Test Bank for Fundamentals of Cost Accounting, 7th Edition by William Lanen

Version 1 1 CHAPTER 01 7e 1) Carley Incorporated incurs many types of costs in its operations. Place the number of the appropriate stage in the value chain in Column 2 in the blank next to each cost in Column 1. Cost Stage in the Value Chain Transportation costs to ship vans to customers 1. Customer Service Labor costs for factory workers 2. Distribution Overtime costs for scientists working on new engine technology 3. Research & Development Utilities cost for the design testing center 4. Marketing Costs to survey customers about their satisfaction 5. Production Costs to sponsor a sporting event 6. Design 2) SuperMax is an integrated provider of genetically engineered corn. Many types of costs are incurred in its operations. Place the number of the appropriate stage in the value chain in Column 2 in the blank next to each cost in Column 1. Cost Stage in the Value Chain Warehouse costs to store seed awaiting shipment to customers 1. Customer Service Utility costs for seed mill 2. Distribution Equipment costs in genetics laboratory 3. Research & Development Labor costs to staff help-line call center 4. Marketing Costs to prepare advertising campaign in national agriculture magazine 5. Production Costs to contract with growers to provide 6. Design Version 1 2 seed 3) Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Travon’s Limo Service Annual Income Statement Before Expansion Sales Revenue $ 960,000 Costs: Vehicle Leases $ 400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other Costs 60,000 Manager’s Salary 120,000 Total Costs 1,020,000 Operating Profit (Loss) $ (60,000) a. Prepare a report of the differential costs and revenues if the delivery service is added. b. Should management start up the delivery service? Explain your answer.