Question 2:

a) How might customer profitability analysis be used to improve organisational performance? Suggest and explain which costing approach can be used to implement customer profitability analysis?

b) Hector Gonzales runs the Floral Art Company, which supplies floral arrangements to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the process and dispatch of orders. An activity analysis of the indirect costs identified the following customer-related costs.

Required:

1. Assign the activity costs to each of the three customers

1. Calculate the contribution for each customer if the sales pattern for each is as follows:

Hints: conduct a customer profitability analysis based on the above customer related indirect costs.

1. What conclusion can we draw from the customer profit analysis? Advise the management of the Floral Art Company as to whether any changes should be made in its relationships with customers. Advise Hector as to how he should go about executing these changes.

Problem 2-20B Context-sensitive nature of cost behavior classifications

Sean Franklin sells a newly developed camera, Panorama Vision. He purchases the cameras from the manufacturer for $150 each and rents a store in a shopping mall for $6,000 per month.

Required

a. Determine the average cost of sales per unit if Mr. Franklin sells 100, 200, 300, 400, or 500 units of Panorama Vision per month. Use the following chart to organize your answer: Sales Volume in Units (a) 100 200 300 400 500 Total cost of cameras (a × $150) $15,000 Total cost of store rental    6,000 Total cost of sales (b) $21,000 Average cost per unit (b ÷ a) $210.00

b. If Mr. Franklin wants to make a gross profit of $30 on each camera he sells, what price should he charge at sales volumes of 100, 200, 300, 400, or 500 units?

c. Record the total cost of store rental if Mr. Franklin opens a camera store at one, two, three, four, or five shopping malls. Record your answers in the following chart. Is the cost of store rental fixed or variable relative to the number of stores opened? Shopping Malls 1 2 3 4 5 Total cost of store rental $6,000

d. Mr. Franklin provides decorative ornaments to customers who purchase cameras. Some customers take the ornaments, others do not, and some take more than one. The number of ornaments varies in relation to the number of cameras sold, but the relationship is not proportional. Assume that, on average, Mr. Franklin gives away $150 worth of ornaments for every 100 cameras sold. What is the additional cost per camera sold? Is the cost fixed or variable?

Smithson Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-75 and Job C-100. It provided the following information related to those two jobs:

  
Smithson had no overapplied or underapplied manufacturing overhead during the year.

Assume Smithson uses departmental overhead rates based on machine-hours.

2-a. Compute the predetermined departmental overhead rates. (Round your answer to 2 decimal places.)

2-b. Compute the total manufacturing costs assigned to Job D-75 and Job C-100. (Round your intermediate calculations to 2 decimal places.)

2-c. If Smithson establishes bid prices that are 120% of total manufacturing costs, what bid price would it have established for Job D-75 and Job C-100? (Round your intermediate calculations to 2 decimal places.)

2-d. What is Smithson’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.)

Walsh company manufactures and sells one product. The following information pertains to each of the company s first two years of operations.
Direct materials.     25$
Direct labor.             10$
Variable manufacturing overhead   4$
Variable selling and administrative. 3$
Fixed manufacturing overhead. 240000$
Fixed selling and administrative expenses. 60000$
During its first year of operations , Walsh produced 50000 units and sold 40000 units. During its second year of operations , it produced 40000 units and sold 50000 units. The selling price of the company s product is 54 $ per unit.
Assume the company uses absorption costing: a ) Compute the unit product cost for Year 1 and Year 2.
b) Prepare an income statement for Year 1 and Year 2.
Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,296,168. Required: 1. Prepare the January 1 journal entry to record the bonds’ issuance. 2(a) For each semiannual period, complete the table below to calculate the cash payment. 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2(c) For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of a straight-line amortization table. 5. Prepare the journal entries to record the first two interest payments

Your team is managing a fundraiser that will offer chocolate tasting at an event. The chocolate is being donated and thus has no cost to you. Your goal is to maximize the revenue you receive from selling the chocolate.

You know that there are two types of people at your event. Chocolate lovers and chocolate likers. There are 10 chocolate lovers and 20 chocolate likers. However, you cannot tell what type any given person is.

• A chocolate lover would be willing to pay $7 for the first chocolate, $5 for the second, $2 for the third, and $1 for fourth.
• A chocolate liker is willing to pay $5 for the first chocolate, $3 for the second, $2 for the third and $0 for a fourth.
• No one is willing to pay anything for a fifth.

Explain how you will price the chocolate. How much will consumers buy? What will be the total revenue you will collect?

Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $60 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $35 million, has a 8 percent coupon, and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 years. The most recent dividend was $5.6 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. Required: What is the company's WACC? (Do not round your intermediate calculations.)

Hillside issues $1,600,000 of 9%, 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,958,394.

Required:

1. Prepare the January 1, 2017, journal entry to record the bonds’ issuance.
2(a) For each semiannual period, complete the table below to calculate the cash payment.
2(b) For each semiannual period, complete the table below to calculate the straight-line premium amortization.
2(c) For each semiannual period, complete the table below to calculate the bond interest expense.
3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.
4. Prepare the first two years of an amortization table using the straight-line method
5. Prepare the journal entries to record the first two interest payments.

During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders’ equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 1 million preferred shares, $50 par per share.

Required:
Prepare the appropriate journal entries to record each transaction. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,468,794.

Required:

1. Prepare the January 1, 2017, journal entry to record the bonds’ issuance.
2(a) For each semiannual period, complete the table below to calculate the cash payment.
2(b) For each semiannual period, complete the table below to calculate the straight-line premium amortization.
2(c) For each semiannual period, complete the table below to calculate the bond interest expense.
3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.
4. Prepare the first two years of an amortization table using the straight-line method
5. Prepare the journal entries to record the first two interest payments.