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Problem 1-8 John Dough’s bakery in Waxahachie, Texas, specializes in chocolate chip cookies.
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Problem 1-8

John Dough’s bakery in Waxahachie, Texas, specializes in chocolate chip cookies. While John’s business does not yet have a national presence, like Mrs. Fields, he does have a strong statewide reputation. Recently, John has been receiving some out-of-state orders through the company’s website. He is beginning to think about the potential for growing his out-of-state business.

How can managerial accounting information be useful to John as he thinks about growing his out-of-state business?

What decisions might John need to make if he decides to grow his out-of-state business?

What managerial accounting information might John find useful as he decides how to grow his out-of-state business?

Problem 2-21

Bob Jones owns a catering company that stages banquets and parties for both individuals and companies. The business is seasonal, with heavy demand during the summer months and yearend holidays and light demand at other times. Bob has gathered the following cost information from the past year:

Month

Labor Hours

Overhead Costs

January

2,500

55,000

February

2,800

59,000

March

3,000

60,000

April

4,200

64,000

May

4,500

67,000

June

5,500

71,000

July

6,500

74,000

August

7,500

77,000

September

7,000

75,000

October

4,500

68,000

November

3,100

62,000

December

6,500

73,000

Total

57,600

805,000

 

Bob recently attended a meeting of the local Chamber of Commerce, at which he heard an accounting professor discuss regression analysis and its business applications. After the

meeting, Bob enlisted the professor’s assistance in preparing a regression analysis of the overhead data he collected. This analysis yielded an estimated fixed cost of $48,000 per month and a variable cost of $4 per labor hour. Why do these estimates differ from estimates using the high-low method?

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