Question
The Trump International Hotel & Tower is a five-star hotel located in downtown Toronto. The hotel's operations vice president would like to replace the hotel's
The Trump International Hotel & Tower is a five-star hotel located in downtown Toronto. The hotel's operations vice president would like to replace the hotel's legacy computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, consume less power than the old computer terminals, and provide additional security since they can be viewed only from a restrictive angle. The new computer displays would not require any new wiring. However, the hotel's chef believes the funds would be better spent on a new bulk freezer for the kitchen.
Classify each item as a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel displays. If none of the categories apply for a particular item, select "None."
Item
Differential Cost
Opportunity Cost
Sunk Cost
None
Cost of the old computer terminals
Cost of existing registration desk wiring
Rent on the space occupied by the registration desk
Wages of registration desk personnel
Benefits from a new freezer
Costs of maintaining the old computer terminals
Cost of removing the old computer terminals
Cost of the new flat-panel displays
you have been given a summer job as an intern at Electronic Waves, a company that manufactures portable two-way radio transceivers for radio enthusiasts. The privately owned company has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs.
Classify the following lists of costs as either product (inventoriable) costs or period (non-inventoriable) costs for purposes of preparing the financial statements for the bank.
Product cost
Period Cost
Depreciation on salespersons' cars.
Salaries of personnel who work in the finished goods warehouse.
Rent on equipment used in the factory.
Lubricants used for machine maintenance.
Soap and paper towels used by factory workers at the end of a shift.
Factory supervisors' salaries.
Heat, water, and power consumed in the factory.
Materials used for boxing company products for shipment overseas. (Units are notnormallyboxed.)
Advertising costs.
Workers' Compensation Insurance for factory employees.
Depreciation on chairs and tables in the factory lunchroom.
The cost of packaging the company's product.
The wages of the receptionist in the administrative offices.
Cost of leasing the corporate jet used by the company's executives.
The cost of renting rooms at a British Columbia resort for the annual sales conference.
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