Week 12 Tutorial Questions Solutions

Week 12 Tutorial Questions Solutions - ACCT1501 2011S1 Week...

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ACCT1501 2011S1 1 Week 12 Tutorial Questions Solutions Tutorial Questions: Problem 16.7 - Question 1 only (i.e. do not do 2 and 3), Vincent’s Cappuccino Express Problem 16.7 Question 1 W. W. Phillips Company Statement of Cost of Goods Manufactured For the Year Ended December 31, 1998 Direct materials: Beginning inventory $ 46,800 Add: Purchases 320,000 Materials available $366,800 Less: Ending inventory 66,800 Direct materials used $300,000 Direct labour 200,000 Manufacturing overhead: Indirect labour $ 40,000 Rent 42,000 Depreciation 60,000 Utilities 11,956 Total overhead costs 153,956 Total manufacturing costs $653,956 Add: Beginning work in process 13,040 Total cost of work in process $666,996 Less: Ending work in process 14,996 Cost of goods manufactured $652,000
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ACCT1501 2011S1 2 Vincent’s Cappuccino Express Three years ago, Vincent Chow completed his degree in accounting. The economy was in a depressed state at that time, and Vincent managed to get an offer of only $30,000 per year as a bookkeeper. In addition to its relatively low pay, this job had limited advancement potential. Since Vincent was an enterprising and ambitious young man, he declined this offer and started a business of his own. He was convinced that because of changing lifestyles, a drive-through coffee establishment would be profitable. He was able to obtain backing from his parents to open such an establishment close to the industrial park area in town. Vincent named his business “The Cappuccino Express” and decided to sell only two types of coffee: cappuccino and decaffeinated. As Vincent had expected, “The Cappuccino Express” was very well received. Within three years, Vincent had added another outlet north of town. He left the day-to-day management of each site to a manager and focused his own attention on overseeing the entire enterprise. He also hired an assistant to do the record keeping and selected other chores. Discussion Questions: (1) What factors can be expected to have a major impact on the success of “The Cappuccino Express”? (2) What major tasks does Vincent have to undertake in managing “The Cappuccino Express”? (3) What are the major costs of operating “The Cappuccino Express”? (4) Vincent would like to monitor the performance of each site manager. What measure, or measures, of performance should he use? (5) If you had suggested more than one measure, which of these should Vincent select if he could use only one? ( Source: Chow, C.W. in Issues in Accounting Education , Vol. 10, No. 1, Spring 1995, p. 173-174)
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ACCT1501 2011S1 3 Copyright American Accounting Association Spring 1995 TEACHING NOTES Increasingly, students in accounting and business courses are expected to actively engage in give and take with the instructor and other students and to integrate new knowledge with old. The objective of this teaching case is to assist instructors of management accounting to
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Week 12 Tutorial Questions Solutions - ACCT1501 2011S1 Week...

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