Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 6.45BE
Sustainability and cost estimation (Learning Objective 2)
SUSTAINABILITY
Skye Entertainment is a provider of cable, Internet, and on-demand video services. Skye currently sends monthly bills to its customers via the postal service. Because of a concern for the environment and recent increases in postal rates, Skye’s management is considering offering an option to its customers for paperless billing. In addition to saving printing, paper, and postal costs, paperless billing will save energy and water (through reduced paper needs, reduced waste disposal, and reduced transportation needs). Although Skye would like to switch to 100% paperless billing, many of its customers are not comfortable with paperless billing or may not have online access, so the paper billing option will remain regardless of whether Skye adopts a paperless billing system or not.
The cost of the paperless billing system would be $81,800 per quarter with no variable costs since the costs of the system are the salaries of the clerks and the cost of leasing the computer system. The paperless billing system being proposed would be able to handle up to 1,000,000 bills per quarter (more than 1,000,000 bills per quarter would require a different computer system and is outside the scope of the current situation at Skye).
Skye has gathered its cost data for the past year by quarter for paper, toner cartridges, printer maintenance costs, and postage costs for its billing department. The cost data are as follows:
Requirements
- 1. Calculate the variable cost per bill mailed under the current paper-based billing system. Use the high-low method.
- 2. Assume that the company projects that it will have a total of 740,000 bills to mail in the upcoming quarter. If enough customers choose the paperless billing option so that 20% of the mailing can be converted to paperless, how much would the company save from the paperless billing system (be sure to consider the cost of the paperless billing system)?
- 3. What if only 10% of the mailings are converted to the paperless option (assume a total of 740,000 bills)? Should the company still offer the paperless billing system? Explain your rationale.
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The Shining Stars primary school was the recent recipient of a technology grant to source and implement a school management system. The school administrator is not technology savvy and therefore sought advice from three of the board members who were knowledgeable in the information systems and technology field.
One director advised the administrator to purchase an off-the-shelf solution that would allow the school to get the system configured and up and running in a short period with reasonable costs.
The second advised the administrator to invest in the development of a unique system to meet the custom requirements of the school’s administration. He suggested that this would create a closer fit to the school’s needs compared to purchasing software, but will cost more.
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You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process:
Costs/Benefits
College Course
Community Course
Cost
$4,300
$1,190
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0.20 miles (walking distance)
18 miles (driving distance)
Timing of course
Weekday
Weekend
Number of meetings
16
8
Qualitative considerations
Convenience, quality of instruction
Flexibility, brief duration
Pretend transportation (gas, mileage, and parking) cost $220 per class session at the library. If you consider solely the cost - including transportation - of each alternative, which would you choose?
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Chapter 6 Solutions
Managerial Accounting (5th Edition)
Ch. 6 - (Learning Objective 1) A graph of a variable cost...Ch. 6 - (Learning Objective 2) Which of the following is...Ch. 6 - (Learning Objective 2) In the cost equation...Ch. 6 - Prob. 4QCCh. 6 - Prob. 5QCCh. 6 - (Learning Objective 3) Which of the following is...Ch. 6 - Prob. 7QCCh. 6 - (Learning Objective 5) Which of the following is...Ch. 6 - Prob. 9QCCh. 6 - Prob. 10QC
Ch. 6 - Identify cost behavior (Learning Objectives 1 2)...Ch. 6 - Prob. 6.2SECh. 6 - Compute fixed costs per unit (Learning Objective...Ch. 6 - Prob. 6.4SECh. 6 - Predict and graph total mixed costs (Learning...Ch. 6 - Prob. 6.6SECh. 6 - Prepare and analyze a scatterplot (Learning...Ch. 6 - Prob. 6.8SECh. 6 - Use the high-low method (Learning Objective 4)...Ch. 6 - Prob. 6.10SECh. 6 - Prob. 6.11SECh. 6 - Prob. 6.12SECh. 6 - Write a cost equation given regression output...Ch. 6 - Prepare a contribution margin income statement...Ch. 6 - Prepare income statements using variable costing...Ch. 6 - Prepare income statements using variable costing...Ch. 6 - Identify cost behavior graph (Learning Objectives...Ch. 6 - Prob. 6.18SECh. 6 - Prob. 6.19SECh. 6 - Prob. 6.20AECh. 6 - Prepare income statement in two formats (Learning...Ch. 6 - Prob. 6.22AECh. 6 - Prob. 6.23AECh. 6 - Sustainability and cost estimation (Learning...Ch. 6 - Create a scatterplot (Learning Objective 3) Melody...Ch. 6 - Continuation of E6-25A: High-low method (Learning...Ch. 6 - Continuation of E6-25A: Regression analysis...Ch. 6 - Regression analysis using Excel output (Learning...Ch. 6 - Prob. 6.29AECh. 6 - Using the high-low method to predict overhead for...Ch. 6 - Using regression analysis output to predict...Ch. 6 - Performing a regression analysis to predict...Ch. 6 - Prob. 6.33AECh. 6 - Prob. 6.34AECh. 6 - Compare absorption and variable costing (Learning...Ch. 6 - Prepare a contribution margin income statement...Ch. 6 - Prepare a contribution margin income statement...Ch. 6 - Prepare income statements using variable costing...Ch. 6 - Prepare a variable costing income statement given...Ch. 6 - Prob. 6.40AECh. 6 - Prob. 6.41BECh. 6 - Prepare income statement in two formats (Learning...Ch. 6 - Use unit cost data to forecast total costs...Ch. 6 - Prob. 6.44BECh. 6 - Sustainability and cost estimation (Learning...Ch. 6 - Create a scatter plot (Learning Objective 3) Tammy...Ch. 6 - Continuation of E6-46B: High-low method (Learning...Ch. 6 - Prob. 6.48BECh. 6 - Prob. 6.49BECh. 6 - Prob. 6.50BECh. 6 - Using the high-low method to predict overhead for...Ch. 6 - Using regression analysis output to predict...Ch. 6 - Prob. 6.53BECh. 6 - Prob. 6.54BECh. 6 - Prob. 6.55BECh. 6 - Prob. 6.56BECh. 6 - Prob. 6.57BECh. 6 - Prob. 6.58BECh. 6 - Prob. 6.59BECh. 6 - Prepare a variable costing income statement given...Ch. 6 - Prob. 6.61BECh. 6 - Analyze cost behavior at a hospital using various...Ch. 6 - Analyze cost behavior (Learning Objectives 1, 2,...Ch. 6 - Prob. 6.64APCh. 6 - Prob. 6.65APCh. 6 - Prob. 6.66APCh. 6 - Analyze cost behavior at a hospital using various...Ch. 6 - Analyze cost behavior (Learning Objectives 1, 2,...Ch. 6 - Prepare traditional and contribution margin income...Ch. 6 - Prob. 6.70BPCh. 6 - Prob. 6.71BPCh. 6 - Prob. 6.72SCCh. 6 - Cost Behavior in Real Companies Choose a company...Ch. 6 - Ethics of building inventory (Learning Objective...Ch. 6 - Prob. 6.76ACT
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