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A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.
The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:
Calculate the annual profit per machine for each of the three sizes of machine, using the current basis for charging the costs of support activities to machines.
Suggested Answer: A
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40 comments · newest first
VE
Venita
11 months ago
Definitely agree with moving to activity-based costing!
LI
Lilli
11 months ago
Surprised by these numbers, thought it would be lower!
TI
Tiera
11 months ago
$1376 sounds way too high, doesn't add up.
UN
Una
12 months ago
I think it should be $1350, seems more accurate!
LO
Long
12 months ago
The profit for the medium machine is $1276.
LU
Luis
1 year ago
I’m leaning towards option B, $1376, but I need to double-check my calculations to be certain.
CR
Crista
1 year ago
I feel like I’ve seen a question where the profit margins varied significantly based on the overhead allocation method. I hope I can remember the right approach here.
FR
Francine
1 year ago
I think the profit for the medium machine should be around $1350, but I’m a bit confused about how the overhead rate affects the final figure.
TH
Thomasena
1 year ago
I remember we practiced a similar question on activity-based costing last week, but I’m not sure about the exact calculations for this one.
ZO
Zona
1 year ago
Ugh, I hate these activity-based costing questions. There are so many moving parts to keep track of. I'll have to read through it a few times to make sure I don't miss anything.
CH
Chaya
1 year ago
I'm feeling pretty confident about this one. The information provided seems comprehensive, and I've done similar problems before. I'll just need to be careful with the calculations.
ME
Melissia
1 year ago
Hmm, I'm a bit confused by all the details in this question. I think I'll need to break it down step-by-step to make sure I understand what I'm supposed to do.
TR
Trina
1 year ago
Okay, this looks like a classic activity-based costing problem. I'll need to calculate the cost per machine based on the support activity costs and then subtract that from the revenue to get the profit per machine.
KA
Kayleigh
1 year ago
This seems straightforward enough. I just need to plug the numbers into the right formulas and I should be able to calculate the profit per machine for each size.
MA
Marva
1 year ago
Hmm, I'm a bit stumped on this one. The wording is a bit technical, but I'll do my best to analyze the details and make an informed guess.
DO
Dorinda
1 year ago
Okay, I've got this. The two site-to-site connectivity options for the Azure virtual network gateway are IPsecVPN and ExpressRoute. I remember seeing that in the Azure docs. Time to mark those two choices and move on to the next question.
IL
Iluminada
1 year ago
Subcontracting could be useful, but it feels less relevant for a restaurant than focusing on in-house production plans.
AD
Adela
1 year ago
I wasn't confident about all the terms, but I know availability usually connects to access, not encryption. I'm going with confidentiality too.
FA
Fallon
1 year ago
I remember a practice question where reducing setup time improved service levels. That might be a good option here, right?
GE
Geoffrey
2 years ago
Alright, time to put on my accounting hat. I think I've got it - the answer is B, $1376. Gotta love those activity-based costing systems, am I right?
DO
Douglass
2 years ago
This is trickier than I thought. But hey, at least it's not as bad as that time I accidentally ordered a truckload of photocopier ink instead of toner. What a mess that was!
WH
Whitney
2 years ago
Well, at least now you have a funny story to tell!
KA
Kallie
2 years ago
I know right! It took forever to clean up.
JE
Jerry
2 years ago
I can't even imagine the mess you had to deal with.
MI
Micaela
2 years ago
Oops, that must have been a disaster!
PH
Phung
2 years ago
Woah, wait a minute... is this a trick question? I'm gonna go with C, $1350, just to be safe.
MA
Marvel
2 years ago
Yes, it will help in determining the actual profit per machine for each size.
IZ
Izetta
2 years ago
I believe implementing an activity-based costing system will provide a more accurate picture of costs.
CE
Celeste
2 years ago
Hold on, I'm not so sure about that. The question specifically says to use the current basis for charging the costs, so I'm leaning towards D, $1250.
SH
Shawna
2 years ago
Let's go with D, $1250, as the profit per machine for the medium machine based on the current cost charging system.
CO
Cordelia
2 years ago
I agree, the question does mention using the current basis for charging costs, so D, $1250, makes sense.
VE
Verona
2 years ago
I think you might be right, D does seem like the most accurate option based on the information provided.
DA
Dalene
2 years ago
Let's go with option D, $1250 for the profit per machine for the medium size machine. It makes sense based on the current charging system.
OM
Omer
2 years ago
I agree, the current basis for charging the costs should lead us to option D, $1250 for the profit per machine.
MA
Margo
2 years ago
I think you might be right, D does seem like the most accurate option based on the information given.
MA
Marvel
2 years ago
I agree, the Service Manager's suggestion makes sense.
IZ
Izetta
2 years ago
I think the current costing system is not accurate.
AD
Adolph
2 years ago
Hmm, let's see here... I think the answer is B, $1376. The numbers just seem to line up better with that option.
AR
Arletta
2 years ago
I think you're right, the profit per machine for the medium machine does look like it would be $1376.
RE
Ressie
2 years ago
I agree, option B does seem to make the most sense based on the information provided.