COST ACCOUNTING W/CONNECT
6th Edition
ISBN: 9781264022021
Author: LANEN
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 15, Problem 26E
a.
To determine
Determine the alternative prices according to the information given in the question.
b.
To determine
Determine the transfer price and provide a reason for the same.
c.
To determine
Determine the preferred price according to the information given in the question.
d.
To determine
Determine the monthly value of difference according to the information given in the question.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Seattle Transit Ltd. operates a local mass transit system. The transit authority is a state governmental agency. It has an agreement with the state government to provide rides to senior citizens for 63 cents per trip. The government will reimburse Seattle Transit for the “cost” of each trip taken by a senior citizen.
The regular fare is $3.30 per trip. After analyzing its costs, Seattle Transit figured that, with its operating deficit, the full cost of each ride on the transit system is $5.30. Routes, capacity, and operating costs are unaffected by the number of senior citizens on any route.
Required:
b. Which price would Seattle Transit prefer? (Round your answer to 2 decimal places.)
c. Which price would the state government prefer? (Round your answer to 2 decimal places.)
d. If Seattle Transit provides an average of 163,000 trips for senior citizens in a given month, what is the monthly value of the difference between the prices in full capacity?
b.
Price…
Lappin Community Transit (LCT) is a not-for-profit mostly volunteer organization that provides transportation to seniors. As a not-for-
profit, it refers to an excess of revenues over costs as a "surplus" and an excess of costs over revenues as a "deficit." LCT prices a
round-trip ticket to downtown at $2.90 per trip. The variable costs of a ride are $4.65. The fixed costs of LCT, primarily for its paid staff
and van leases, are $88,000 annually. The town of Lappin provides LCT with a flat subsidy, partially funded by downtown merchants,
of $148,600 annually plus a per-trip subsidy of $0.25.
Required:
a. What is the break-even point for LCT in terms of number of round-trip ticket sold?
b. The director of LCT expects 23,600 riders this year and asks you if it will operate at a surplus or deficit. What is your answer?
Complete this question by entering your answers in the tabs below.
Required A
Required B
What is the break-even point for LCT in terms of number of round-trip ticket sold?…
CBA analysis for these two options
Option A requires the purchase of a garbage collection vehicle that needs a two-person crew. The vehicle will cost $60,000 and each worker will be paid $20,000 a year. The city would pick up 400 tons of garbage annually, and for each ton of garbage collected, it would charge a $400 fee. The city would have annual revenue of $160,000 (400 × $400) from this operation.
Option B requires a vehicle for a three-person crew. The vehicle will cost $80,000 and each worker will be paid $15,000 annually. With this option, the city’s garbage collection capacity would be 300 tons annually, so the annual revenue would be $120,000 (300 × $400).
Using a three-year period and a discount rate of 5 percent, which option should be recommended in the budget request?
Chapter 15 Solutions
COST ACCOUNTING W/CONNECT
Ch. 15 - What is the purpose of a transfer price?Ch. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - What are the limitations of market-based transfer...Ch. 15 - Prob. 5RQCh. 15 - When would you advise a firm to use prices other...Ch. 15 - What is the basis for choosing between actual and...Ch. 15 - What are the advantages and disadvantages of a...Ch. 15 - Prob. 9RQCh. 15 - Why is transfer pricing important in tax...
Ch. 15 - Prob. 11RQCh. 15 - What should an effective transfer pricing system...Ch. 15 - Prob. 13CADQCh. 15 - Prob. 14CADQCh. 15 - Refer to the Business Application item, Transfer...Ch. 15 - Prob. 16CADQCh. 15 - Prob. 17CADQCh. 15 - In what ways is transfer pricing like cost...Ch. 15 - In Chapter 12, we discussed corporate cost...Ch. 15 - Prob. 20ECh. 15 - Prob. 21ECh. 15 - Apply Transfer Pricing Rules Best Practices, Inc.,...Ch. 15 - Prob. 23ECh. 15 - Prob. 24ECh. 15 - Evaluate Transfer Pricing System Southwest...Ch. 15 - Prob. 26ECh. 15 - Evaluate Transfer Pricing System Carmen Seville...Ch. 15 - Prob. 28ECh. 15 - Prob. 29ECh. 15 - Prob. 30ECh. 15 - Prob. 31ECh. 15 - Prob. 32ECh. 15 - Prob. 33ECh. 15 - Prob. 34ECh. 15 - Prob. 35ECh. 15 - Segment Reporting Leapin Larrys Pre-Owned Cars has...Ch. 15 - Segment Reporting Perth Corporation has two...Ch. 15 - Prob. 38PCh. 15 - Prob. 39PCh. 15 - Prob. 40PCh. 15 - International Transfer Prices Skane Shipping Ltd....Ch. 15 - International Transfer Prices Badger Air is an...Ch. 15 - Prob. 43PCh. 15 - Prob. 44PCh. 15 - Prob. 45PCh. 15 - Weaver, Inc., is a large consumer products...Ch. 15 - Western States Supply, Inc. (WSS), consists of...Ch. 15 - Prob. 48PCh. 15 - Midwest Entertainment has four operating...Ch. 15 - Prob. 50PCh. 15 - Mathes Corporation manufactures paper products....Ch. 15 - Refer to the data in Problem 15-51. At the end of...Ch. 15 - CHS is a large multidivision firm. One division,...Ch. 15 - Prob. 54PCh. 15 - Prob. 56IC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Orearrow_forwardPlease write the CBA analysis for these two options Option A requires the purchase of a garbage collection vehicle that needs a two-person crew. The vehicle will cost $60,000 and each worker will be paid $20,000 a year. The city would pick up 400 tons of garbage annually, and for each ton of garbage collected, it would charge a $400 fee. The city would have annual revenue of $160,000 (400 × $400) from this operation. +Please fill in the correct answer in each blank provided below. Project A. NPV Present value of Benefits Present value of Costsarrow_forwardUrmila benarrow_forward
