Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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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.
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Activity-Based Customer-Driven Costs
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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).
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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:
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Non-JITDistributors
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Average order size
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Chapter 18 Solutions
Financial And Managerial Accounting
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