TestaBankaFundamentalsaofaCostaAccounting,a7thaEditionabyaLanen,aMaher
AnswersaIncluded ✅
Chaptera01a7e
1) CarleyaIncorporatedaincursamanyatypesaofacostsainaitsaoperations.aPlaceatheanumberaofathea
appropriateastageainatheavalueachainainaColumna2ainatheablankanextatoaeachacostainaColumna1.
Cost StageainatheaValueaChain
Transportationacostsatoashipavansatoacu 1. CustomeraService
stomers
Laboracostsaforafactoryaworkers 2.aDistribution
Overtimeacostsaforascientistsaworkingaonane 3. Researcha&a
waengineatechnology Development
Utilitiesacostaforatheadesignatestingace 4. Marketing
nter
Costsatoasurveyacustomersaaboutatheirasa 5. Production
tisfaction
Costsatoasponsoraaasportingaevent 6.aDesign
2) SuperMaxaisaanaintegratedaprovideraofageneticallyaengineeredacorn.aManyatypesaofacostsa
areaincurredainaitsaoperations.aPlaceatheanumberaofatheaappropriateastageainatheavalueachainainaCo
lumna2ainatheablankanextatoaeachacostainaColumna1.
Cost StageainatheaValue
Chain
Warehouseacostsatoastoreaseedaawaitingash 1. CustomeraService
ipmentatoacustomers
Utilityacostsaforaseedamill 2.aDistribution
Equipmentacostsainageneticsalaboratory 3.aResearcha&
Development
Laboracostsatoastaffahelp-lineacallacentera 4.aMarketing
Costsatoaprepareaadvertisingacampaignainana 5. Production
tionalaagricultureamagazine
Costsatoacontractawithagrowersatoaprovidease 6. Design
ed
Versiona1 1
,3) Travon'saLimoaServiceaprovidesatransportationaservicesainaandaaroundaBentonville.aItsapro
fitsahaveabeenadeclining,aandamanagementaisaplanningatoaaddaaapackageadeliveryaserviceathataisaex
pectedatoaincreasearevenueabya$275,000aperayear.aTheatotalacostatoaleaseaadditionaladeliveryavehic
lesafromathealocaladealeraisa$60,000aperayear.aTheapresentamanagerawillacontinueatoasuperviseaallas
ervices.aHowever,alaboraandautilitiesacostsawillaincreaseabya40%aandarentaandaotheracostsawillaincre
aseabya15%awhenatheapackageadeliveryaserviceaisaadded.
Travon’saLimoaServiceaAnnua
laIncomeaStatement
Before Expansion
SalesaRevenue $a960,000
Costs:
VehicleaLeases $a400,000
Labor 290,000
Utilities 50,000
Rent 100,000
OtheraCosts 60,000
Manager’saSalary 120,000
TotalaCosts 1,020,000
OperatingaProfita(Loss) $a(60,000)
a. Prepareaaareportaofatheadifferentialacostsaandarevenuesaifatheadeliveryaserviceaisaadded.
b. Shouldamanagementastartaupatheadeliveryaservice?aExplainayouraanswer.
Versiona1 2
,4) MorrisaIncorporatedaisaaamanagementaconsultingafirmathataspecializesainamanagementat
rainingaprograms.aTackleaManufacturingaIncorporatedahasaapproachedaMorrisatoacontractafora
managementatrainingaforaaaone-
yearaperiod.aLastayear'saincomeastatementaforaMorrisaisaasafollows:
SalesaRevenue $a360,000
Costs:
Labor $a120,000
EquipmentaLease 12,000
Rent 24,000
Utilities 8,400
Supplies 23,600
OtheraCosts 14,400
Manager’saSalary 80,000
TotalaCosts 282,400
OperatingaProfita(Loss) $a77,600
ToasatisfyatheaTackleacontract,aanotherapart-
timeatrainerawillaneedatoabeahiredaata$42,000.aSuppliesawillaincreaseabya12%aandaotheracostsawillai
ncreaseabya15%.aInaaddition,anewaequipmentawillaneedatoabealeasedaataaacostaofa$2,500.
a. WhataareatheadifferentialacostsathatawouldabeaincurredaifatheaTackleacontractaisasigned?
b. IfaTackleawillapaya$55,000aforaoneayear,ashouldaMorrisaacceptatheacontract?aExplainayouraa
nswer.
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, 5) TheaArielleaCompanyareportedatheafollowingaresultsaforatheamanufactureaandasaleaofaonea
ofaitsaproductsaknownaasaControllersaduringatheamostarecentayear.
Salesa(6,500aControllersaata$130aeach) $a845,000
Costaofasales 390,000
Distributionacosts 65,000
Advertisingaexpense 275,000
Salaries 25,000
Buildingacosts 145,000
Operatingaloss $a(55,000)
TheaArielleaCompanyaisatryingatoadetermineawhetheraoranotatoadiscontinueatheamanufactureaandas
aleaofaControllers.aTheaoperatingaresultsareportedaaboveaforalastayearaareaexpectedatoacontinueainath
eaforeseeableafutureaifatheaproductaisanotadropped.aTheabuildingacostsarepresentatheacostsaofaprodu
ctionafacilitiesaandaequipmentathatatheaControllersaproductasharesawithaotheraproductsaproducedab
yaArielle.aIfatheaControllersaproductawereadropped,athereawouldabeanoachangeainatheabuildingacosts
aofatheacompany.aManagementahasadeterminedathatadiscontinuingatheamanufactureaandasaleaofaCo
ntrollersawillahaveanoaeffectaonatheacompany'saotheraproductalines.aDetermineatheachangeainaoperat
ingaprofitsathatawillahappenaifatheamanufactureaandasaleaofaControllersaisadiscontinued.
6) TheamanagementaofaParachuteaCorporationaisaconsideringadroppingaproductaABC123.a
Dataafromatheacompany'saaccountingasystemaappearabelow:
Sales $a260,000
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