systems Ford Motor Company manufactures...Ch. 1 - Cost Data for Managerial Purposes As an analyst at...Ch. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Refer to the information in Exercise 1-31. The...Ch. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Trends in Cost Accounting Required For each cost...Ch. 1 - Prob. 35ECh. 1 - Prob. 36ECh. 1 - Refer to the information in Exercise 1-32. Jon...Ch. 1 - Prob. 38PCh. 1 - Cost Data for Managerial Purposes Imperial Devices...Ch. 1 - Cost Data for Managerial Purposes You have been...Ch. 1 - Prob. 41PCh. 1 - Cost Data for Managerial Purposes Campus Package...Ch. 1 - Cost Data for Managerial Purposes KC Services...Ch. 1 - Cost Data for Managerial Purposes B-You is a...Ch. 1 - Cost Data for Managerial Purposes Toms Tax...Ch. 1 - Gilman’s Café is a popular restaurant in a local...Ch. 1 - Prob. 47PCh. 1 - Prob. 48PCh. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Cost Data for Managerial PurposesFinding Unknowns...Ch. 1 - Prob. 51PCh. 1 - Prob. 52PCh. 1 - Prob. 53ICCh. 1 - Miller Cereals is a small milling company that...Ch. 1 - Before Miller Cereals can introduce the new...Ch. 1 - The following story is true except that all names...
Knowledge Booster
Similar questions
- You work for Alphabet Holdings Plc as a junior management accountant. The board of directors are considering ways to improve the suboptimal performance of an investment in a manufacturing company called DEF products Ltd. As you can see from the table below the directors are considering closing products Bozon and Carbon in an effort to improve overall profitability. You spot that marginal costing would show the results differently and may affect the directors’ decision. Requirements for Question 2 Use your knowledge of management accounting and marginal costing to calculate the contribution of each product Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Bozon Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Carbon Discuss how and why marginal costing calculates contribution to pay overheads and why this is…arrow_forwardManuel Inc. produces textiles in many different forms. After recording lower than anticipated profits last year, Manuel has decided to shut down one of its divisions that is not performing well. The accounting manager has compiled the following data on the two divisions being considered for closing and has asked you to evaluate the short-term and long-term effects on profits of closing each division. Which division should be closed if Manuel is most concerned with increasing long-run profits? Winter Outerwear High-End Suits Net revenues $ 1,200,000 $ 5,200,000 Variable costs 660,000 2,160,000 Contribution margin 540,000 3,040,000 Controllable fixed costs 0 2,020,000 Controllable margin 540,000 1,020,000 Noncontrollable fixed costs 770,000 1,540,000 Contribution by division $ (230,000 ) $ (520,000 ) multiple choice Winter Outerwear High-End Suits Closing either would have the same…arrow_forwardOption 1: Break-even analysis is an important tool for managing any business, including colleges and universities. Identify two areas where break-even analysis might be used at your current/previous college or university. For each area, identify some of the revenues, variable costs, and fixed costs in 150 wordsarrow_forward
- jarrow_forwardPlease do not give solution in image format ? And Fast answering please and explain proper steps by Step.arrow_forwardWhich of the following is a reason for a company to implement a knowledge management system? Select one: O a. Some of the company's policies and procedures will be revised in the coming year. O b. A new Human Resources manager who is a recent, external hire is telling everyone that a KMS is the way to go and that she used one at her old company. Oc. There is leftover budget money at the end of the year, and the IT department thinks a new software program is the way to spend it. Od. An early retirement program was offered, and many senior managers across the organization are interested in taking advantage of it.arrow_forward
- The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $179,000 of the fixed manufacturing expenses and $155,200 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued. Required: What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Net operating income (loss) would $ 745,000 $ 387,000 $ 253,400 $216,200 decline increase by if product B90D were dropped. Therefore, the product droppedarrow_forwardCustomer Profitability Analysis: Boston Depot sells office supplies to area corporations and organizations. Tom Delayne, founder and CEO, has been disappointed with the operating results and the profit margin for the last two years. Business forms are mostly a "commodity" business with low profit margins. To increase profit margins and gain competitive advantages, Delayne introduced "Desk-Top Delivery" service. The business seems to be as busy as ever. Yet, the operating income has been declining. To help identify the root cause of declining profits, he decided to analyze the profitability of two of the firm's major customers: Omega International (OI) and City of Albion (CA).According to the customer profitability analysis that Boston Depot conducts regularly, Boston Depot has the same amount of total sales with both OI and CA. However, the firm earns a higher gross margin and gross margin ratio from CA than those from the sales to OI, as demonstrated here: Customer…arrow_forwardAndrew Jarvis started his manufacturing business earlier this year and has been preparing management accounts using variable (marginal) costing. He has approached you as a Certified Chartered Management Accountant, to help his finance team prepare annual financial statements. As part of your discussions with the company’s finance team, you mentioned that you will use absorption costing to prepare the financial statements. Peter Cullen, the Finance Manager, said that he was unfamiliar with this method of costing and has asked you for more information about it.REQUIREMENT:Draft a Report for Peter Cullen that:a) Describes and explains the basis of variable (marginal) and absorption costing systems.b) Explains the effect on profit of using variable (marginal) and absorption costing. c) Outlines TWO advantages and TWO disadvantages of both variable (marginal) AND absorption costing systems.arrow_forward
- Ellie Ice-cream’s owner is disturbed by the poor profit performance of his ice cream counter. He has prepared the following profit analyses for the year just ended: The owner is thinking the elimination of this counter. If it is eliminated then: Depreciation of counter equipment is avoidable The supervisory salaries is avoidable The insurance expense is unavoidable The depreciation of building unavoidable The general overhead is unavoidable Required:a) Should the company eliminate the counter or not? Fill in the table and justify your answer. b) Mention at least three relevant costs.arrow_forwardThe South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets $2,950,000 1,947,000 2. 595,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 3. 5,000,000 1. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%)arrow_forwardCalculating the Costs of Increasing the Total CompensationBudget at Butcher EnterprisesButcher Enterprises has experienced substantial employee turnover among its office workers. During exit interviews, more than 80 percent stated that low pay was the top reason for resigning. The company conducted a survey of local companies’ pay practices to confirm whether this concern is valid. Indeed, Butcher Enterprises’ average hourly pay rate for total compensation falls well below the market. The compensation survey showed an average hourly rate of $23 for total compensation. Of this amount, wages are $16 per hour and benefits are $7 per hour. In comparison, Butcher Enterprises spends an average hourly rate of $19 for total compensation. Of this amount, 70 percent is allocated for wages.1.1. On an average hourly basis, how much does Butcher Enterprises spend on wages and benefits,respectively, in dollars?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
College Accounting (Book Only): A Career Approach
Accounting
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning