Economics
Required:
1. Compute two different unit costs for each of the Cable Service Division’s products. What managerial objectives are being served by these unit cost computations?
2. Three different cost categories are provided by the Cable Service Division: direct attribution, driver tracing, and allocation. Discuss the meaning of each. Based on how costs are assigned, do you think that the Cable Service Division is using a functional-based or an activity-based cost accounting system? What other differences exist between functional-based and activity-based cost accounting systems?
3. Discuss the differences between the Cable Service Division’s products and the Phone Division’s products.
4. Prepare an income statement for the Cable Service Division for March.
5. Prepare an income statement for the Phone Division for March. Include a supporting cost of goods manufactured statement.
6. The Phone Division has been using the same cost accounting system for over 10 years. Explain why its cost accounting system may be outmoded. What factors determine when a new cost accounting system is warranted?
7. Using the method of least squares, calculate two cost formulas: one for overhead using direct labor cost as the driver, and one for material-handling cost using number of moves as the driver. Comment on Jacob Carder’s observations concerning the outcomes.
8. How would you describe the cost behavior of the inspection activity? Assume that the quality control manager implements a program that reduces the number of defective units by 50 percent. Because of the improved quality, the demand for inspection hours will also drop by 50 percent. What is the potential monthly reduction in inspection costs? How did knowledge of inspection’s cost behavior help?
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