ACCT 311 CONNECT CHP 1 complete solutions correct answers key

ACCT 311 CONNECT CHP 1 complete solutions correct answers key

1-1

Apple, Inc. incurs many types of costs in its operations.

Required:

For each cost in the following table, identify the stage in the value chain where this cost is incurred.

Cost

Stage in the Value Chain

  Programmer costs for a new operating system.

Research and Development  

  Costs to ship computers to customers.

Distribution  

  Call center costs for support calls.

Customer Service  

  Salaries for employees working on new product designs.

Design  

  Costs to purchase advertising in university stores.

Marketing  

  Costs of memory chips to make computers.

Production  

1-2

As an analyst in an airline's finance department, you are asked to help the operations staff. Personnel has identified a new method of loading baggage that is expected to result in a 30 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $1.00 per bag. Other costs are $0.50 per bag.

Required:

(a)

What differential costs should the operations staff consider for the decision to use the new method next year? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  Differential costs

$ 

(b)

Describe how management would use the information in requirement (a) and any other appropriate information to proceed with the comtemplated use of the new baggage loading method.

1-3

Beige Computers operates retail stores in both downtown (City) and suburban (Mall) locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Beige’s CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent income statement follows. The CEO has asked for your advice on shutting down the City Division's operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

BEIGE COMPUTERS, CITY DIVISION
Divisional Income Statement
For the Year Ending January 31

  Sales revenue

$

12,900,000

  Costs

    Advertising—City Division

525,000

    Cost of goods sold

6,450,000

    Divisional administrative salaries

870,000

    Selling costs (sales commissions)

1,730,000

    Rent

2,215,000

    Share of corporate administration

1,425,000

  Total costs

$

13,215,000

  Net loss before income tax benefit

$

(315,000

)

  Tax benefit at 40% rate

126,200

  Net loss

$

(189,000

)

Required:

What revenues and costs are probably differential for the decision to discontinue City division's operations? (Input all values as positive number. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

BEIGE COMPUTERS, CITY DIVISION
Divisional Income Statement
Differential Revenues and Costs
For the Year Ending January 31

  Sales revenue

  $ 

  Differential

  Costs

    Advertising—City Division

  Differential

    Cost of goods sold

  Differential

    Divisional administrative salaries

  Differential

    Selling costs (sales commissions)

  Differential

    Rent

  Differential

    Share of corporate administration

  Not Differential

       Total costs

$ 

  Net differential gain before income tax expense

$ 

  Tax expense at 40% rate

  Differential

  Net differential gain from store

$ 

1-4

Assume that Carmen's Cookies is preparing a budget for the month ending June 30. Management prepares the budget by starting with the actual results for April 30. Next, management considers what the differences in costs will be between April and June.

     Management expects the number of cookies sold to be 5 percent greater in June than in April, and it expects all food costs (e.g., flour, eggs) to be 5 percent higher in June than in April. Management expects "other" labor costs to be 10 percent higher in June than in April, partly because more labor will be required in June and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,000 in April to $3,500 in June. Rent and utilities are not expected to change.

Required:

Prepare a budget for Carmen's Cookies for June. (Omit the "$" sign in your response.)

CARMEN'S COOKIES
Retail Responsibility Center
Budgeted Costs
For the Month Ending June 30

Actual
(April)

Budget
(June)

  Food

      Flour

$

2,700  

$

      Eggs

5,300  

      Chocolate

2,600  

      Nuts

2,700  

      Other

2,900  

   Total food

$

16,200  

$

  Labor

      Manager

$

3,000  

$

      Other

1,700  

   Total labor

$

4,700  

$

  Utilities

1,900  

  Rent

4,800  

  Total cookie costs

$

27,600  

$

  Number of cookies sold

32,000  

1-4b

Assume that Carmen's Cookies is preparing a budget for the month ending June 30. Management prepares the budget by starting with the actual results for April 30. Next, management considers what the differences in costs will be between April and June.

     Management expects the number of cookies sold to be 5 percent greater in June than in April, and it expects all food costs (e.g., flour, eggs) to be 5 percent higher in June than in April. Management expects "other" labor costs to be 10 percent higher in June than in April, partly because more labor will be required in June and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,400 in April to $3,900 in June. Rent and utilities are not expected to change.

Required:

Prepare a budget for Carmen's Cookies for June. (Omit the "$" sign in your response.)

