1. Madison Corporation has a single facility that it uses for manufacturing, sales, and administrative activities. Should the company's building depreciation charge be expensed in its entirety or is a is the different accounting procedure appropriate? Explain. There is a more appropriate accounting procedure for the problem. Although Madison Corporation has a single facility, depreciation of that said facility should be allocated to each manufacturing, sales and administrative activities. Especially when recording and summarizing activities done by accountants shows the cost of goods sold and other administrative expenses separately and as accurately as possible. With this said, the depreciation and other expenses related to the facility should be allocated to each activities. 2. In discussing the operation of his automobile, a once observed that gasoline is a fixed cost because per gallon is relatively stable. Insurance, on the hand, is a variable cost because the cost per mile varies inversely with the miles driven. Comment on the doctor's observation. doctor the cost other number of The gasoline cost should rise as he drives and its cost will vary depending on how far and often he drives. While his insurance will remain fixed whether he drives his car or not. Therefore, the gasoline cost is a variable cost while the insurance is a fixed cost. 3. One of the many changes in the business environment in recent years that has had significant impact on cost management practices is a "focus on the customer". You are part of the management team in a medium-size Internet service company. The company is just three years old and is growing dramatically, doubling its customer base every six months. Required: A. Describe your typical customer's needs and service expectations. - A typical customer’s needs are fast internet speed, convenient mode of payment and an affordable price. B. How has the doubling of your firm's customer base every six months affected its ability to maintain this focus on the customer? If this dramatic growth continues, what are some specific actions your firm can take to retain its goal of "focus on the customer"? - While the customers are doubling, more will contact the customer service that will result in busy lines. Also, internet speed will be affected, the more people use their service the slower it will be. Lastly, more customers also means more expenses are expected in retaining and improving their services. - Ofcourse, with doubling customers the company should hire more employees until they reach the most efficient number. They can also invest in automated computers and machinery to adapt to rising demands. Also, they should make payment by their customers online. Through this, they will cut short in payroll by hiring significantly fewer information technology specialists that will handle any bugs in the online payment. With this, less expenses will be made so they can offer lower prices to be “price competitive” in the market. 4. The controller of one division of a large diversified firm is compensated by salary plus bonus. The bonus is a significant part of total compensation, and is based directly on the profits of the division. Thus, the controller has an incentive to find ways to increase profits, including the delay of discretionary expenses such as research and development, delay of maintenance and repair of manufacturing equipment, and delay of sales promotions. Required: Is finding ways to increase profits as described above unethical? Why or why not? Who is to blame, if anyone. The ways of “increasing profit” mentioned above is unethical. The controller is prioritizing his self interest more than the company. By not delaying activities for the improvement of the firm, it gives the illusion of more profits because those expenses will not be shown in the income statement as deductions. With this said, the firm is purposely stagnated in order to make an illusion of “higher profit”. 5. The management of DGM Marble Manufacturing has identified activity centers to which overhead costs are assigned. The following data are available: Activity Centers Costs Activity Drivers Utilities P400,000 80,000 machine hours Scheduling and Setup 379,950 800 setups Material Handling 828,000 1,800,000 pounds of materials The company’s products and other operating statistics are the following: A. Ceramic Tiles B. Granite Tiles C. Onyx Tiles Prime costs P120,000 P130,000 P150,000 Machine hours 40,000 20,000 20,000 Number of setups 150 400 250 Pounds of materials 800,000 500,000 500,000 Number of units produced 60,000 35,000 60,000 Direct labor hours 35,000 26,000 50,000 Provide the following based on the procedures of Activity-Based Costing (ABC) system. (2 items x 10 points) a. Pool rates Utilities: P400,000/80,000 = P5 per machine hours Scheduling and setup P379,950/800 = P474.94 per Setups Material Handling P828,000/1,800,000 = P0.64 per pounds of materials b. Overhead cost allocated to each product of DGM Marble Manufacturing A. Ceramic Tiles B. C.