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

Del gato clinic deposits all cash receipts on the day when

Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2015, its Cash account shows a(n) $14,287 debit balance. Del Gato ...

A company is considering to replace an existing machine for

A Company is considering to replace an existing machine for which two suppliers have given quotation. Supplier A has proposed a machine costing Rs. 180 lakh that uses the existing boiler while supplier B has quoted for t ...

Gasbvisit the website of the governmental accounting

G.A.S.B Visit the website of the Governmental Accounting Standards Board (G.A.S.B.) at http://gasb.org. Review the website to learn about the organization, its act ivies, and its goals. Review one or more of the "Plain-L ...

Assignment gaap applicationsinternal controlrecall that in

Assignment: GAAP Applications Internal Control Recall that in Units 2 and 3, you completed the accounting cycle for Dustin Larkin of Quixote Consulting. Quixote Consulting is a part-time consulting business that recently ...

Question 1the following information relates to the

Question 1 The following information, relates to the imputation credit account (ICA) for Killorglin Park Fair Ltd ("Killorglin Park") for the year ending 31 March 2016. (i) The shareholders as at 31 March 2015 were Donna ...

Internet case-citizen-centric reportingalthough citizens

Internet Case-Citizen-Centric Reporting Although citizens should be concerned about the performance of government, in truth, few citizens typically review the financial information provided by their government. In part, ...

In todays technology environment hackers present a

In today's technology environment, hackers present a substantial risk to a firm's accounting or business system. As the result of these attacks, firms suffer huge losses, ranging from financial losses to losses in confid ...

Mnc paper and presentationgoogle company paper and

MNC Paper and Presentation: GOOGLE COMPANY Paper and Presentation will consist of research to write a paper on an annual SEC 10-K report filed by a public multinational corporation with the U.S. Securities and Exchange C ...

Indeed it can be said that newspapers are facing tough

Indeed it can be said that newspapers are facing tough times, and yes, the Internet can offer many things that papers cannot. Even so, the death of newspapers has been predicted by many for decades. Radio, TV and now the ...

Question 1under the allowance method bad debt expense is

Question 1 Under the allowance method, Bad Debt Expense is recorded A. as an estimate. B. when an individual account is written off. C. several times during the year as needed. D. None of the above Question 2 Which amoun ...

  • 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