Stan is opening a coffee shop next to Big State University. He knows that controlling his costs will be important to the success of the shop. He will not be able to work all the hours the shop is open, so the employees will need some guidelines to perform their jobs correctly. After talking to an accounting professor, he decides he needs a
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- Pocket Umbrella, Inc. is considering producing a new type of umbrella. This new pocket-sized umbrella would fit into a coat pocket or purse. Classify the following costs of this new product as direct materials, direct labor, manufacturing overhead, or selling and administrative. Cost of advertising the product Fabric used to make the umbrellas Maintenance of cutting machines used to cut the umbrella fabric so it will fit the umbrella frame Wages of workers who assemble the product Presidents salary The salary of the supervisor of the people who assemble the product Wages of the product tester who stands in a shower to make sure the umbrellas do not leak Cost of market research survey Salary of the companys sales managers Depreciation of administrative office buildingarrow_forwardThe computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs. Required 1. What are the features that distinguish job order costing from process costing? 2. Should Santana continue to use job order costing or switch to process costing for her workstation furniture manufacturing? Explain.arrow_forwardThe following situations describe decision scenarios that could use managerial accounting information: The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates. By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run. The division controller of West Coast Supplies needs to determine the cost of products left in inventory. The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures. For each situation, discuss how managerial accounting information could be used. b) What are the major differences between managerial accounting and financial accounting?arrow_forward
- As a new graduate employee in a hospitality company, you are being introduced to the staff. The company owns several businesses. You have been informed that your initial job will require you to analyse the costing system of a restaurant (Café Deluxe) which is situated on a beach side tourist area. Your supervisor has recently attended a business conference where he was introduced with an improved costing system, Activity Based Costing. Café Deluxe presently uses traditional costing method and they want your help to explore the adoption of Activity based costing systems. In your first visit you have noticed that it is a sit-down restaurant and offers menu dining. The corporate marketing manager is considering introducing a buffet menu at Café. Required: a) Explain the types of decisions Café Deluxe faces under normal business circumstances and the associated management accounting information required by the Café management. b) Do you think the profitability of restaurant services…arrow_forwardGino's Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities Activity Cost Pool Serving a party of diners Serving a diner Serving drinks A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served. Data concerning these activities are shown below: Total cost Total activity Activity Measure Number of parties served Number of diners served Number of drinks ordered Serving Party $ 56,000 7,000 parties Serving a Diner $ 189,000 30,000 diners Prior to the activity-based costing study, the owner knew very little about the costs of the…arrow_forwardVVH Training is a company that provides expert training sessions on how to run your business and make it profitable. They offer these training sessions in their offices and offer catering services during the sessions. You have been hired to complete a profitability analysis and you decided to start by completing a cost analysis of the business, in order to figure out for each training sessions, what costs are fixed and what costs are variable. You were able to gather the following information about the associated costs: Instructor: $11,000 per session Training Material: $2,500 per session and $35 per attendee Catering Services: Food: $75 per attendee Setup/cleanup: $25 per attendee Fixed fee: $5,000 per training session The catering company has also offered VVH Training a 1,000$ discount per session, if they are willing to leave their brochures on the dinner table as a form of advertising. VVH has accepted the offer saying that it is a no-brainer Required: plot a…arrow_forward
- Mel Gibbeson has recently graduated from a business school and has joined the family business as anaccountant. At the first management meeting with production, marketing and sales, a great deal oftime was spent discussing the unit cost of products.Required: What kinds of decisions can managers make using the unit cost information?( explain briefly your answer) (use your own words to avoid plagirism)arrow_forwardPacific Decor, Inc., designs, manufactures, and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much of the past month working on the design of a high-end dining room table. The design has been well-received by Jose Alvarez, the product development manager. However, Alvarez wants to make sure that the table can be priced competitively. Amy Hoover, Pacific's cost accountant, presents Alvarez with the following cost data for the expected production of 200 tables: Design cost $ 5,000 Direct materials 120,000 Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 142,000 64,000 46,500 Marketing 15,000 1. Alvarez thinks that Pacific can successfully market the table for $2,000. The company's target operating income is 10% of revenue. Calculate the target full cost of producing the 200 tables. Does the cost estimate developed by Hoover meet Pacific's requirements? Is value engineering needed? 2. Alvarez discovers…arrow_forwardVaughn, Inc produces two types of gas grill: a family model and deluxe model. Vaughn’s controller has decided to use overhead rate based on direct labor costs. The president of the company recently heard of activity based on direct labor costs. The president of the company recently heard of activity- based costing and wants to see hoe the results would differ if this system were used. Two activity cost pools were developed: machine setup. Presented below is information related to the company’s operation: Family model Deluxe Model Direct Labor Cost: $78,000 $156,000 Machine Hours: 2,000 2,000 Setup Hours: 200 800 Total estimated overhead costs are $468,000. Overhead cost allocated to the machining activity cost pool is $280,800 and $187,200 is allocated to the machine setup activity cost pool. Compute the overhead rates using the activity-bases costing approach.arrow_forward
- Tim Johnson is a news reporter and feature writer for The Wall Street Review, an important daily newspaper for financial managers. Tim’s assignment is to develop a feature article on target costing, including interviews with chief financial officers and operating managers. Tim has a generous travel budget for research into company history, operations, and market analysis for the firms he selects for the article. Tim has asked you to recommend industries and firms that would be good candidates for the article. What would you advise? Explain your recommendations.arrow_forwardTed Lozano is a cost accountant for Company C. Fred Lopez, Vice President of Marketing, has asked Ted to meet with representatives of Company C’s major competitor to discuss product cost data. Fred indicates that the sharing of these data will enable Company C to determine a fair and equitable price for its products. Instructions: Would it be ethical for Ted to attend the meeting and share the relevant cost data? Explain your answer.arrow_forwardIn the lecture video I used Lay's Potato Chips and an imaginary company (Smith Co.) as examples to explain Process Costing. Please think about a real life manufacturing company (big or small) that would be a good fit for the Process Costing method. Explain why you feel that your company would be a good candidate for Process Costing (hint: look at the criteria). Also, describe how you believe the units of product move through the processing department(s) and how direct labor, direct material and manufacturing overhead cost are added in each department (keep in mind that direct labor and material in process costing are traced to processing departments rather than units of products). Finally, explain what allocation base you would suggest for the calculation of the predetermined overhead rate(s) in your processing departments and why. (Min. 150 words).arrow_forward
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