CARMEN'S COOKIES
Retail Responsibility Center
Budgeted Costs
For the Month Ending June 30

Actual
(April)

Budget
(June)

  Food

      Flour

$

2,200  

$

      Eggs

6,000  

      Chocolate

2,200  

      Nuts

2,000  

      Other

2,500  

   Total food

$

14,900  

$

  Labor

      Manager

$

3,400  

$

      Other

1,400  

   Total labor

$

4,800  

$

  Utilities

2,000  

  Rent

4,600  

  Total cookie costs

$

26,300  

$

  Number of cookies sold

34,000  

1-5

Ringer Company makes a variety of products. It is organized in two divisions, East and West. West Division normally sells to outside customers but, on occasion, also sells to the East Division. When it does, corporate policy states that the price must be cost plus 20 percent to ensure a "fair" return to the selling division. West received an order from East Division for 300 units. West's planned output for the year had been 1,200 units before East's order. West's capacity is 1,500 units per year. The costs for producing those 1,200 units follow.

Total

Per Unit

  Materials

$

108,000

$

90

  Direct labor

57,600

48

  Other costs varying with output

42,000

35

  Fixed costs

528,000

440

  Total costs

$

735,600

$

613

     Based on these data, West's controller calculated that the unit price for East's order should be $736 (= $613 × 120 percent). After producing and shipping the 300 units, West sent an invoice for $220,680. Shortly thereafter, West received a note from the buyer at East stating that this invoice was not in accordance with company policy. The unit cost should have been

  Materials

$

90

  Direct labor

48

  Other costs varying with output

35

  Total

$

173

The price per unit would be $207.6 (= $173 × 120 percent).

Required:

What is the total price for 300 units of products that should be charged by West Division under the following options? (Round intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Options:

A.

Use the full per unit cost for normal production of 1,200 units.

B.

Use only differential costs as the cost basis.

C.

Use differential costs plus a share of fixed costs, based on actual production volume (with East's order) of 1,500 units.

  Total price

  Option A

$   

  Option B

$     

  Option C

$   

1-6

Assume that Carmen's Cookies is preparing a budget for the month ending November 30. Management prepares the budget by starting with the actual results for April that are shown below. Then, management considers what the differences in costs will be between April and September.

CARMEN'S COOKIES
Retail Responsibility Center
Actual Costs
For the Month Ending April 30

Actual

(April)

  Food

    Flour

     $

 2,300    

    Eggs

5,000    

    Chocolate

1,700    

    Nuts

1,900    

    Other

2,100    

  Total food

     $

13,000    

  Labor

    Manager

     $

3,000    

    Other

1,600    

  Total labor

     $

4,600    

  Utilities

1,800    

  Rent

5,500    

  Total cookie costs

     $

24,900    

  Number of cookies sold

33,000    

         Management expects cookie sales to be 100 percent greater in November than in April because of the holiday season. Management expects that all food costs (e.g., flour, eggs) will be 120 percent higher in November than in April because of the increase in cookie sales and because prices for ingredients are generally higher in the high demand holiday months. Management expects “other” labor costs to be 120 percent higher in November than in April, partly because more labor will be required in November and partly because employees will get a pay raise. (120 percent higher means that the amount in November will be 220 percent of the amount in April.) The manager will get a pay raise that will increase the salary from $3,000 in April to $3,500 in November. Utilities will be 15 percent higher in November than in April. Rent will be the same in November as in April.

     Now, move ahead to December and assume the following actual results occurred in November:

  Number of cookies sold

66,000  

  Flour

 $

4,800  

  Eggs

10,200  

  Chocolate

3,600  

  Nuts

4,000  

  Other

4,400  

  Manager's salary

3,500  

  Other labor

3,400  

  Utilities

2,600  

  Rent

5,500  

Required:

Prepare a statement that compares the budgeted and actual costs. (Negative amounts and differences should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

CARMEN'S COOKIES
Retail Responsibility Center
Budgeted versus Actual Costs
For the Month Ending November 30:

Actual
(November)

Budget
(November)

Difference

  Food

    Flour

 $

4,800

$    

$    

    Eggs

10,200

    Chocolate

3,600

    Nuts

4,000

    Other

4,400

  Total food

$

27,000

$    

$   

  Labor

    Manager

$

3,500

$    

$   

    Other

3,400

  Total labor

$

6,900

$    

$    

  Utilities

2,600

  Rent

5,500

  Total cookie costs

$

42,000

$    

$    

  Number of cookies sold

66,000

CARMEN'S COOKIES
Retail Responsibility Center
Budgeted versus Actual Costs
For the Month Ending November 30:

Actual
(November)

Budget
(November)

Difference

  Food

    Flour

 $

5,400

$    

$    

    Eggs

11,800

    Chocolate

3,600

    Nuts

4,300

    Other

4,800

  Total food

$

29,900

$    

$   

  Labor

    Manager

$

3,800

$    

$   

    Other

2,800

  Total labor

$

6,600

$    

$    

  Utilities

2,500

  Rent

5,000

  Total cookie costs

$

44,000

$    

$    

  Number of cookies sold

66,000