Test Bank For Accounting for Decision Making and Control 8e Jerold Zimmerman -The controller of a small private college is complaining about the amount of work
she is required to do at the beginning of each month. The p
...
Test Bank For Accounting for Decision Making and Control 8e Jerold Zimmerman -The controller of a small private college is complaining about the amount of work
she is required to do at the beginning of each month. The president of the university
requires the controller to submit a monthly report by the fifth day of the following month.
The monthly report contains pages of financial data from operations. The controller was
heard saying, "Why does the president need all this information? He probably doesn't
read half of the report. He's an old English professor and probably doesn't know the
difference between a cost and a revenue."
Required:
a. What is the probable role of the monthly report?
b. What is the controller's responsibility with respect to a president who doesn't
know much accounting?
2-1: Fixed, Variable, and Average Costs
Midstate University is trying to decide whether to allow 100 more students into
the university. Tuition is $5000 per year. The controller has determined the following
schedule of costs to educate students:
Number of Students Total Costs
4000 $30,000,000
4100 30,300,000
4200 30,600,000
4300 30,900,000
The current enrollment is 4200 students. The president of the university has calculated
the cost per student in the following manner: $30,600,000/4200 students = $7286 per
student. The president was wondering why the university should accept more students if
the tuition is only $5000.
Test Bank and Solutions
2
Required:
a. What is wrong with the president's calculation?
b. What are the fixed and variable costs of operating the university?
2-2: The Elements of Cost Volume Profit
The M Company’s variable costs are 75% of the sales price per unit and their fixed
costs are $240,000. If the company earned $60,000 in selling 150,000 units, what was
the sales price per unit?
2-3: Opportunity Costs
The First Church has been asked to operate a homeless shelter in part of the
church. To operate a homeless shelter the church would have to hire a full time
employee for $1,200/month to manage the shelter. In addition, the church would have to
purchase $400 of supplies/month for the people using the shelter. The space that would
be used by the shelter is rented for wedding parties. The church averages about 5
wedding parties a month that pay rent of $200 per party. Utilities are normally $1,000
per month. With the homeless shelter, the utilities will increase to $1,300 per month.
What is the opportunity cost to the church of operating a homeless shelter in the
church?
[Show More]
