Midterm Solution ACC9811 Spring 2014

Midterm Solution ACC9811 Spring 2014 - Zicklin School of...

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

View Full Document Right Arrow Icon
1 Zicklin School of Business, Baruch College, CUNY ACC 9811. Managerial Accounting Midterm Solutions: Spring 2014 1 [5 points] Our company - EIS Technologies - designs and installs sophisticated internal-reporting systems for large firms. In 2013, our largest client was a grocery store chain Half Foods ; we designed and installed a reporting system for this client. Engagement profitability report for the Half Foods contract is below: Engagement revenues $2,400,000 Engagement costs: Attributable salaries consultants $967,000 Attributable salaries support staff 297,000 Other attributable expenses 95,000 1,359,000 Engagement profit $1,041,000 Half Foods Engagement Profitability Report Which of the following statements is correct (choose only one): A. EIS Technologies uses variable costing; B. EIS Technologies should be using practical consultant capacity to avoid the death spiral in its reporting system; C. The reported engagement profit is likely under-estimated because of the volume bias; D. The reported engagement profit is likely over-estimated because of the volume bias; E. None of the above statements is correct. The correct answer is A. There is no allocation of indirect cost in the profitability report, so the report uses variable costing. Death spiral and volume bias are not issues for firms using variable costing.
Image of page 1

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

View Full Document Right Arrow Icon