External Linkages, Customer Costing, Customer Profitability

Emery Company sells small machine parts to heavy equipment manufacturers for an average price of $1.70 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plant’s manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customer’s specifications have been met. Inspection takes essentially the same time regardless of the type of part being produced. Emery’s Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year):

^*This cost does not include the cost of the following "customer-related" activites:

Required:

1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type.

Calculate the profitability of each customer type. (Because sales revenues for each customer type are equal, the profitability will be the same for each customer type.)
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2. Assign the customer-related activity costs to each customer type using activity rates. Enter the appropriate activity rates below.

Calculate the profitability of each customer category.

1. B&B Corporations are on the accrual basis of accounting, revenue should be recognized on the Income Statement when:

A.    Cash is received

B.    Revenue is earned and collectability of any cash is reasonably assured

C.   Revenue is earned regardless of the collectability of any uncollected cash

D.   Revenue is earned even if the full sales price is uncertain

2. B&B Tech disclosed the following information in its recent annual report:

What is the B&B Tech’s’s Gross Profit for Years 1 & 2?

A.    $4,000,000 & $8,000,000

B.     $12,000,000 &$14,950,000

C.     $4,000,000 & $5,000,000

D.    None of the Above

3. B&B Co. opened a new business location on April 1.  During April, Copy Co. sold

$50,000 of copies for cash along with $280,000 of copies on account to customers.

Payments collected from these customers amounted to $212,000 during April, with

the balance to be collected during May.  

How much revenue should B&B. report on its April income statement?

A.    $150,000

B.    $430,000

C.     $380,000

D.    $530,000

Presented below are selected amounts from B&B, Inc.’s financial statements:

How many days, on average, does it take B&B's to pay an outstanding account payable?  

A.    139.days

B.    115 days

C.     123 days

D.    119 days    

E.     None of the above

4. Presented below are selected ratios derived from B&B's financial statements:

Using the ROE model framework, how much is B&B’s ROE?

A.    12.95%

B.    19.87%

C.     29.18%

D.    39.59%

Consider a company that has an intrusion detection system in half of its systems (50%), has bring your own device (BYOD) for 30% of its employees, and uses three systems (computers 40%, smartphones 25%, and cloud 35%).

The probability of a breach is 11%.

The probability of a breach given there is an intrusion detection is 15%

The probability of a breach given there is no intrusion detection 25%

The probability of a breach given employees’ use their own devices 43%

The probability of a breach given employees use company devices 13%

The probability of a breach given computer systems is 7%

The probability of a breach given smartphone systems is 27%

The probability of a breach given cloud system is 17%

3.a. What is the probability of a breach of company computer systems that have no intrusion detection?

3.b. What are the conditions that result in the highest risk of an attack?

Zebra Company manufactures custom-designed skins (covers) for iPods® and other portable MP3 devices. Variable costs are $12.00 per custom skin, the price is $20, and fixed costs are $144,800. Required:

1.What is the contribution margin for one custom skin? Round your answer to the nearest cent. $ per custom skin

2. How many custom skins must Zebra Company sell to break even? custom skins

3. If Zebra Company sells 19,000 custom skins, what is the operating income? $

4. Calculate the margin of safety in units and in sales revenue if 19,000 custom skins are sold. Margin of safety in units units Margin of safety in sales revenue $

Is there difference on what is included in the Financial's of the publicly reporting companies versus the format presented in the lectures and book.

At the end of the day, the cash register tape lists $881.40 as total income from services. Cash on hand consists of $18.25 in coins, $433.60 in currency, $100.00 in traveler's checks, and $427.00 in customers' checks. The amount of the Change Fund is $100.

Required:

Record the entry to record the day's cash revenue. If an amount box does not require an entry, leave it blank.

A bank with a branch located in a commercial district of a city has the business objective of improving the process for serving customers during the noon-to-1 pm lunch period. To do so, the waiting time (defined as the number of minutes that elapses from when the customer enters the line until he or she reaches the teller window) needs to be shortened to increase customer satisfaction. A random sample of 15 customers is selected and the waiting times are recorded. Suppose that another branch, located in a residential area, is also concerned with the noon-to-1 pm lunch period. A random sample of 15 customers is selected and the waiting times are recorded. Data are available in the worksheet labeled “Problem 3”.

4. Conduct an appropriate test to compare the mean waiting times of the two branches. Report the p-value of this test and state your conclusions.

Data Set