The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below. Sales in units Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses Shipping expense Advertising expense Salaries & commissions Insurance expense Depreciation expense Total operating expenses Net income Central Valley Company Comparative Monthly Income Statements March COGS Shipping Salaries and commissions 5,900 $755,200 386,400 368,800 Y Y Y 68,800 79,000 April 5,400 $691,200 $787,200 359,400 394,900 331,800 392,300 64,300 79,000 157,300 9,900 48,000 358,500 May 6,150 71,800 79,000 174, 100 174,800 9,900 9,900 48,000 48,000 379,800 383,500 $(11,000) $(26,700) $8,800 X X X June 6,800 $870,400 435,000 435,400 Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. 75,500 79,000 189,500 9,900 48,000 401,900 $33,500 4

The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below. Sales in units Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses Shipping expense Advertising expense Salaries & commissions Insurance expense Depreciation expense Total operating expenses Net income Central Valley Company Comparative Monthly Income Statements March COGS Shipping Salaries and commissions 5,900 $755,200 386,400 368,800 Y Y Y 68,800 79,000 April 5,400 $691,200 $787,200 359,400 394,900 331,800 392,300 64,300 79,000 157,300 9,900 48,000 358,500 May 6,150 71,800 79,000 174, 100 174,800 9,900 9,900 48,000 48,000 379,800 383,500 $(11,000) $(26,700) $8,800 X X X June 6,800 $870,400 435,000 435,400 Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. 75,500 79,000 189,500 9,900 48,000 401,900 $33,500 4

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 57P: Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account...

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Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer 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 categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.
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Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,030 Labor expense 41,590 Sales 189,000 Research and development (uncontrollable) 320 Depreciation expense 18,000 Net income/(loss) ? Cost of goods sold 119,070 Selling expense 1,250 Total expenses ? Marketing costs (uncontrollable) 780 Administrative expense 700 Income tax expense (21% of pretax income) ? Other expenses 310 A. Prepare the income statement to include all costs, but separate out uncontrollable costs using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended December…
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales 189,000 Research and development (uncontrollable) 310 Depreciation expense 16,000 Net income/(loss) ? Cost of goods sold 119,070 Selling expense 1,250 Total expenses ? Marketing costs (uncontrollable) 790 Administrative expense 700 Income tax expense (21% of pretax income) ? Other expenses 330 A. Prepare the income statement using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended Dec. 31, 20xx Sales $fill in the blank cde9000a3faf056_2 Cost of…
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Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,570 Sales 188,000 Research and development (uncontrollable) 315 Depreciation expense 18,000 Net income/(loss) ? Cost of goods sold 118,440 Selling expense 1,250 Total expenses Marketing costs (uncontrollable) 780 Administrative expense 690 Income tax expense (21% of pretax income) ? Other expenses 320 A. Prepare the income statement to include all costs, but separate out uncontrollable costs using the above information. Round your answers to the nearest dollar. BDS Enterprises Income Statement For the Year Ended December 31, 20xx Controllable Expenses: Total Controllable…
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,030 Labor expense 41,570 Sales 190,000 Research and development (uncontrollable) 310 Depreciation expense 17,000 Net income/(loss) ? Cost of goods sold 119,700 Selling expense 1,240 Total expenses ? Marketing costs (uncontrollable) 790 Administrative expense 680 Income tax expense (21% of pretax income) ? Other expenses 320 Question Content Area A. Prepare the income statement using the above information. Round your answers to the nearest dollar. BDS EnterprisesIncome StatementFor the Year Ended Dec. 31, 20xx $Sales Cost of Goods Sold…