FUND.OF COST ACCT >CUSTOM<
6th Edition
ISBN: 9781307515565
Author: LANEN
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 2, Problem 66P
Cost Allocation with Cost Flow Diagram
The library at Pacific Business School (PBS) serves both undergraduate and graduate programs. The dean of PBS is interested in evaluating the profitability of the degree programs and has asked the head of the library, Rex Gilmore, to allocate the annual library cost of $4,035,000 to the two programs.
Rex believes that two cost drivers explain most of the costs: number of students and credit hours. Using information from a previous analysis, he split the annual library budget as follows:
Required
- a. Allocate the cost of the library to the two programs (undergraduate and graduate).
- b. Draw a cost flow diagram to illustrate your answer to requirement (a).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Gipps Business College (GBC) has two degree programs, undergraduate (UG) and graduate (GRAD) and three service departments, information technology (IT), Event Planning (EP), and Career Services (CS). The CFO of GBC is conducting a profitability analysis of the two programs and wants to include the appropriate costs of the service departments in the costs of the two degree programs. As a part of the analysis, the CFO has collected the following usage patterns of the ser vice departments over the last two years.
Using Departments
Suppying Department
IT
EP
CS
UG
GRAD
IT
0
10%
20%
40%
30%
EP
0
0
25%
25%
50%
CS
0
0
0
60%
40%
Direct Costs
$ 70,000.00
$ 90,000.00
$ 100,000.00
To be determined
Required:-
a.) The CFO is unsure what the best way to allocate the cost is and has asked you for the allocations to the UG and GRAD programs using:
The direct method;
The step method starting with IT, followed by EP,…
Burgess Business School has two degree programs, BBA and MBA. The school uses an ABC system to cost the three support services
it provides to students from both programs: Career Center, Events, and Library. Following are the costs of these three activities and the
cost drivers used in the system:
Activity
Cost
Activity
Career Center
Event planning and hosting.
Library
For the most recent year, data collected from the central IT systems indicate the following:
MBA
5,600
4,500
30,300
BBA
10,400
5,500
70,700
$ 448,000
440,000
606,000
Cost Driver
Interview-hours
Event attendance
Number of visits
Interview-hours
Event attendance
Library visits
Required:
a. Compute the cost-driver rates for the three activities at the school.
b. Suppose that in a future period, no students from the MBA program visited the Library. What amount of the Library cost would be
assigned to the MBA program?
Princeton offers a large range of undergraduate courses. The
University is interested in determining the cost equation for the
facilities cost as a function of student credit hours so that it can more
accurately budget its facilities costs as enrollment grows. Information
for the high and low cost semesters and volumes for last 5 years
appears below:
Semester
Spring 2016
Fall 2017
Student Credit Hours
Facilities Cost
160,000
$750,000
140,000
$660,000
Using the high-low method, with student credit hours as the activity
driver, what is the equation for facilities cost (FC) as a function of student
credit hours?
FC $4.50/ student credit hour
O FC = $1.14 / student credit hour
O FC $30,000+ $4.50/ student credit hour
O FC $568,182 + $0.22 / student credit hour
◄ Previous
MAR
18
tv
C
Next▸
Chapter 2 Solutions
FUND.OF COST ACCT >CUSTOM<
Ch. 2 - What is the difference in meaning between the...Ch. 2 - What is the difference between product costs and...Ch. 2 - What is the difference between outlay cost and...Ch. 2 - Prob. 4RQCh. 2 - Is cost-of-goods sold an expense?Ch. 2 - Is cost-of-goods a product cost or a period cost?Ch. 2 - What are the similarities between the Direct...Ch. 2 - What are the three categories of product cost in a...Ch. 2 - Prob. 9RQCh. 2 - Prob. 10RQ
Ch. 2 - What do the terms step costs and semivariable...Ch. 2 - What do the terms variable costs and fixed costs...Ch. 2 - How does a value income statement differ from a...Ch. 2 - Why is a value income statement useful to...Ch. 2 - Materials and labor are always direct costs, and...Ch. 2 - Prob. 16CADQCh. 2 - In evaluating product profitability, we can ignore...Ch. 2 - Prob. 18CADQCh. 2 - The friend in question 2-18 decides that she does...Ch. 2 - Consider a digital music service such as those...Ch. 2 - Consider a ride-sharing service such as Uber or...Ch. 2 - Pick a unit of a hospital (for example, intensive...Ch. 2 - The dean of Midstate University Business School is...Ch. 2 - Prob. 24CADQCh. 2 - Prob. 25CADQCh. 