USA: +1(669)289-8683 
Sign in
Week Two Problems & Summary:
Complete the following problems from Chapters 12 & 13 : Problems: 12-16, 12-17, 13-23.
(attached)
Article Summary
ProQuest article: Van der Merwe, A., & Thomson, J. (2007, February). The Lowdown on Lean Accounting. Strategic Finance, 88(8), 26-33. Write a 1 to 2 page summary of the article. (attached)
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
The Lowdown on Lean Accounting
van der Merwe, Anton;Thomson, Jeffrey
Strategic Finance; Feb 2007; 88, 8; ABI/INFORM Complete
pg. 26
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
PRINTED BY: genevieve.rodriguez@verizon.net. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission.
Violators will be prosecuted.
458 ACC201
La 1, 2, 3,4
E
LO 1.3.4
LO 1.4,7
J{il
21.
b.
c.
d.
e.
r.
Ji:.
Problem 12-16 Cost IIIloC«li611 ;” a service iJubtstry
Kir’by AirlJnes is a small airline that occasionally carries overload shipments for the overnighr
delivery company ever-Fail Inc .• ‘ever-Fail is a muitimillion-dollar company started by Jack
‘e~-er immediately after he failed to finish his (lIst accounting course. TM company’s motto is
“We ever-Pail 10 Deliver Your Package on Time. ~ When ever-Fail has more freight than it
can deliver, it pa)’S Kirby 10 carry the excess, Kirby contracts with independent pilots to fl)’ its
planes on a per trip basis. Kirby recently purchased an airplane that cost tbe company S~,500,OOO.
The plaee has an estimated useful life of 25,000,000 miles and a zero salvage value. During the
first week in January, Kirby flew two trips. The first trip “”3.$ a round trip flight from Chicago to
San Francisco, for which Kirby paid 5350 for the pilot and 5)00 for fuel. The second flight was a
reund trip (rom Chicago to ew York.. For this trip, it paid $300 for the pilo; and 5150 for fuel.
The I’OUI1C trip between Chicago and San Francisco is approximately 4,400 miles and 1M round
trip between Chicago and . -ev,’ York is 1.600.miles.
lie iJld
•• Identify 1M direct and indirect costs that Kirby incurs for each trip.
It. Determine the total cost of each trip.
e, In addition 10 depreciation, identify three other indirect costs that may need to be allocated
to determine the cost of each trip.
Problem 12·11 Cost aIlocatioll;” a mIUIIIfachlring romplUlp
Hunt danufacturing Company makes tents that it sells directly to camping enthusiasts through
a mail-order marketing program. The company pays a quality control expert S72,000 per )’C3.I’ to
inspect completed tents before they are shipped to customers, Assume that the company com-
pleted J.600 tents in January and 1,200 tents in February. For the entire year, the company
expects to produce 15,000 tents.
••••• ired
., Explain haw changes in tM cost driver (number of tents inspected) affect the total amount of
fixed inspection COSL
It. ExplaiJl how chao~s in the cost driver (number of tents inspected) affect the amount of
fixed inspection cost per unit.
e, If the cost objective is to determine the cost per tent, is the expert’s salary a dieecr or an indi-
rect cost?
d. How much of the expert’s salary should be allocated to tents produced in January and
Februa.t;1
Probl 12·18
S 500.000
440.000
40.000
80.000
18O.lDJ
~
Sl.!!O.ooo
PRINTED BY: genevieve.rodriguez@verizon.net. Printing is for personal, private use only. pan of this book Dll!f be rq>n>daced at a-aa:smitIedwithout publishers prior permission.
Violators will be prosecuted.
492 ACC201
13-23 Effec:t uf order l[IUIIffity 011~cUd order decisio”
Ellis _ • !lla.Us blankets that it oa.rkets through a variety of department stores.
It maRs the bl.anJa:u in baIches of 1,000 units. Ellis carle 20,000 blankets during the prior
aa:ounting peried. The cost of producing the blankets is summarized here.
L03
Matenals cast {S1Sper x 20.0001
Labor cost 1m per tnit x 20.0001
Manufacn.r g supplies (S2 x 2D.lDJ1
BatclHevel cests (20 batches at$4JlXl per batchl
Product-level costs
Facility-level costs
TOOlI costs
Costper unit = S1.510.01lO + 20.000 = S75.50
Required
a. Kent Motels has offered to buy a bateh of 500 blankets for S56 each. E.!E5’s nonmI sdling
price is 590 per unit. Based on the preceding quantitative data. sh.ouk! Ellis aa:epl the special
order? Support your answer with appropriate computations.
b. Would your answer to Requirement a change if Kent offered to buy a bmch of 1.000 blan-
kets for SS6 per unit’! Support your answer with appropriate computations,
c. Describe the qualitative factors that Ellis Quilting Company should consider before acoept-
ing a special order to sell blankets [0 Kent Motels.
Pro Ie 13-24 ects of tire Inel of prolhl(:tum 0″ IIlJ OIdUIIITc:UJK decirioll
5e)-mour Cban.icaI mpan), makes a variety of cosmetic products, one of ~iDCh is a skin cream
designed to reduce the· of aging. Seymour produces a reIatn~ small amomn (15.000 Utriu) of
the aut:l is . . the pwd!ase of the product from an ou.uiCc supplier forS4.50 each. If
~’IDOW’ pun:hases froo ftIe outside SlJpp~, it would continue to sdJ and distribute the cream un-
der its own brand oaoe. ~ur’s accountant constructed the f ling profitability ~
L04
a. Teo I relevant cost SH.lDJ
Reverue (1!i ts x SlO)
Ur.r-leYel costs 115.lDJ UTl!tS x Sl.40)
Un -level bo~;)SIS 1I!l.tm units x SJ.5OI
U -level ~ costs il5..ooo x SJ.1 0)
Un -level se •. enses 115.tm x SJ.201
Contnbutwn nargrr
Skin crea prod perviso(s salary
AllocatEd portior of ‘a~ costs
Praduct-leYel adV .
Contributionto Cllt7lPil~ e
Sl5l.ooo
(21.DOO)
[1.5001
(1.5001
[3.DlIOl
117.000
(44.000)
(11.3001
134.0001
S T1.711O
Rell_ired
a. Identify the COStitems relevant to the make-or
b. Should Seymour continue to make the product or . it from the supplier? Suppon )’OW’ an-
swer by determining the change in net income if ~n buys the cream instead of making it-
Co Suppose thar Se}-“JDOUI’is able to increase sales by 10, units (sales will increase to 25,000
units). At this level of production, should Seymour or buy the cream? Support )’OUf
ansm!r by explaining how the increase in production aff the cost per unit.
d. Discuss the qualitative factors that Seymour should eoasid before deciding to outsource
the skin cream. How can Seymour minimize the risk of est .shing a relationship with an
unreliable supplier?
L04.B Problem 13-25 Out$Oun:ing decision ufftctt!il by eIplipmeRl T·~!Ia!7IU!1It
Jenkins Bike Company (JDC) makes the frames used to build its bicyd
made 20,000 frames; the costs incurred follow.
