Chapter 10: Exercise 15
Auburn Furniture Company makes a variety of wood furniture for the home and office. The company uses a standard costing system for its manufacturing costs. During a recent unexpected surge in demand, the company decided to use temporary employees from a local employment agency. The company used the temporary employees for two months, after which managers stopped using them. There were many complaints from production foremen that the temporary employees were not very efficient. Additionally, customer service staff noted that during the two month time period when the temporary employees were working there was an increase in the number of units that had to be reworked and the number of units being returned by customers.
Management is considering filing a lawsuit against the temporary employment company for providing workers who did not perform at the level of regular employees as had been promised by the employment company. Before filing the lawsuit, management would like to have some information about the possible damages in the case. What accounting and other information would you look at to assist management in evaluating possible damages?
Chapter 11: Exercise 14
A travel agency had its highest operating costs in June ($26,250), and its lowest operating costs in November ($21,750). The agency sold 1,500 tickets in June and 900 tickets in November.
- Using the high-low method of cost estimation, compute the fixed and variable components of the travel agency’s monthly operating costs.
- If the travel agency expects to sell 1,900 tickets in December, estimate its operating expenses for December.
- What concerns might arise about making the December operating expense estimate?
Chapter 12: Exercise 30
Jimmy Jones was on his way to work when he was hit broadside by a truck that ran a red light. Jimmy suffered twenty seven broken bones, numerous lacerations, and a variety of other medical problems. Mr. Jones was in the hospital for two months and he has been recovering at home for the past four months. He is certain that he will never be able to work again. At the time of the accident, Mr. Jones was 35 years old. The insurance company for the trucking company that hit Jimmy Jones is not sure that he is completely disabled and they intend to contest that issue. You have been hired as a financial expert witness by the attorney of Jimmy Jones to assist in this case. You have visited Jimmy several times and you are certain he is never going to return to his pre-accident health.
- What is your role in supporting Jimmy’s disability claim?
- What are the possible/probable components of Jimmy’s economic damage claim?
- What information will you seek from Jimmy/his lawyer and what information/research will you pursue on your own?
- What information, if any, will you seek from Jimmy’s attorney about the nature and severity of Jimmy’s injuries and the extent of his disability?