Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Mile-High Foods, Inc., was formed in March 2011 to provide prepackaged snack boxes for a new low cost regional airline beginning on April 1. The company has just leased warehouse space central to the two airports to store materials. To move packaged materials from the warehouses to the airports, where final assembly will take place, Mile-High must choose whether to lease a delivery truck and pay a full-time driver at a fixed cost of $5,000 per month, or pay a delivery service a rate equivalent to $0.40 per box. This cost will be included in either fixed manufacturing overhead or variable manufacturing overhead, depending on which option is chosen. The company is hoping for rapid growth, as sales forecasts for the new airline are promising. However, it is essential that Mile-High managers carefully control costs in order to be compliant with their sales contract and remain profitable. Ron Spencer, the company's president, is trying to determine whether to use absorption, variable, or throughput costing to evaluate the performance of company managers. For absorption costing, he intends to use the practical-capacity level of the facility, which is 20,000 boxes per month. Production-volume variances will be written off to cost of goods sold.
Costs for the three months are expected to remain unchanged. The costs and revenues for April, May, and June are expected to be as follows:
Sales revenue $6.00 per box
Direct material cost $1.20 per box
Direct manufacturing labor cost $0.35 per box
Variable manufacturing overhead cost $0.15 per box
Variable delivery cost (if this option is chosen) $0.40 per box
Fixed delivery cost (if this option is chosen) $5,000 per month
Fixed manufacturing overhead costs $15,000 per month
Fixed administrative costs $28,000 per month
Projected production and sales for each month follow. High production in May is the result of an anticipated surge in June employee vacations.
April/May/June sale (units) 12,000/12,500/13,000
April/May/June Production 12,200/18,000/9,000

 

 

Required
1. Compute operating income for April, May, and June under absorption costing, assuming that Mile-High opts to use
a. the leased truck and salaried driver.
b. the variable delivery service.
2. Compute operating income for April, May, and June under variable costing, assuming that Mile-High opts to use
a. the leased truck and salaried driver.
b. the variable delivery service.
3. Compute operating income for April, May, and June under throughput costing, assuming that Mile-High opts to use
a. the leased truck and salaried driver.
b. the variable delivery service.
4. Should Mile-High choose absorption, variable, or throughput costing for evaluating the performance of managers? Why? What advantages and disadvantages might there be in adopting throughput costing?
5. Should Mile-High opt for the leased truck and salaried driver or the variable delivery service? describebriefly.

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M947757

Have any Question? 


Related Questions in Accounting Basics

Discussionpart 1 please respond the following question no

Discussion Part 1 please respond the following question no less then 350 words (original work, no plagiarism, 1 reference "criminal fraud versus civil fraud and taxation of u.s. businesses operating abroad" please respon ...

Accounting practice set -this case is designed to reinforce

Accounting Practice Set - This case is designed to reinforce certain technical accounting skills that are a prerequisite to a solid understanding of the generally accepted accounting principles that underlie preparation ...

Fifteen years ago dan bought a home and financed 150000

Fifteen years ago Dan bought a home and financed $150,000 with a 30-years mortgage at 8.2%. (a) find his monthly payment, the total amount of his payments, and the total amount of interest he will pay over the life of th ...

Accounting paperfor this assignment you will decide what

Accounting paper For this assignment, you will decide what type of budget to implement for a start-up company. Write a three to four page paper in which you: 1. Summarize the type of manufacturing company you plan to sta ...

Vaughn company reports the following financial information

Vaughn Company reports the following financial information before adjustments.   Dr. Cr. Accounts Receivable $155,400 Allowance for Doubtful Accounts   $3,890 Sales Revenue (all on credit)   800,700 Sales Returns and All ...

Transfer pricing is the pricing of assets funds services

Transfer pricing is the pricing of assets, funds, services, etc., transferred among related organizations. Using online library resources, and the Internet, conduct research to discuss the transfer pricing regulations an ...

Section i multiple choicemark one box only to indicate the

Section I: Multiple Choice Mark one box only to indicate the answer you consider correct for each question 1. Which of the following is the goal of the U.S. health care system? a. Access b. Cost c. Quality d. All of the ...

Reflectionbulldescribe and explain what you believe are the

Reflection • Describe and explain what you believe are the top three most important corporate taxation concepts you learned in this course. (Some of the topics, Enacting New Taxes, Calculating Tax Cost, Cash Method Versu ...

Define pat positive accounting theorytheoretical definition

Define PAT (positive accounting theory). Theoretical Definition of PAT and, implication and describe the limitation with the contribution and its significance. Write about the agency theory (An individual action is drive ...

Ace lawn care module - mini practice problemjim graham

Ace Lawn Care Module - Mini Practice Problem Jim Graham started his career mowing lawns for neighbors while he was in junior high school. Jim worked summers for the local golf course while he was in high school and now t ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro