Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 18, Problem 17E
Evaluating selling and administrative cost allocations
Gordon Gecco Furniture Company has two major product lines with the following characteristics:
Commercial office furniture: Few large orders, little advertising support, shipments in full truckloads, and low handling complexity
Home office furniture: Many small orders, large advertising support, shipments in partial truckloads, and high handling complexity
The company produced the following profitability report for management:
The selling and administrative expenses are allocated to the products on the basis of relative sales dollars.
Evaluate the accuracy of this report and recommend an alternative approach.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Activity-Based Customer-Driven Costs
Suppose that Stillwater Designs has two classes of distributors: JITdistributors and non -JIT distributors. The JIT distributor places small,frequent orders, and the non -JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product.Stillwater Designs provides the following information about customer-related activities and costs for the most recent quarter:
Required:1. Calculate the total revenues per distributor category, and assignthe customer costs to each distributor type by using revenues asthe allocation base. Selling price for one unit is $150.
2. CONCEPTUAL CONNECTION Calculate the customer cost perdistributor type using activity-based cost assignments. Discuss themerits of offering the non -JIT distributors a $2 price decrease(assume that they are agitating for a price concession).
3. CONCEPTUAL CONNECTION Assume that the JIT distributors are simply imposing the frequent orders on…
Activity-Based Customer-Driven Costs
Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT
distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater Designs provides the following information about
customer-related activities and costs for the most recent quarter:
Sales orders
Sales calls
Service calls
Average order size
Manufacturing cost/unit
Customer costs:
Processing sales orders
Selling goods
Servicing goods
Total
Sales (in units)
JIT
Distributors
JIT
1,000
70
350
750
$125
$3,330,000
1,120,000
1,050,000
$5,500,000
Non-JIT
Distributors
100
Non-JIT
70
175
Required:
1. Calculate the total revenues per distributor category, and assign the customer costs to each distributor type by using revenues as the allocation base. Selling price for
one unit is $150. Round calculations to the nearest dollar.
7,500…
Please help me with show all Calculation thanku
Chapter 18 Solutions
Financial And Managerial Accounting
Ch. 18 - Why would management be concerned about the...Ch. 18 - Why would a manufacturing company with multiple...Ch. 18 - How do the multiple production department and the...Ch. 18 - Under what two conditions would the multiple...Ch. 18 - How does activity-based costing differ from the...Ch. 18 - Shipping, selling, marketing, sales order...Ch. 18 - Prob. 7DQCh. 18 - Under what circumstances might the activity-based...Ch. 18 - When might activity-based costing be preferred...Ch. 18 - Prob. 10DQ
Ch. 18 - Single plantwide factory overhead rate The total...Ch. 18 - Multiple production department factory overhead...Ch. 18 - Activity-based costing: factory overhead costs The...Ch. 18 - Activity-based costing: selling and administrative...Ch. 18 - Activity-based costing for a service business...Ch. 18 - Kennedy Appliance Inc.s Machining Department...Ch. 18 - Bach Instruments Inc. makes three musical...Ch. 18 - Scrumptious Snacks Inc. manufactures three types...Ch. 18 - Isaac Engines Inc. produces three productspistons,...Ch. 18 - Handy Leather, Inc., produces three sizes of...Ch. 18 - Eclipse Motor Company manufactures two types of...Ch. 18 - The management of Nova Industries Inc....Ch. 18 - Comfort Foods Inc. uses activity-based costing to...Ch. 18 - Nozama.com Inc. sells consumer electronics over...Ch. 18 - Hercules Inc. manufactures elliptical exercise...Ch. 18 - Lonsdale Inc. manufactures entry and dining room...Ch. 18 - Activity cost pools, activity rates, and product...Ch. 18 - Handbrain Inc. is considering a change to...Ch. 18 - Prob. 14ECh. 18 - Activity-based costing and product cost distortion...Ch. 18 - Single plantwide rate and activity-based costing...Ch. 18 - Evaluating selling and administrative cost...Ch. 18 - Construct and interpret a product profitability...Ch. 18 - Metroid Electric manufactures power distribution...Ch. 18 - Activity-based costing for a service company...Ch. 18 - Bounce Back Insurance Company carries three major...Ch. 18 - Gwinnett County Chrome Company manufactures three...Ch. 18 - The management of Gwinnett County Chrome Company,...Ch. 18 - Activity-based and department rate product costing...Ch. 18 - Activity-based product costing Mello Manufacturing...Ch. 18 - Allocating selling and administrative expenses...Ch. 18 - Product costing and decision analysis for a...Ch. 18 - Single plantwide factory overhead rate Spotted Cow...Ch. 18 - Multiple production department factory overhead...Ch. 18 - Activity-based department rate product costing and...Ch. 18 - Activity-based product costing Sweet Sugar Company...Ch. 18 - Allocating selling and administrative expenses...Ch. 18 - Product costing and decision analysis for a...Ch. 18 - Life Force Fitness, Inc., assembles and sells...Ch. 18 - Activity-based product cost improvement Gourmet...Ch. 18 - Labor classification trade-off Skidmore...Ch. 18 - Production run size and activity improvement...Ch. 18 - Hospital activity-based costing analysis Lancaster...Ch. 18 - Ethics in Action The controller of Tri Con Global...Ch. 18 - Communication The controller of New Wave Sounds...Ch. 18 - Pelder Products Company manufactures two types of...Ch. 18 - The Chocolate Baker specializes in chocolate baked...Ch. 18 - Young Company is beginning operations and is...Ch. 18 - Cynthia Rogers, the cost accountant for Sanford...
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
- The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.arrow_forwardAssume you are the department B manager for Marleys Manufacturing. Marleys operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only o department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. (Hint: It may be helpful to perform a vertical analysis.)arrow_forwardAssign the customer-related activity costs to each customer type using activity rates. Now calculate the profitability of each customer category. As a manager, how would you use this information? Emery Company sells small machine parts to heavy equipment manufacturers for an average price of 1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plants manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customers specifications have been met Inspection takes essentially the same time regardless of the type of part being produced. Emerys Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year): Required: 1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type. Calculate the profitability of each customer type. Discuss the problems with this measure of customer profitability.arrow_forward
- Assume you are the warehouse manager for Vinnies Vinyls, a multi-location business specializing in vinyl records. Vinniess operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to Vinnies stores. The manager of the West store has some concerns relating to the stores financial performance and has asked for your help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. (Hint: it may be helpful to perform a vertical analysis.)arrow_forwardActivity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater Designs provides the following information about customer-related activities and costs for the most recent quarter: JITDistributors Non-JITDistributors Sales orders 1,100 110 Sales calls 70 70 Service calls 350 175 Average order size 750 7,500 Manufacturing cost/unit $125 $125 Customer costs: Processing sales orders $3,330,000 Selling goods 1,120,000 Servicing goods 1,050,000 Total $5,500,000 Required: 1. Calculate the total revenues per distributor category, and assign the customer costs to each distributor type by using revenues as the allocation base. Selling price for one unit is $150. Round…arrow_forwardActivity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater Designs provides the following information about customer-related activities and costs for the most recent quarter: JITDistributors Non-JITDistributors Sales orders 1,000 100 Sales calls 70 70 Service calls 350 175 Average order size 550 5,500 Manufacturing cost/unit $125 $125 Customer costs: Processing sales orders $3,430,000 Selling goods 1,120,000 Servicing goods 1,050,000 Total $5,600,000 Required: 1. Calculate the total revenues per distributor category, and assign the customer costs to each distributor type by using revenues as the allocation base. Selling price for one unit is $150. Round…arrow_forward
- The following is a financial information from MayPagAsaPa Company: Additional information:The company purchase office supplies from big manufacturers and distributes among different segments. Cost of goods sold and shipping expenses are both variable. 1.Prepare a new contribution format segmented income statement. 2.Analyze your requirement #1. What points that might help to improve the company’s performance would you bring to management’s attention? 3.Compare your output with Requirement 1 with the information above. List the items you think that is an error/disadvantage/weakness of the given data.arrow_forwardABC Data; Resource-Capacity Planning; Nonfinancial Performance Indicators ZenonComputer competes at the retail level on the basis of customer service. It has invested significantresources in its customer service department. Recently, the company has installed a traditionalactivity-based costing (ABC) system to provide better cost information for pricing, decision making,and customer profitability analysis. Most of the costs of running the customer service departmentare considered committed (i.e., short-term fixed) costs (principally, personnel and equipment costs).The budgeted cost for the upcoming period is $800,000. Activity analysis, recently conducted whenthe ABC system was implemented, revealed the following information:ActivitiesPercentage ofEmployee TimeEstimated (Budgeted)Cost Driver QuantityHandling customer orders 75% 8,000 customer ordersProcessing customer complaints 10 400 customer complaintsConducting customer credit checks 15 500 credit checksRequired1. Based on the…arrow_forwardSubject :- Accountingarrow_forward
- How to calculate profitability analysis?arrow_forwardProduct Profitability Analysis Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVS), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products: Conquistador Hurricane Sales price $4,800 $3,200 Variable cost of goods sold (3,020) (2,140) Manufacturing margin $1,780 $1,060 Variable selling expenses (964) (548) Contribution margin $816 $512 Fixed expenses (380) (200) Operating income $436 $312 In addition, the following sales unit volume information for the period is as follows: Conquistador 2,800 Hurricane 2,000 Sales unit volume a. Prepare a contribution margin by product report. Compute the contribution margin ratjo for each product as a whole percent. Galaxy Sports Inc. Contribution Margin by Productarrow_forwardIn the spreadsheet below, there is data on the price, cost, demand, and quantity produced for an item. There are also different "what if" values that can help a manager to calculate costs and revenue with variability in demand. A B C 1 Profit Model 2 What- 3 Data IfDemand Values 4 20,000 5 Unit Price ($) 50 40,000 9 Unit Cost ($) 25 55,000 7 Fixed Cost ($) 550,000 60,000 8 Demand 60,000 65,000 9 Quantity Produced 55,000 10 From the "what if" values, calculate the total cost when demand is 40,000. A. $2,000,000 B. $75,000 C. $1,100,000 D. $1,925,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Profitability index; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Md5ocNqKHq8;License: Standard Youtube License