2 - Basic Concepts For each of the following...Ch. 2 - Basic Concepts For each of the following costs...Ch. 2 - Basic Concepts For each of the following costs...Ch. 2 - Basic Concepts Place the number of the appropriate...Ch. 2 - Basic Concepts Intercontinental, Inc., provides...Ch. 2 - Prob. 31ECh. 2 - For each of the following costs incurred in a...Ch. 2 - Basic Concepts For each of the following costs...Ch. 2 - Basic Concepts The following data apply to the...Ch. 2 - Cost AllocationEthical Issues In one of its...Ch. 2 - Cost AllocationEthical Issues Star Buck, a coffee...Ch. 2 - Prepare Statements for a Manufacturing Company The...Ch. 2 - Prepare Statements for a Service Company Chucks...Ch. 2 - Prepare Statements for a Service Company Where2...Ch. 2 - Prepare Statements for a Service Company The...Ch. 2 - Prepare Statements for a Service Company Lead!...Ch. 2 - Prepare Statements for a Manufacturing Company The...Ch. 2 - Basic Concepts The following data refer to one...Ch. 2 - Basic Concepts The following data refers to one...Ch. 2 - Prepare Statements for a Merchandising Company The...Ch. 2 - Prepare Statements for a Merchandising Company...Ch. 2 - Cost Behavior and Forecasting Dayton, Inc....Ch. 2 - Sophia’s Restaurant served 5,000 meals last...Ch. 2 - Prob. 49ECh. 2 - Components of Full Costs Madrid Corporation has...Ch. 2 - Prob. 51ECh. 2 - Components of Full Costs Larcker Manufacturings...Ch. 2 - Prob. 53ECh. 2 - Gross Margin and Contribution Margin Income...Ch. 2 - Gross Margin and Contribution Margin Income...Ch. 2 - Value Income Statement Ralphs Restaurant has the...Ch. 2 - Value Income Statement DeLuxe Limo Service has the...Ch. 2 - Cost Concepts The following information comes from...Ch. 2 - Cost Concepts The controller at Lawrence...Ch. 2 - Cost Concepts Columbia Products produced and sold...Ch. 2 - Prepare Statements for a Manufacturing Company...Ch. 2 - Prepare Statements for a Manufacturing Company...Ch. 2 - Prepare Statements for a Manufacturing Company The...Ch. 2 - Cost Allocation with Cost Flow Diagram Coastal...Ch. 2 - Cost Allocation with Cost Flow Diagram Wayne...Ch. 2 - Cost Allocation with Cost Flow Diagram The library...Ch. 2 - Greenfield Consultants conducts analyses of public...Ch. 2 - Consider the Business Application, “Indirect Costs...Ch. 2 - Find the Unknown Information After a computer...Ch. 2 - Find the Unknown Information Just before class...Ch. 2 - Cost Allocation and Regulated Prices The City of...Ch. 2 - Koufax Materials Corporation produces plastic...Ch. 2 - Reconstruct Financial Statements San Ysidro...Ch. 2 - Westlake, Inc., produces metal fittings for the...Ch. 2 - Finding Unknowns Marys Mugs produces and sells...Ch. 2 - Finding Unknowns BST Partners has developed a new...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Variable Costing Income Statement for a Service Company The actual and planned data for Underwater University for the Fall term were as follows: Enrollment Tuition per credit hour Credit hours Registration, records, and marketing costs per enrolled student Revenue Variable costs: Registration, records, and marketing costs $ Instructional costs Total variable costs Instructional costs per credi ur Depreciation on classrooms and equipment Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. Contribution margin Depreciation on classrooms and equipment Operating income $ Actual $ 4,500 Prepare a variable costing income statement showing the contribution margin and operating income for the Fall term. Underwater University Variable Costing Income Statement For the Fall Term $ $120 60,450 $275 $64 $825,600arrow_forwardFriendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?arrow_forwardFanning Academy is a profit-oriented education business. Fanning provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $730 per course. During the previous year, Fanning provided instruction for 1,000 students. The income statement for the company follows: Revenue Cost of instructors Overhead costs Net income $ 730,000 (434,000) (232,500) $ 63,500 The company president, Andria Rossi, indicated in a discussion with the accountant, Sam Trent, that she was extremely pleased with the growth in the area of computer-assisted instruction. She observed that this department served 300 students using only three part- time instructors. In contrast, the classroom-based instructional department required 28 instructors to teach 700 students. Ms. Rossi noted that the per-student cost of instruction was dramatically lower for the computer-assisted department. She based her conclusion on the following information: Fanning pays its…arrow_forward
- Break-even analysis is an important tool for managing any business, including colleges and universities. Instructions 1. Identify three areas where break-even analysis might be used at your college or university. 2. For each area, identify the revenues, variable costs, and fixed costs.arrow_forwardTroglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows: Budgeted Activity-Base Activity Activity Base Activity Cost Usage Facilities Square feet $800,000 80,000 square feet Instruction Number of course sections 1,200,000 600 sections Student services Number of students 290,000 2,500 students The activity-base usage associated with the Archaeology and Geology departments is as follows: Department Facilities Instruction Student Services Archaeology 8,000 square feet 8 sections 150 students Geology 5,200 square feet 15 sections 200 students a. Determine the activity rate for each activity. Activity Activity Rate Facilities per sq. ft. Instruction per section Student services per student b. Determine the total activity cost for the Archaeology Department. Total activity cost Nextarrow_forwardDirect Method Seattle Western University has provided the following data to be used in its service department cost allocations: Required: Using the direct method, allocate the costs of the service departments to the two operating departments. Allocate the Administration cost on the basis of student credit-hours and the Facility Services cost on the basis of space occupied.arrow_forward
- Troglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows: Activity Activity Base BudgetedActivity Cost Activity-BaseUsage Facilities Square feet $800,000 80,000 square feet Instruction Number of course sections 1,200,000 600 sections Student services Number of students 290,000 2,500 students The activity-base usage associated with the Archaeology and Geology departments is as follows: Department Facilities Instruction Student Services Archaeology 8,000 square feet 8 sections 150 students Geology 5,200 square feet 15 sections 200 students Determine the activity rate for each activity. Activity Activity Rate Facilities per sq. ft. Instruction per section Student services per…arrow_forwardTroglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows: Activity Activity Base BudgetedActivity Cost Activity-BaseUsageFacilities Square feet $800,000 80,000 square feetInstruction Number of course sections 1,200,000 600 sectionsStudent services Number of students 290,000 2,500 studentsThe activity-base usage associated with the Archaeology and Geology departments is as follows:Department Facilities Instruction Student ServicesArchaeology 8,000 square feet 8 sections 150 studentsGeology 5,200 square feet 15 sections 200 studentsa. Determine the activity rate for each activity.Activity Activity RateFacilities $ per sq. ft.Instruction $ per sectionarrow_forwardTroglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows: Activity Activity Base BudgetedActivity Cost Activity-BaseUsage Facilities Square feet $800,000 80,000 square feet Instruction Number of course sections 1,200,000 600 sections Student services Number of students 290,000 2,500 students The activity-base usage associated with the Archaeology and Geology departments is as follows: Department Facilities Instruction Student Services Archaeology 8,000 square feet 8 sections 150 students Geology 5,200 square feet 15 sections 200 students a. Determine the activity rate for each activity. Activity Activity Rate Facilities $fill in the blank 1 per sq. ft. Instruction $fill in the blank 2 per section Student services $fill in the blank 3 per student b. Determine the…arrow_forward
- Variable Costing Income Statement for a Service Company The actual and planned data for Broadwater Institute & Technical School for the Fall term were as follows: Actual Planned Enrollment Tuition per credit hour Credit hours Line Item Description Revenue Variable costs Registration, records, and marketing costs Registration, records, and marketing costs per enrolled student Instructional costs per credit hour Depreciation on classrooms and equipment $1,875,000 $1,875,000 Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. Prepare a variable costing income statement showing the contribution margin and operating income for the Fall term Broadwater Institute & Technical School Variable Costing Income Statement For the Fall Term Instructional costs Total variable costs Contribution margin Depreciation on classrooms and equipment Operating income Amount 9.200.000 ✓…arrow_forwardOption 1: Break-even analysis is an important tool for managing any business, including colleges and universities. Identify two areas where break-even analysis might be used at your current/previous college or university. For each area, identify some of the revenues, variable costs, and fixed costs in 150 wordsarrow_forwardVariable Costing Income Statement for a Service Company The actual and planned data for Broadwater Institute & Technical School for the Fall term were as follows: Actual Enrollment Tuition per credit hour Credit hours Line Item Description Revenue Variable costs: Registration, records, and marketing costs Instructional costs. Registration, records, and marketing costs per enrolled student Instructional costs per credit hour Depreciation on classrooms and equipment $1,875,000 Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. Total variable costs Contribution margin Depreciation on classrooms and equipment Operating income 5,000 $115 80,000 $300 $45 Prepare a variable costing income statement showing the contribution margin and operating income for the Fall term. Broadwater Institute & Technical School Variable Costing Income Statement For the Fall Term Amount…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY