Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 18, Problem 6PB
Product costing and decision analysis for a service company
Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:
Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:
The size of the company’s ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation:
Three recent representative flights have been selected for the profitability study. Their characteristics are as follows:
Instructions
Determine the fuel, crew, and
Determine the cost per arrival or departure by terminal city.
Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.
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Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services Department (CCS) costs to profit centers. The following table lists the types of services and cost drivers for each service. The table also includes the budgeted cost and quantity for each service for August.
CCS ServiceCategory
Cost Drivers
Budgeted Cost
Budgeted Quantityof Services
Help desk
Number of calls
$70,300
3,700
Network center
Number of devices monitored
140,400
1,800
Electronic mail
Number of user accounts
148,500
4,500
Smartphone support
Number of smartphones issued
87,000
3,000
One of the profit centers for Varney Corporation is the Communication Systems (COMM) sector. Assume the following information for COMM:
• COMM has 2,300 employees, of whom 25% are office employees.
• All the office employees have been issued a smartphone, and 93% of them have a computer on the network.
• Ninety percent of the employees with a…
Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services Department (CCS) costs to profit centers. The following table lists the types of services and cost drivers for each service. The table also includes the budgeted cost and quantity for each service for August.
CCS ServiceCategory
Cost Drivers
Budgeted Cost
Budgeted Quantityof Services
Help desk
Number of calls
$50,400
2,800
Network center
Number of devices monitored
170,100
2,100
Electronic mail
Number of user accounts
151,700
4,100
Smartphone support
Number of smartphones issued
115,600
3,400
One of the profit centers for Varney Corporation is the Communication Systems (COMM) sector. Assume the following information for COMM:
• COMM has 2,400 employees, of whom 40% are office employees.
• All the office employees have been issued a smartphone, and 92% of them have a computer on the network.
• Ninety percent of the employees with a…
Middler Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services (CCS) service department costs to profit centers. The following table lists service categories and cost drivers used by the CCS department. The table also includes cost and cost drivers for each service for October.
CCS ServiceCategory
Cost Driver
Budgeted Cost
Budgeted CostDriver Quantity
Help desk
Number of calls
$110,250
2,500
Network center
Number of devices monitored
619,500
8,850
Electronic mail
Number of user accounts
47,600
5,950
Handheld technology support
Number of handheld devices issued
106,240
8,300
One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:
The sector has 2,000 employees, of whom 40% are office employees.
Almost all office employees (70%) have a computer on the network.
90 percent of the employees with a computer…
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...
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