Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 9.32P
Motivational considerations in denominator-level capacity selection (continuation of 9-37).
- 1. If the plan manager of the Jacksonville Brewery gets a bonus based on operating income, which denominator-level capacity concept would he prefer to use? Explain.
Required
- 2. What denominator-level capacity concept would Castle Lager prefer to use for U S. income-tax reporting? Explain.
- 3. How might the IRS limit the flexibility of an absorption-costing company like Castle Lager attempting to minimize its taxable income?
9-31 Variable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,0 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):
| Inventory, January 1, 2017: | 0 basketballs |
| Inventory, December 31, 2017: | 20,000 basketballs |
| Fixed |
$380,000 |
| Fixed administrative costs: | $660,000 |
| Direct materials costs: | $ 3 per basketball |
| Direct labor costs: | $ 4 per basketball |
- 1. Calculate the breakeven point (in basketballs sold) in 2017 under:
- a. Variable costing
- b. Absorption costing
- 2. Suppose direct materials costs were $4 per basketball instead. Assuming all other data are the same, calculate the minimum number of basketballs Camino must have sold in 2017 to attain a target operating income of $120,000 under:
- a. Variable costing
- b. Absorption costing
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Motivational considerations in denominator-level capacity selection (continuation of 9-31). 1. If the plant manager of the Jacksonville Brewery gets a bonus based on operating income, which denominator-level capacity concept would he prefer to use? Explain. 2. What denominator-level capacity concept would Castle Lager prefer to use for U.S. income-tax reporting? Explain. 3. How might the IRS limit the exibility of an absorption-costing company like Castle Lager attempting to minimize its taxable income?
6. Laura Riley manages a fleet of 225 delivery trucks for Poole Corporation.
1(Click the icon to view additional information.)
Requirement 1. Which alternative will maximize Poole's short-term operating income?
In order to maximize short-term operating income, Poole Corporation should
because the variable cost of outsourcing to FMS results in (2)
|(1)
of
Requirement 2. What qualitative factors should Poole consider before making a final decision?
○ A. Will laying off five employees hurt the morale and productivity of other employees remaining with Poole?
○ B. Will FMS provide speedy maintenance and repairs?
○ C. Will FMS provide the level of service Poole needs?
○ D. Will FMS quickly and satisfactorily handle calls and questions from Poole's employees who are driving the trucks?
○ E. All of the above
OF. None of the above
Riley performed the following analysis:
2(Click the icon to view the outsourcing decision analysis.)
Read the requirements³.
1: More Info
Riley must decide whether…
Q.Would you have included some measure of employee satisfaction and employee training in the l earning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strategy? Why or why not? Explain briefly
Chapter 9 Solutions
Cost Accounting (15th Edition)
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.18ECh. 9 - Prob. 9.19ECh. 9 - Prob. 9.20ECh. 9 - Prob. 9.21ECh. 9 - Prob. 9.22ECh. 9 - Prob. 9.23ECh. 9 - Capacity management, denominator-level capacity...Ch. 9 - Prob. 9.25ECh. 9 - Prob. 9.26ECh. 9 - Prob. 9.27ECh. 9 - Prob. 9.28PCh. 9 - Prob. 9.29PCh. 9 - Prob. 9.30PCh. 9 - Prob. 9.31PCh. 9 - Motivational considerations in denominator-level...Ch. 9 - Prob. 9.33PCh. 9 - Prob. 9.34PCh. 9 - Prob. 9.35PCh. 9 - Prob. 9.36PCh. 9 - Prob. 9.37PCh. 9 - Prob. 9.38PCh. 9 - Prob. 9.39PCh. 9 - Prob. 9.40PCh. 9 - Prob. 9.41PCh. 9 - Prob. 9.42P
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