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Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
Edition 2ISBN: 978-0077274993Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
Edition 2ISBN: 978-0077274993 Exercise 21
Cost Data for Managerial Purposes
As an analyst in an airline's finance department, you are asked to help the operations staff. Personnel have identified a new method of loading baggage that is expected to result in a 35 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $0.20 per bag. Other costs are $0.09 per bag.
Required
a. What differential costs should the operations staff consider for the decision to use the new method next year What would be the cost savings per bag using it
b. Describe how management would use the information in requirement ( a ) and any other appropriate information to proceed with the contemplated use of the new baggage loading method.
As an analyst in an airline's finance department, you are asked to help the operations staff. Personnel have identified a new method of loading baggage that is expected to result in a 35 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $0.20 per bag. Other costs are $0.09 per bag.
Required
a. What differential costs should the operations staff consider for the decision to use the new method next year What would be the cost savings per bag using it
b. Describe how management would use the information in requirement ( a ) and any other appropriate information to proceed with the contemplated use of the new baggage loading method.
Explanation
Verified
Verified
a.
Calculate cost savings per bag:
Let...
Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher
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