Question

In: Accounting

Which of the following is consistent with the controllability concept (principle)? A. A store manager's performance...

Which of the following is consistent with the controllability concept (principle)?

	A.	A store manager's performance evaluation is not negatively affected by the hurricane damages.
	B.	The Dollar Tree headquarters allocates the advertising costs to individual stores.
	C.	Airlines' stock prices plunged due to big loss of passengers in the midst of the COVID 19 pandemic.
	D.	Insurance companies charge deductibles when the car is damaged by vandalism.

A joint process resulted in Products M1 and M2. Both of them can be sold immediately. For M2, further processing option is available. Which of the following information is relevant for deciding whether to process further M2?

	A.	Sales value of M1
	B.	Demand for M2 after further processing
	C.	Portion of joint costs allocated to M2
	D.	Entire joint costs

Lido manufactures Products A and B from a joint process, which cost $60,000. After the process, 2,000 pounds of Product A and 1,000 pounds of Product B have been manufactured. With further processing, Product B can be converted into Product BX (1 lbs of BX can be made out of 1 lbs of B). This conversion process costs $9,200 total fixed cost and $2 variable cost for each pound. The following information is given:

Product	Demand	Selling price per lbs
A	Unlimited	$20
B	Unlimited	$40
BX	-	$65

Assume that the demand for BX is unlimited. What would be the effect on the company’s overall profit of processing further B and selling BX?

	A.	$8,200 decrease
	B.	$16,200 decrease
	C.	$23,200 increase
	D.	$13,800 increase

Use the same information in the above question. But this time, assume that the demand for BX is uncertain. For the company to process further B (to make BX), the minimum demand for BX has to be:

	A.	400 lbs
	B.	788 lbs
	C.	781 lbs
	D.	368 lbs

Expert Solution

Answer 1:

Option A is Correct. Controllabilty Concept is that evalaution should not be based on factors whch are beyond the control of the Manager So, Statment that "A store manager's performance evaluation is not negatively affected by the hurricane damages." is Correct

Answer 2:

For Decision Making wether to go ahead with further processing from splitoff point or to sale as such depends on the sale price of the product at splitoff, Sale Price after further processing, Proportionate Joint costs at slpit off and Further costs. . So, In the given options, Option C is correct. Proportionate Joint Costs at splitoff are relevant for Decision Making.

Answer 3:

Happy Learning and All The Best.

ekkarill92 answered 2 years ago

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