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Uitwerkingen 'Cost Accounting' - hoofdstuk 14
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- Hogeschool Van Amsterdam (HvA)
Uitwerkingen 'Cost Accounting' - hoofdstuk 14
[Meer zien]Voorbeeld 2 van de 55 pagina's
Voorbeeld 2 van de 55 pagina's
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Voorbeeld van de inhoud
CHAPTER 14COST ALLOCATION, CUSTOMER-PROFITABILITY
ANALYSIS, AND SALES-VARIANCE ANALYSIS
14-1 Disagree. Cost accounting data plays a key role in many management planning and
control decisions. The division president will be able to make better operating and strategy
decisions by being involved in key decisions about cost pools and cost allocation bases. Such an
understanding, for example, can help the division president evaluate the profitability of different
customers.
14-2 Exhibit 14-1 outlines four purposes for allocating costs:
1. To provide information for economic decisions.
2. To motivate managers and other employees.
3. To justify costs or compute reimbursement amounts.
4. To measure income and assets.
14-3 Exhibit 14-2 lists four criteria used to guide cost allocation decisions:
1. Cause and effect.
2. Benefits received.
3. Fairness or equity.
4. Ability to bear.
The cause-and-effect criterion and the benefits-received criterion are the dominant criteria when
the purpose of the allocation is related to the economic decision purpose or the motivation
purpose.
14-4 Disagree. In general, companies have three choices regarding the allocation of corporate
costs to divisions: allocate all corporate costs, allocate some corporate costs (those “controllable”
by the divisions), and allocate none of the corporate costs. Which one of these is appropriate
depends on several factors: the composition of corporate costs, the purpose of the costing
exercise, and the time horizon, to name a few. For example, one can easily justify allocating all
corporate costs when they are closely related to the running of the divisions and when the
purpose of costing is, say, pricing products or motivating managers to consume corporate
resources judiciously.
14-5 Disagree. If corporate costs allocated to a division can be reallocated to the indirect cost
pools of the division on the basis of a logical cause-and-effect relationship, then it is in fact
preferable to do so—this will result in fewer division indirect cost pools and a more cost-
effective cost allocation system. This reallocation of allocated corporate costs should only be
done if the allocation base used for each division indirect cost pool has the same cause-and-effect
relationship with every cost in that indirect cost pool, including the reallocated corporate cost.
Note that we observe such a situation with corporate human resource management (CHRM)
costs in the case of CAI, Inc., described in the chapter—these allocated corporate costs are
included in each division’s five indirect cost pools. (On the other hand, allocated corporate
treasury cost pools are kept in a separate cost pool and are allocated on a different cost-allocation
base than the other division cost pools.)
14-1
, 14-6 Customer profitability analysis highlights to managers how individual customers
differentially contribute to total profitability. It helps managers to see whether customers who
contribute sizably to total profitability are receiving a comparable level of attention from the
organization.
14-7 Companies that separately record (a) the list price and (b) the discount have sufficient
information to subsequently examine the level of discounting by each individual customer and
by each individual salesperson.
14-8 No. A customer-profitability profile highlights differences in current period's profitability
across customers. Dropping customers should be the last resort. An unprofitable customer in one
period may be highly profitable in subsequent future periods. Moreover, costs assigned to
individual customers need not be purely variable with respect to short-run elimination of sales to
those customers. Thus, when customers are dropped, costs assigned to those customers may not
disappear in the short run.
14-9 Five categories in a customer cost hierarchy are identified in the chapter. The examples
given relate to the Spring Distribution Company used in the chapter:
• Customer output-unit-level costs—costs of activities to sell each unit (case) to a customer.
An example is product-handling costs of each case sold.
• Customer batch-level costs—costs of activities that are related to a group of units (cases)
sold to a customer. Examples are costs incurred to process orders or to make deliveries.
• Customer-sustaining costs—costs of activities to support individual customers, regardless
of the number of units or batches of product delivered to the customer. Examples are costs
of visits to customers or costs of displays at customer sites.
• Distribution-channel costs—costs of activities related to a particular distribution channel
rather than to each unit of product, each batch of product, or specific customers. An
example is the salary of the manager of Spring’s retail distribution channel.
• Corporate-sustaining costs—costs of activities that cannot be traced to individual
customers or distribution channels. Examples are top management and general
administration costs.
14-10 Charting cumulative profits by customer or product type generates a whale curve. This
provides information on the profitability of your customers and clearly identifies the most
profitable from the least profitable.
14-11 Using the levels approach introduced in Chapter 7, the sales-volume variance is a Level 2
variance. By sequencing through Level 3 (sales-mix and sales-quantity variances) and then
Level 4 (market-size and market-share variances), managers can gain insight into the causes of a
specific sales-volume variance caused by changes in the mix and quantity of the products sold as
well as changes in market size and market share.
14-12 The total sales-mix variance arises from differences in the budgeted contribution margin
of the actual and budgeted sales mix. The composite unit concept enables the effect of individual
product changes to be summarized in a single intuitive number by using weights based on the
mix of individual units in the actual and budgeted mix of products sold.
14-2
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