Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 12, Problem 16P
Problem 4-19A Cost allocation in a service industry
Eagle Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail, Inc. Never-Fail is a multimillion-dollar company started by Wes Never immediately after he failed to finish his first accounting course. The company’s motto is “We Never-Fail to Deliver Your Package on Time.” When Never-Fail has more freight than it can deliver, it pays Eagle to carry the excess. Eagle contracts with independent pilots to fly its planes on a per-trip basis. Eagle recently purchased an airplane that cost the company $6,000,000. The plane has an estimated useful life of 20,000,000 miles and a zero salvage value. During the first week in January, Eagle flew two trips. The first trip was a round trip flight from Chicago to San Francisco, for which Eagle paid $350 for the pilot and $500 for fuel. The second flight was a round trip from Chicago to New York. For this trip, it paid $300 for the pilot and $300 for fuel. The round trip between Chicago and San Francisco is approximately 4,400 miles and the round trip between Chicago and New York is 1,600 miles.
Required
- a. Identify the direct and indirect costs that Eagle incurs for each trip.
- b. Determine the total cost of each trip.
- c. In addition to
depreciation , identify three other indirect costs that may need to be allocated to determine the cost of each trip.
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Students have asked these similar questions
Chapter 6 Cost-Volume-Profit Analysis
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Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per
seat for the flight is $760. The costs associated with the flight are as follows:
Fixed costs for the flight:
Crew salaries.....
Operating costs .
Aircraft depreciation..
$ 5,000
50,000
25,000
$80,000
Total......
Variable costs per passenger:
Passenger check-in
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$ 20
100
$120
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Chapter 5 Activity-Based Costing and Management
Problem 5-57 Customers as a Cost Object
Morrisom National Bank has requested an analysis of checking account profitability by custom-
er 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 catego-
ries and their associated annual costs are as follows:
Opening and closing accounts
Issuing monthly statements
Processing transactions
Customer inquiries
$ 300,000
450,000
3,075,000
0000 Providing automatic teller machine (ATM) services
600,000
Total cost
1,680,000
$6,105,000
Additional data concerning the usage of the activities by the various customers are also
provided:
Account Balance
Low
Medium
High
Number of accounts opened/closed
22,500
4,500
3,000
Number of statements issued
675,000
150,000
75,000
Processing transactions
27,000,000
3,000,000
750,000
Number of telephone minutes
1,500,000
900,000
600,000
Number…
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Chapter 12 Solutions
Survey Of Accounting
Ch. 12 - 1.What is a cost object? Identify four different...Ch. 12 - Prob. 2QCh. 12 - 3.If the cost object is a manufactured product,...Ch. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - Prob. 6QCh. 12 - Prob. 7QCh. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - 10.Why are some manufacturing costs not directly...
Ch. 12 - Prob. 11QCh. 12 - 12.On January 31, the managers of Integra, Inc....Ch. 12 - 13.Respond to the following statement: The...Ch. 12 - Prob. 14QCh. 12 - Define the term cost pool. How are cost pools...Ch. 12 - LO 4-1Exercise 4-1A Direct versus indirect costs...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Exercise 4-4APooling overhead cost Ware...Ch. 12 - Prob. 5ECh. 12 - Exercise 4-5A Allocating overhead cost among...Ch. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Exercise 4-6AAllocating overhead costs among...Ch. 12 - Exercise 4-9AAllocating to solve a timing problem...Ch. 12 - Prob. 11ECh. 12 - Exercise 4-11AHow the allocation of fixed cost...Ch. 12 - Prob. 13ECh. 12 - Problem 4-17A Cost accumulation and allocation...Ch. 12 - Problem 4-18A Selecting an appropriate cost driver...Ch. 12 - Problem 4-19A Cost allocation in a service...Ch. 12 - Prob. 17PCh. 12 - Problem 4-21A Allocation to accomplish smoothing...Ch. 12 - Problem 4-22A Allocating indirect costs between...Ch. 12 - Prob. 20PCh. 12 - Prob. 1ATCCh. 12 - Prob. 2ATCCh. 12 - ATC 4-3 Research Assignment Using real-world data...Ch. 12 - Prob. 4ATCCh. 12 - Prob. 5ATC
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