Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 51

Assigning Capacity Costs: Seasonality

Refer to the information in Problem 10-50. The ice cream business has two seasons, summer and winter. Each season lasts exactly six months. Chuck’s orders 4,500 gallons in the summer and 4,500 gallons in the winter. Marcee’s is closed in the winter and orders all 4,500 gallons in the summer.

Required

How would you modify, if at all, the cost system you designed previously for Cathy and Tom’s in Problem 10-50? Why?

Step 1 of 4

Cost accounting system

This is a system designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.