FINANCIAL+MANAG.ACCT.
9th Edition
ISBN: 9781260728774
Author: Wild
Publisher: RENT MCG
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What benefits and drawbacks are there for a business that uses a Standard/Traditional Costing model?
What benefits and drawback are there for a business that uses an Activity Based Costing (ABC) model?
If you owned a small manufacturing business with relatively high volume and multiple product lines, would it be good for you to implement an ABC model? Why?
What are the benefits and the risks - or how could you adapt it to get the best of both?
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes.
The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden
beds, the distance to travel to customers, and the number of customers. In addition, the costs of malntalning garden beds depends on
whether the beds are low malntenance beds (malnly ordinary trees and shrubs) or high malntenance beds (malnly flowers and exotic
plants). Accordingly, the company uses the five activity cost pools listed below:
Activity Cost Pool
Caring for lawn
Caring for garden beds-low maintenance
Caring for garden beds-high maintenance
Travel to jobs
Customer billing and service
Activity Measure
Square feet of lawn
Square feet of low maintenance beds
Square feet of high maintenance beds
Miles
Number of customers
The company already has completed Its first stage allocations of costs and has summarized Its…
Google uses variable costing for several business decisions. How can variable costing income be converted to absorption costing income?
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- Winters, Inc. is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using variable costing because it is better for planning purposes. variable costing because it follows GAAP. absorption costing because it is better for controlling purposes. absorption costing because it follows GAAP.arrow_forwardWhich of the following statements is not a characteristic of a target costing system? It is a good system to compare the cost of your products with that of your competitors Assists with ensuring that a business can achieve its desired profit levels Focuses on cost reductions after the product has been designed Focuses on the manufacturing processes to see if improvements can be made from a cost perspective.arrow_forwardKertas, Inc. produces paper and office supplies and uses the just-in-time inventory system. Currently, the company is using variable costing. Which of the following is true of the effect of costing systems on the financial results of Kertas? A. Its operating income will vary a little if the company uses absorption costing instead of variable costing. B. Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. C. Its operating income will be negative if the company uses absorption costing instead of variable costing. D. Its operating income will be significantly lower if the company uses absorption costing instead of variable costing.arrow_forward
- How important is it to trace costs appropriately? Explain. As you are beginning to think about the importance of tracing costs appropriately, please consider the differences between variable costing and absorption costing. What implications does each of these have on such things as financial reporting of profit and pricing your products for the marketplace?arrow_forwarda difference in cost-plus pricing and target costing is that target costing starts with the price customers are willing to pay whereas cost-plus pricing starts with the cost. computes the desired markup while cost-plus pricing computes the maximum cost the company is willing to incur. is generally determined after introducing a product and cost-plus pricing is determined before introducing a product. is a simple approach while cost-plus pricing is relatively complex.arrow_forwardGreen Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenanc beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high…arrow_forward
- Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:arrow_forwardGreen Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Activity Measure Caring for lawn Square feet of lawn Caring for garden beds–low maintenance Square feet of low maintenance beds Caring for garden beds–high maintenance Square feet of high maintenance beds Travel to jobs Miles Customer billing and service Number of customers The company already has completed its first-stage allocations of costs and…arrow_forwardGreen Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance. Caring for garden beds-high maintenance Travel to jobs Customer billing and service Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance. Caring for garden beds-high maintenance Travel to jobs Customer billing and service Square feet of low maintenance beds Square feet of high maintenance beds i…arrow_forward
- Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Caring for lawn. Caring for garden beds-low maintenance Caring for garden beds-high maintenance. Travel to jobs Customer billing and service Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Caring for garden…arrow_forwardGreen Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its…arrow_forwardGreen Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service Square feet of lawn The company already has completed its first stage…arrow_forward
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