analysis4.2 - AC2720 Module 4 Cost Allocation Analysis 4.2...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
AC2720: Module 4 Cost Allocation Analysis 4.2 Pricing Decisions and Cost Management 1 There are four problems in this assessment. You need to complete all the four problems. Problem 1: Target Operating Income, Value-Added Costs, Service Company Calvert Associates prepares architectural drawings to conform to local structural-safety codes. Its income statement for 2013 is as follows: Assume that administrative and support costs vary with professional-labor costs. Consider each requirement independently. Answer the following questions: 1. How much of the total costs in 2013 are value-added, non-value-added, or in the gray area between? Explain your answers briefly. What actions can Calvert take to reduce its costs? 2. What are the consequences of misclassifying a non-value-added cost as a value-added cost? When in doubt, would you classify a cost as a value-added or non-value-added cost? Explain. 3. Suppose Calvert could eliminate all errors so that it did not need to spend any time making corrections and, as a result, could proportionately reduce professional-labor costs. Calculate Calvert’s operating income for 2013. 4. Now suppose Calvert could take on as much business as it could complete, but it could not add more professional staff. Assume that Calvert could eliminate all errors so that it does not need to
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
AC2720: Module 4 Cost Allocation Analysis 4.2 Pricing Decisions and Cost Management 2 spend any time correcting those errors. Assume that Calvert could use the time saved to increase revenues proportionately. Assume that travel costs will remain at $15,000. Calculate Calvert’s operating income for 2013. Problem 2: Target Prices, Target Costs, Activity-Based Costing Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern