1.

Madison Corporation has a single facility that it uses for manufacturing, sales, and
administrative activities.  Should the company's building depreciation charge be expensed in
its entirety or is a different accounting procedure appropriate?  Explain. 
Answer:
Fundamental concept of depreciation in which when accounting for a long-term fixed
asset such as building and equipment, cannot be simply recorded as an expense for the cost of the
asset and record the entire outflow of cash in one accounting period. The company’s charge is in
part of period costs that are expenses came from selling and administrative activities of the
manufacturing company. The second part is the depreciation of the single facility and it is part of
product cost which is a manufacturing overhead will be allocated or assigned to the goods
produced.
2. In discussing the operation of his automobile, a doctor once observed that gasoline is a fixed
cost because the cost per gallon is relatively stable.  Insurance, on the other hand, is a
variable cost because the cost per mile varies inversely with the number of miles driven.
Comment on the doctor's observation. 
Answer:
The doctor’s observation is not correct. Even though the gasoline prices are fixed in
nature per gallon, the gasoline cost of operating the automobile is variable cost as it would vary
on the miles or kilometers traveled in the automobile. Therefore, gasoline cost will increase with
the number of miles/kilometers driven. In contrast of insurance, it is a fixed cost and outlays will
remain the same. The idea of per-unit cost behavior and the "total" perspective, as described by
accountants, appear to have been muddled by the doctor.
3. One of the many changes in the business environment in recent years that has had significant
impact on cost management practices is a "focus on the customer". You are part of the
management team in a medium-size Internet service company. The company is just three
years old and is growing dramatically, doubling its customer base every six months.
Required:
A. Describe your typical customer's needs and service expectations.
B. How has the doubling of your firm's customer base every six months affected its
ability to maintain this focus on the customer? If this dramatic growth continues, what are
some specific actions your firm can take to retain its goal of "focus on the customer"?
Answer:
A. The factors that a typical customer of an Internet service provide the affordability of
the internet service whether it is worth for what the company offers and is worth the
money that they will pay later on. The reliability of the internet service of the
company if they are trustworthy and keep their words that they will serve a fast
internet service. The availability or the coverage of the service is also one factors,
sufficient internet bandwidth. Lastly, quality and flexibility of the service should have
high standards for better usage of the customers.
B. The doubling size of the company’s customer indicates that the company is growing,
which signifies greater amount of profit and success. However, this drastic change
has an impact especially on the company’s focus on its customers, as the number of
customers grow, the company will require more resources to prioritize the customers
needs and meet their expectations. If the rapid growth of the company continues, it
can make use of new and various strategies to retain their consistency in the general
public and to their customers. Example, the company should build their relationship
to their customers by providing a platform and receive feedbacks and suggestions
from customers on how the company should address and solve user’s problems. They
may also meet the customers or have a visitorial day/s to their customers to better
understand their needs and requirements. Lastly, given that the company is growing,
they should hire or plan and create a team or manpower to focus on certain types of
conditions to address problems and give assistance to customers.
4. The controller of one division of a large diversified firm is compensated by salary plus
bonus. The bonus is a significant part of total compensation, and is based directly on the
profits of the division. Thus, the controller has an incentive to find ways to increase profits,
including the delay of discretionary expenses such as research and development, delay of
maintenance and repair of manufacturing equipment, and delay of sales promotions.
Required: Is finding ways to increase profits as described above unethical? Why or why
not? Who is to blame, if anyone?
Answer:
Salary and bonuses are good strategies to motivate and compensate the company
employees to do their best at work. However, the methods to find out ways to hike or
 expansion of profits that the controller did is unethical. Delaying the discretionary costs or
expenses for increasing the bonus is a violation of integrity and is a conflict with employee’s
ethical and moral deeds. By this means, delaying these certain expenses will affect the
financial statements and financial decisions as they are no longer reliable and the faithfulness
are not present. The controller is not the only one to blame; the incentive system of the
company is also accountable. Bonuses should place more of an emphasis on producing a
major long-term contribution than merely short-term performance. However, it is clear that
the controller took advantage of the bonuses and fabricated the reports for personal benefits.
5. The management of DGM Marble Manufacturing has identified activity centers to which
overhead costs are assigned. The following data are available:

Activity Centers Costs Activity Drivers

Utilities P400,000 80,000 machine hours

Scheduling and Setup 379,950 800 setups

Material Handling 828,000 1,800,000 pounds of materials

The company’s products and other operating statistics are the following:

A. Ceramic
  B. Granite Tiles C. Onyx Tiles
Tiles

Prime costs P120,000 P130,000 P150,000

Machine hours 40,000 20,000 20,000

Number of setups 150 400 250

Pounds of materials 800,000 500,000 500,000

Number of units produced 60,000 35,000 60,000

Direct labor hours 35,000 26,000 50,000

Provide the following based on the procedures of Activity-Based Costing (ABC) system. (2
items x 10 points)
 a. Pool rates
b.  Overhead cost allocated to each product of DGM Marble Manufacturing