1.) State University Business School (SUBS) offers several degrees, including Ba
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1.) State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and is reviewing a staff-developed income statement broken down by the degree offered. The dean is considering closing down the BBA program because the analysis, which follows, shows a loss. Tuition increases are not possible. The dean has asked for your advice. If the BBA degree program is dropped, school administration costs are not expected to change, but direct costs of the program, such as operating costs, building maintenance, and classroom costs, would be saved. There will be no other changes in the operations or costs of other programs.
What will be the net effect on the SUBS contribution (profit) if the BBA program is dropped? (Omit the "$" sign in your response.)
2.) Pine Ridge Cabinets (PRC) produces cabinets for new home builders. You have been called in to settle a dispute between PRC and Eastern Homes, a builder of custom homes.
Eastern Homes buys 10,000 units of a particular cabinet from PRC every year. It insists that PRC keep a one-month inventory to accommodate fluctuations in Eastern%u2019s demand. PRC does not want to keep any inventory and says that Eastern Homes should buy components in advance and store them.
You determine that the inventory storage costs per unit are $100 at PRC and $200 at Eastern Homes.
Pine Ridge Cabinets (PRC) should carry the inventory, but Eastern Homes should cover all the inventory carrying costs.
3.) Assume that Carmen's Cookies is preparing a budget for the month ending June 30. Management prepares the budget by starting with the actual results for April 30. Next, management considers what the differences in costs will be between April and June.
Management expects the number of cookies sold to be 10 percent greater in June than in April, and it expects all food costs (e.g., flour, eggs) to be 10 percent higher in June than in April. Management expects "other" labor costs to be 15 percent higher in June than in April, partly because more labor will be required in June and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,300 in April to $3,800 in June. Rent and utilities are not expected to change.
1.) State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and is reviewing a staff-developed income statement broken down by the degree offered. The dean is considering closing down the BBA program because the analysis, which follows, shows a loss. Tuition increases are not possible. The dean has asked for your advice. If the BBA degree program is dropped, school administration costs are not expected to change, but direct costs of the program, such as operating costs, building maintenance, and classroom costs, would be saved. There will be no other changes in the operations or costs of other programs.
STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREEDegree Income Statement
For the Academic Year Ending June 30 Revenue $ 330,000 Costs Advertising%u2014BBA program 23,000 Faculty salaries 150,000 Degree operating costs (part-time staff) 24,500 Building maintenance 27,000 Classroom costs (building depreciation) 55,000 Allocated school administration costs 59,000 Total costs $ 338,500 Net loss $ (8,500) Requirement 1: What revenues and costs are probably differential for the decision to drop the BBA program?
Degree Income Statement
Differential Revenues and Costs
For the Academic Year Ending June 30 Revenue $ (Click to select)DifferentialNot differential Costs Advertising%u2014BBA program (Click to select)Not differentialDifferential Faculty salaries (Click to select)Not differentialDifferential Degree operating costs (Click to select)Not differentialDifferential Building maintenance (Click to select)DifferentialNot differential Classroom costs (Click to select)DifferentialNot differential Allocated school administration costs (Click to select)Not differentialDifferential Total costs $ (Click to select)Net differential gain from storeNet differential loss from store $ Requirement 2:
What will be the net effect on the SUBS contribution (profit) if the BBA program is dropped? (Omit the "$" sign in your response.)
Net income will be (Click to select)lowerhigher by $2.) Pine Ridge Cabinets (PRC) produces cabinets for new home builders. You have been called in to settle a dispute between PRC and Eastern Homes, a builder of custom homes.
Eastern Homes buys 10,000 units of a particular cabinet from PRC every year. It insists that PRC keep a one-month inventory to accommodate fluctuations in Eastern%u2019s demand. PRC does not want to keep any inventory and says that Eastern Homes should buy components in advance and store them.
You determine that the inventory storage costs per unit are $100 at PRC and $200 at Eastern Homes.
Required: How do you suggest the two companies settle their dispute? To minimize costs in the supply chain, Pine Ridge Cabinets (PRC) should carry the inventory and the two firms could share the inventory savings through price discounts or other contractual agreements.Pine Ridge Cabinets (PRC) should carry the inventory, but Eastern Homes should cover all the inventory carrying costs.
There is no need for Pine Ridge Cabinets (PRC) to carry the inventory. Eastern Homes should buy in advance.3.) Assume that Carmen's Cookies is preparing a budget for the month ending June 30. Management prepares the budget by starting with the actual results for April 30. Next, management considers what the differences in costs will be between April and June.
Management expects the number of cookies sold to be 10 percent greater in June than in April, and it expects all food costs (e.g., flour, eggs) to be 10 percent higher in June than in April. Management expects "other" labor costs to be 15 percent higher in June than in April, partly because more labor will be required in June and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,300 in April to $3,800 in June. Rent and utilities are not expected to change.
Explanation / Answer
It is important that costs are minimized in the supply chain. Because it is cheaper for Pine Ridge Cabinets to carry the inventory, the resolution should result in Pine Ridge Cabinets carrying the inventory. You might suggest that the two firms share the inventory savings through price discounts or other contractual agreements. ============================================================================================================================== Food: Flour = $2800 * 1.10 = $3,080 ============================================================================================================================== Eggs = $5,500 * 1.10 = $6050 ==============================================================================================================================Chocolate = $1900 * 1.10 = $2090 ==============================================================================================================================0 Nuts = $2,500 * 1.10 = $2750 ==============================================================================================================================Other = $2,100 * 1.10 = $2,310
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