How does depreciation serve as a tax shield? How is the amount of the annual tax
shield calculated?
The College of Business Administration needs to distribute $12,000 received from an
anonymous donor and earmarked for three business student organizations, Beta Alpha
Psi (BAP), Delta Sigma Pi (DSP), and Beta Gamma Sigma (BGS). Relevant
information is provided below:
Assume that each organization wishes to obtain the highest funding possible.
Required:
1) Which cost driver will each organization recommend be used to distribute the funds?
2) Which cost driver would you recommend and why?
Why does a company that uses a process cost system need to calculate equivalent whole
units?
Taylor Mayberry is sales manager for a specialty products company that has over 100
product lines. The company uses twenty-five vendors and competes with dozens of
competitors. It has been the company’s practice to match competitor prices on the
products it sells. Describe a technique that will assist Taylor in assessing the impact of
constantly changing purchase costs, selling prices, and volumes.
Sandford Company manufactures one product. Its variable manufacturing cost is $16
per unit; total fixed manufacturing cost is $600,000.
Required:
1.) Calculate Sandford’s total manufacturing costs if it produces 10,000 units.
2.) What would be the total cost per unit (including both fixed and variable costs)
assuming that Sandford produces 10,000 units?
3.) Calculate Sandford’s total manufacturing costs if it produces 20,000 units.
4.) What would be the total cost per unit assuming that Sandford produces 20,000 units?
5.) Compare your answers from parts 2 and 4. If the cost per unit is different at 10,000
units than at 20,000 units, explain why.
ETutor is an online tutoring service provider that is particularly popular with college
students. The company is interested in estimating the fixed and variable components of
its tutoring services costs. The manager believes that these costs are driven by the
number of hours of tutoring services provided. The following information was gathered
for the last six months of business:
Required:
1) Compute the average tutoring cost per hour for the six-month period.
2) Use the high-low method to estimate the total fixed cost and the variable cost per
hour.
3) Name one advantage and one disadvantage of the high-low method.
4) Describe the scattergraph method that can be used to analyze mixed costs.