cost accounting chapter 1 homework
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1. As an analyst at Delta Airlines, you are asked to help the operations staff.
Operations has identified a new method of loading baggage that is expected
to result in a 40 percent reduction in labor time but no changes in any other
costs. The current labor cost to load bags is $5 per bag. Other costs are $4
per bag.
a-1. What differential costs should the operations staff consider for the deci-
sion to use the new method next year?: Labor cost
2. As an analyst at Delta Airlines, you are asked to help the operations staff.
Operations has identified a new method of loading baggage that is expected
to result in a 40 percent reduction in labor time but no changes in any other
costs. The current labor cost to load bags is $5 per bag. Other costs are $4
per bag.
What would be the cost savings per bag using it?: $5 x 40%=$2
3. How would management use the information in requirement (a) and any
other appropriate information to proceed with the contemplated use of the new
baggage loading method?: Management would use the information, but would
also want to know the effect on quality.
4. State University Business School (SUBS) offers several degrees, including
Bachelor of Business Administration (BBA). The new dean believes in using
cost accounting information to make decisions and is reviewing a staff-de-
veloped income statement broken down by the degree offered. The dean is
considering closing down the BBA program because the analysis, which
follows, shows a loss. Tuition increases are not possible. The dean has asked
for your advice. If the BBA degree program is dropped, school administration
costs are not expected to change, but direct costs of the program, such as
operating costs, building maintenance, and classroom costs, would be saved.
There will be no other changes in the operations or costs of other programs.
Revenue $ 310,000
Costs
Advertising—BBA program 8,000
Faculty salaries 125,000
Degree operating costs (part-time staff) 27,500
Building maintenance 26,500
Classroom costs (building depreciation) 87,300
Allocated school administration costs 55,200
Total costs $ 329,500
1/6
, cost accounting chapter 1 homework
Study online at https://quizlet.com/_29mjev
Net loss $ (19,500 )
Using the worksheet below, determine which revenues and costs are probably
differential for the decision to drop the BBA program.: Revenue $310,000
Differential
Costs
Advertising - BBA program 8,000 Differential
Faculty salaries 125,000 Differential
Degree operating costs 27,500 Differential
Building maintenance 26,500 Differential
Classroom costs 87,300 Differential
Allocated school administration costs 0 Not differential
Total costs $274,300
Net differential gain from BBA program $35,700
5. State University Business School (SUBS) offers several degrees, including
Bachelor of Business Administration (BBA). The new dean believes in using
cost accounting information to make decisions and is reviewing a staff-de-
veloped income statement broken down by the degree offered. The dean is
considering closing down the BBA program because the analysis, which
follows, shows a loss. Tuition increases are not possible. The dean has asked
for your advice. If the BBA degree program is dropped, school administration
costs are not expected to change, but direct costs of the program, such as
operating costs, building maintenance, and classroom costs, would be saved.
There will be no other changes in the operations or costs of other programs.
Revenue $ 310,000
Costs
Advertising—BBA program 8,000
Faculty salaries 125,000
Degree operating costs (part-time staff) 27,500
Building maintenance 26,500
Classroom costs (building depreciation) 87,300
Allocated school administration costs 55,200
Total costs $ 329,500
Net loss $ (19,500 )
What will be the net effect on the SUBS contribution (profit) if the BBA program
is dropped?: SUBS contribution (profit) will decrease by $35,700
2/6
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1. As an analyst at Delta Airlines, you are asked to help the operations staff.
Operations has identified a new method of loading baggage that is expected
to result in a 40 percent reduction in labor time but no changes in any other
costs. The current labor cost to load bags is $5 per bag. Other costs are $4
per bag.
a-1. What differential costs should the operations staff consider for the deci-
sion to use the new method next year?: Labor cost
2. As an analyst at Delta Airlines, you are asked to help the operations staff.
Operations has identified a new method of loading baggage that is expected
to result in a 40 percent reduction in labor time but no changes in any other
costs. The current labor cost to load bags is $5 per bag. Other costs are $4
per bag.
What would be the cost savings per bag using it?: $5 x 40%=$2
3. How would management use the information in requirement (a) and any
other appropriate information to proceed with the contemplated use of the new
baggage loading method?: Management would use the information, but would
also want to know the effect on quality.
4. State University Business School (SUBS) offers several degrees, including
Bachelor of Business Administration (BBA). The new dean believes in using
cost accounting information to make decisions and is reviewing a staff-de-
veloped income statement broken down by the degree offered. The dean is
considering closing down the BBA program because the analysis, which
follows, shows a loss. Tuition increases are not possible. The dean has asked
for your advice. If the BBA degree program is dropped, school administration
costs are not expected to change, but direct costs of the program, such as
operating costs, building maintenance, and classroom costs, would be saved.
There will be no other changes in the operations or costs of other programs.
Revenue $ 310,000
Costs
Advertising—BBA program 8,000
Faculty salaries 125,000
Degree operating costs (part-time staff) 27,500
Building maintenance 26,500
Classroom costs (building depreciation) 87,300
Allocated school administration costs 55,200
Total costs $ 329,500
1/6
, cost accounting chapter 1 homework
Study online at https://quizlet.com/_29mjev
Net loss $ (19,500 )
Using the worksheet below, determine which revenues and costs are probably
differential for the decision to drop the BBA program.: Revenue $310,000
Differential
Costs
Advertising - BBA program 8,000 Differential
Faculty salaries 125,000 Differential
Degree operating costs 27,500 Differential
Building maintenance 26,500 Differential
Classroom costs 87,300 Differential
Allocated school administration costs 0 Not differential
Total costs $274,300
Net differential gain from BBA program $35,700
5. State University Business School (SUBS) offers several degrees, including
Bachelor of Business Administration (BBA). The new dean believes in using
cost accounting information to make decisions and is reviewing a staff-de-
veloped income statement broken down by the degree offered. The dean is
considering closing down the BBA program because the analysis, which
follows, shows a loss. Tuition increases are not possible. The dean has asked
for your advice. If the BBA degree program is dropped, school administration
costs are not expected to change, but direct costs of the program, such as
operating costs, building maintenance, and classroom costs, would be saved.
There will be no other changes in the operations or costs of other programs.
Revenue $ 310,000
Costs
Advertising—BBA program 8,000
Faculty salaries 125,000
Degree operating costs (part-time staff) 27,500
Building maintenance 26,500
Classroom costs (building depreciation) 87,300
Allocated school administration costs 55,200
Total costs $ 329,500
Net loss $ (19,500 )
What will be the net effect on the SUBS contribution (profit) if the BBA program
is dropped?: SUBS contribution (profit) will decrease by $35,700
2/6
