Chapter_2P1

# Chapter_2P1 - Homework Manager Questions Problems What Does...

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Homework Manager Questions? Problems?

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What Does Aspirin Cost? Hospitals justify the high price of aspirin based on high costs. For example, hospitals routinely charge \$4.50 per aspirin based on a reported cost of \$3.50 . Source: “The Legacy of \$7 Aspirin” D. McFadden, Management Accounting, April 1990, pp. 38-41
Do You Believe Aspirin Costs the Hospital \$3.50 per Tablet?

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More Costs… ( The Avalanche Journal ). “False alarms cost the Lubbock Police Department about \$255,000 per year…”
Do You Believe False Alarms Cost the City ¼ Million per year? Does the city need to charge \$100 per false alarm to “cover its costs”? What does one more false alarm cost?

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Why is Cost information important? Forming Expectations. Making Decisions. Affecting Evaluations.
Krispy Kreme Doughnuts Last Year This Year Revenue 146,000 175,200 Total Cost 120,000 Profit 26,000 20% ↑ \$31,200 ??? 20% ↑ Krispy Kreme will likely make Krispy Kreme will likely make more than more than \$31,200. \$31,200. Why? Why? Some of their costs won’t go up by 20%. Some of their costs won’t go up by 20%.

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Doughnuts Made Total Cost of Doughnuts Variable Costs : the total increases with output If costs are variable, the more doughnuts you make – the more costs you incur.

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## This homework help was uploaded on 04/22/2008 for the course ACCT 2302 taught by Professor All during the Spring '08 term at Texas Tech.

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Chapter_2P1 - Homework Manager Questions Problems What Does...

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