- Sanj Please give me correct answer with explanation..arrow_forwardJefferson City has invited an orchestra to play in the city's museum. Your job is to calculate the cost of an individual ticket in order for the city to break even on sales. The city estimates that their total fixed costs are $300,000. The variable cost is $20 per ticket. (a) If the city sets the price of the ticket at $75, how many tickets does the city need to sell in order to break even? (b) If the city sets the price of the tickets at $50, how many tickets does the city need to sell in order to break even? Use Formula: P = FC + Q x UVC / Qarrow_forwardSolve this problemarrow_forward
- Triad Children's Center (TCC), a non-profit organization, uses relevant cost analysis to determine whether new services are desirable. TCC is looking at adding a new educational program for grade school children who are having difficulty with their reading and math skills. The following relevant costs are expected if the program is accepted: Costs (per year) Program Director salary $ 39,000 Part-time Assistants $ 28,000 Variable cost per child $ 900 TCC estimates that a maximum of 40 children will participate in this program in the first year. If TCC decides to implement this program, funding will be received from the City Chamber of Commerce ($50,000) and a local Private University Endowment Fund ($35,000). Calculate the expected surplus or deficit from operations given the above information.arrow_forwardHardyke Group operates a local after-school recreation and activities program. The Education Department is a state governmental agency. Hardyke has an agreement with the Department to provide services to students in need for a nominal $1 per day, to be paid by the student. The government will reimburse Hardyke for the "cost" of providing daily services used by a student. The regular price to participate in the program is $5.90 per day. After analyzing its costs, Hardyke calculates that, with its operating deficit, the full cost of each student for a day is $8.40. All programs that Hardyke offers are unaffected by the number of students paying the nominal fee. Required: b. Which price would Hardyke Group prefer? Note: Enter your answer to 2 decimal places. c. Which price would the Education Department prefer? Note: Enter your answer to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. d. If Hardyke provides an average of 3,900 student-days for in-need…arrow_forwardClassic Limo, Inc., provides limousine service to Tri-Cities airport. The price of the service is fixed at a flat rate for each trip and most costs of providing service are stable for each trip. Marc Pence, the owner, budgets income by estimating two factors that fluctuate with the economy: the fuel cost associated with each trip and the number of customers who will take trips. Looking at next year, Marc develops the following estimates of contribution margin (price less variable cost of the trip, including fuel) and for the estimated number of customers. Although Marc understands that it is not strictly true, he assumes that the cost of fuel and the number of customers are independent. Contribution Margin per Ride Scenario (Price – Variable cost) Number of Customers Excellent $55 4,800 Fair 25 3,500 Poor 20 2,200 In addition to the costs of a ride, Marc estimates that other service costs are $41,000 plus $5…arrow_forward
- Hardyke Group operates a local after-school recreation and activities program. The Education Department is a state governmental agency. Hardyke has an agreement with the Department to provide services to students in need for a nominal $1 per day, to be paid by the student. The government will reimburse Hardyke for the "cost" of providing daily services used by a student. The regular price to participate in the program is $6.70 per day. After analyzing its costs, Hardyke calculates that, with its operating deficit, the full cost of each student for a day is $9.20. All programs that Hardyke offers are unaffected by the number of students paying the nominal fee. Required: b. Which price would Hardyke Group prefer? Note: Enter your answer to 2 decimal places. c. Which price would the Education Department prefer? Note: Enter your answer to 2 decimal places. Leave no cells blank - be certain to enter "O" wherever required. d. If Hardyke provides an average of 4,700 student-days for in-need…arrow_forwardQuestion: The management of Health Supplement Inc. wants to reduce its labor cost by installing a new machine. Two types of machines are available in the market – machine X and machine Y. Machine X would cost $18,000 where as machine Y would cost $15,000. Both the machines can reduce annual labor cost by $3,000.Required:Which is the best machine to purchase according to payback method?arrow_forwardGateway Tours is choosing between two bus models, one of which lasts longer than the other. Gateway’s discount rate is 8%. It plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? For each of the two bus models, give the relevant cost that you would use for comparison purposes. [Note: to make it easier for you to solve this problem, I have already calculated the EAA for one of the buses, as you can see. You do not need to recalculate that one.] Model Year 0 Year 1 Year 2 Year 3 Year 4 Old Reliable 0 -15 -15 -15 -15 Short and Sweet -12 -12 -6 The relevant cost for Old Reliable is: A. -15.00 B. -49.68 C. -14.99 D. -15.01 E. -12.44 F. -15.10 G. -12.42 The relevant cost for Short and Sweet is: A. -15.70 B. -28.26 C. -15.87 D. -9.12 E. -15.84 F. -8.53 G.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Operating segments; Author: The Finance Storyteller;https://www.youtube.com/watch?v=8IDQtBn902Q;License: Standard Youtube License