BT Inc. manufactures telephone sets, Regular and Specialized. The Managing Director wants to initiate a program...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
BT Inc. manufactures telephone sets, Regular and Specialized. The Managing Director wants to initiate a program of cost reduction at BT Inc. His plan is to use activity-based costing to allocate costs more accurately and to identify non-value adding activities. The first department to be studied is the Customer Care Department because it is believed that the current method of cost allocation is giving unrealistic results for the two product types Regular and Specialized. Currently, the Finance Manager absorbs the cost of Customer Care Department into the product cost on a per unit basis using the following data: 000.$ Rent 900 Electricity Salaries 30 258 Stationery and sundries Depreciation of equipment 54 172 1,414 Note: Customer Care Department cost is currently allocated to each telephone set based on 16,000 orders a year, 14,400 for Regular telephone set order and 1,600 for Specialized telephone set order. Below are the activity-based costing data: Activities of Staff Customer Care Department time Comments 40%a Relates to 35,000 enquiries/quotes per year "Handling enquiries and preparing quotes for potential orders "Receiving actual orders and Customer credit checkse 35% Relates to 16,000 orders in the year "Complaints handling 25% Relates to 3,200 complaints per year Notes: 1 Each Regular telephone set order contains an average of six telephone sets and each Specialized telephone set order contains an average of one telephone set. 2 Total Customer Care Department cost is allocated using staff time as this drives all of the other costs in the department. 3 Handling enquires and preparing quotes for Specialized telephone sets takes 20% of the time allocated to this activity. 4 90% of receiving actual orders and customer credit checks are for Regular telephone sets. The remainder are for Specialized telephone sets. Notes: 1 Each Regular telephone set order contains an average of six telephone sets and each Specialized telephone set order contains an average of one telephone set. Total Customer Care Department cost is allocated using staff time as this drives all of the other costs in the department. 3 Handling enquires and preparing quotes for Specialized telephone sets takes 20% of the time allocated to this activity. 90% of receiving actual orders and customer credit checks are for Regular telephone sets. The remainder are for Specialized telephone sets. 4 50% of the complaints received are for Specialized telephone sets. Required: Compare the Customer Care Department cost allocation on the two products using (i) the existing costing system and (ii) activity-based costing system. (Show workings and round to 2 decimal places) (20 marks)- BT Inc. manufactures telephone sets, Regular and Specialized. The Managing Director wants to initiate a program of cost reduction at BT Inc. His plan is to use activity-based costing to allocate costs more accurately and to identify non-value adding activities. The first department to be studied is the Customer Care Department because it is believed that the current method of cost allocation is giving unrealistic results for the two product types Regular and Specialized. Currently, the Finance Manager absorbs the cost of Customer Care Department into the product cost on a per unit basis using the following data: 000.$ Rent 900 Electricity Salaries 30 258 Stationery and sundries Depreciation of equipment 54 172 1,414 Note: Customer Care Department cost is currently allocated to each telephone set based on 16,000 orders a year, 14,400 for Regular telephone set order and 1,600 for Specialized telephone set order. Below are the activity-based costing data: Activities of Staff Customer Care Department time Comments 40%a Relates to 35,000 enquiries/quotes per year "Handling enquiries and preparing quotes for potential orders "Receiving actual orders and Customer credit checkse 35% Relates to 16,000 orders in the year "Complaints handling 25% Relates to 3,200 complaints per year Notes: 1 Each Regular telephone set order contains an average of six telephone sets and each Specialized telephone set order contains an average of one telephone set. 2 Total Customer Care Department cost is allocated using staff time as this drives all of the other costs in the department. 3 Handling enquires and preparing quotes for Specialized telephone sets takes 20% of the time allocated to this activity. 4 90% of receiving actual orders and customer credit checks are for Regular telephone sets. The remainder are for Specialized telephone sets. Notes: 1 Each Regular telephone set order contains an average of six telephone sets and each Specialized telephone set order contains an average of one telephone set. Total Customer Care Department cost is allocated using staff time as this drives all of the other costs in the department. 3 Handling enquires and preparing quotes for Specialized telephone sets takes 20% of the time allocated to this activity. 90% of receiving actual orders and customer credit checks are for Regular telephone sets. The remainder are for Specialized telephone sets. 4 50% of the complaints received are for Specialized telephone sets. Required: Compare the Customer Care Department cost allocation on the two products using (i) the existing costing system and (ii) activity-based costing system. (Show workings and round to 2 decimal places) (20 marks)-
Expert Answer:
Answer rating: 100% (QA)
Answer to ovestiong Compaye tue customev Care Department cost alloc... View the full answer
Related Book For
Accounting Information Systems
ISBN: 978-0133428537
13th edition
Authors: Marshall B. Romney, Paul J. Steinbart
Posted Date:
Students also viewed these general management questions
-
A hospital can use activity based costing (ABC) for costing its services. In a hospital, what activities might be considered to be value-added activities? What activities at that hospital might be...
