Problem Assignment

Problem Assignment. P 1–2:
One Cost System Isn’t Enough Robert S. Kaplan in “One Cost System Isn’t Enough” (Harvard Business Review. January–February 1988, pp. 61–66) No single system can adequately answer the demands made by diverse functions of cost systems. While companies can use one method to capture all their detailed transactions data, the processing of this information for diverse purposes and audiences demands separate, customized development. Companies that try to satisfy all the needs for cost information with a single system have discovered they can’t perform important managerial functions adequately. Moreover, systems that work well for one company may fail in a different environment. Each company has to design methods that make sense for its particular products and processes. Of course, an argument for expanding the number of cost systems conflicts with a strongly ingrained financial culture to have only one measurement system for everyone. Describe the costs and benefits of having a single measurement system.
P 2–1: Darien Industries
Darien Industries operates a cafeteria for its employees. The operation of the cafeteria requires fixed
costs of $4,700 per month and variable costs of 40 percent of sales. Cafeteria sales are currently
averaging $12,000 per month.
Darien has an opportunity to replace the cafeteria with vending machines. Gross customer
spending at the vending machines is estimated to be 40 percent greater than current sales because
the machines are available at all hours. By replacing the cafeteria with vending machines, Darien
would receive 16 percent of the gross customer spending and avoid all cafeteria costs. How much
does monthly operating income change if Darien Industries replaces the cafeteria with vending
P 2–12: Napoli Pizzeria Gino Potestio, owner of Napoli Pizzeria, is evaluating leasing an espresso/cappuccino machine. A number of patrons have inquired about espresso and cappuccino beverages. Napoli currently does not offer these beverages. Gino believes adding these beverages will increase the demand for his pizzas. A good espresso/cappuccino machine can be leased for $300 month. Each espresso/cappuccino will sell for $3 and the coffee and milk will average $1 per serving. No additional labor cost is needed because the restaurant staff has enough idle time to prepare and serve the espresso/cappuccino. Gino estimates that the machine will add about $75 of additional pizza profits per month. Required: a. How many espresso/cappuccino beverages must Napoli sell to break even? b. Gino doesn’t want to offer espresso/cappuccino beverages unless he makes at least $1,000 per month after taxes including the additional sales of pizzas from adding espresso/ cappuccino beverages. Napoli’s income tax rate is 35 percent. How many servings of espresso/cappuccino must Gino sell to meet his after tax profit goal?

Problem Assignment


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