Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 9.38P
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 flexibility of an absorption-costing company like Castle Lager attempting to minimize its taxable income?
The management of Ramir Manufacturing Company is trying to decide whether to continue
manufacturing a part or to buy it from an outside supplier. The part, called BROCO, is a component of
the company's finished product.
The following information was collected from the accounting records and production data for the year
ending December 31, 2022.
1.
8,000 units of BROCO were produced in the Production Department.
2. Variable manufacturing costs applicable to the production of each BROCO unit were: direct
materials $4.80, direct labor $4.30, indirect labor $0.43, utilities $0.40.
Fixed manufacturing costs applicable to the production of BROCO were:
3.
Cost Item
Depreciation
Property taxes
Insurance
Direct
$2,100
Instructions
500
900
$3.500
Allocated
$ 900
200
600
$1,700
Total
$3,000
700
1,500
$5.200
All variable manufacturing and direct fixed costs will be eliminated if BROCO is purchased. Allocated
costs will not be eliminated if BROCO is purchased. So if BROCO is purchased, the fixed…
Jaguar tea shop located at Davao city has been established in 2010. It has a total of 100 seating capacity and a total cover of 46908 for the year 2020 and 54344 for 2021.
Required:
Assess the revenue part.
Provide negative and positive observation.
Answer this for an upvote.
Chapter 9 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th 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 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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