-
How will fixed costs expressed on a per unit basis react to a change in the level of activity?
-
During the transition of an electron from a higher energy state to the ground energy state of the hydrogen atom, the wavelength of emitted light by the atom is 122 nm. Determine the higher energy...
-
How does MacKinnon analyze cases of sexual harassment where the woman complies with the sexual advance? She suggests that these cases are therefore not wrongful. She suggests that these cases are too...
-
Although we typically use these terms with goods production, is your college a make to order or make to stock operation? Be sure to support your conclusion.
-
Write the nuclear equation for the fusion of H-3 with H-1 to form He-4.
-
Orbit Airways purchased a baggage-handling truck for $41,000. Suppose Orbit Airways sold the truck on December 31,2010, for $28,000 cash, after using the truck for two full years and accumulating...
-
Brite Lite Inc. manufactures light bulbs. Their purchasing policy requires that the purchasing agents place each quarters purchasing requirements out for bid. This is because the Purchasing...
-
Provide 3 reasons why the matrix organizational structure has been adopted by many organizations with specific reference related to staff self actualization new product development launch initiatives...
-
Calls for WI and IL both arrive at the Log call process in two separate streams as follows: WI calls: Arrive in a defined daily pattern of 20 calls per hour during the 8 hour period on Monday between...
-
Which scenario demonstrates deregulation efforts? A. A country exercises tight control over the prices of food grains. B. The establishment of private enterprises in the steel industry is prohibited...
-
"Managing Away Bad Habits Team Assignment Organizational Behavior IILeadership Assigned is ashort case from the exercise Managing Away Bad Habits. The task is to develop a turnaround strategy for...
-
18 years ago, I purchased 185 shares of a stock worth $14.25 per share. There was a 2:1 split, a 4:1 split, and a 3:1 split during that time period. Today the stock is worth $1.53 per share. If the...
-
Tracy has several debts. She owes approximately $8500 on a car loan, approximately $3000 on a credit card, and $12500 to her parents. Determine the total amount paid on a five-year consolidation loan...
-
What industry is Airbnb in? Is Airbnb in a risky industry? Why/when Airbnb begin its operations? Has Airbnb announced an IPO, or possibly a SPAC deal, since it received its initial funding? If now...
-
The amount of realized gain to be recognized in a tax year is equal to the gross profit multiplied by the ratio of payments received in the current year divided by the total contract price. ...
-
. Consider the first digit of Tucker software's accounts payable entries in the clustered column chart in Figure 1.3 (page 12.) Does it appear that the data follow Benford's Law? b. Which first...
-
Apply Jacobis method to the given system. Take the zero vector as the initial approximation and work with four-significant-digit accuracy until two successive iterates agree within 0.001 in each...
-
Wang Labs tremendous growth left the company with a serious problem. Customers would often wait months for Wang to fill orders and process invoices. Repeated attempts by Wangs understaffed IS...
-
During final testing, just before launching a new payroll system, the project manager at Reutzel Legal Services found that the purchased payroll system was doing the following: Writing checks for...
-
Use EXCELs regression tools to analyze and forecast future sales. a.Create a spreadsheet with the following data about targeted emails, click ads, and unit sales: b. Create a scatter graph to...
-
Derive Equation 3.9, \(x(t)=C e^{-\zeta \omega_{n} t} \cos \left(\omega_{d} t-\phi ight)\).
-
(a) The response of an oscillator with mass \(m=1\) kg is shown in Figure 3.51. What can you say about the properties of the oscillator and the response? Determine the equation of motion and the...
-
Solve Equation 3.6, \(\ddot{x}+2 \zeta \omega_{n} \dot{x}+\omega_{n}^{2} x=0\) for \(\zeta>1\).\
Study smarter with the SolutionInn App