Fun and Games, Inc. (FGI), headquartered in Boston, is a software consulting company specializing in games. It has been growing at an alarming pace. Mr. Furst, president of the company is considering expanding his operations by opening his seventh office in Portsmouth. FGI recently completed an ABC analysis of its Boston office to better understand the supply and use of facility-level resources. Mr. Furst does not expect the Portsmouth office to be different from the one in Boston in terms of resource requirement and consumption. For example, he expects to hire as many employees as in the Portsmouth office and also exert as much sales effort. However, he expects that business ( of projects) and sales revenue will be only 75% of that in Boston during the first year. Miss Bridges tracked the following information to assist in the decision.
Required
(a) Using the information given above, estimate the cost of supporting the new office in Portsmouth. Assume that the resources used is the same as resources supplied.
(b) Should the level of resources used always be equal to the level of resources supplied? Why or why not?
(c) Is activity-based information always better than average-cost information? Explain.

Question

Fun and Games, Inc. (FGI), headquartered in Boston, is a software consulting company specializing in games. It has been growing at an alarming pace. Mr. Furst, president of the company is considering expanding his operations by opening his seventh office in Portsmouth. FGI recently completed an ABC analysis of its Boston office to better understand the supply and use of facility-level resources. Mr. Furst does not expect the Portsmouth office to be different from the one in Boston in terms of resource requirement and consumption. For example, he expects to hire as many employees as in the Portsmouth office and also exert as much sales effort. However, he expects that business ( of projects) and sales revenue will be only 75% of that in Boston during the first year. Miss Bridges tracked the following information to assist in the decision.
  Required
(a) Using the information given above, estimate the cost of supporting the new office in Portsmouth. Assume that the resources used is the same as resources supplied.
(b) Should the level of resources used always be equal to the level of resources supplied? Why or why not?
(c) Is activity-based information always better than average-cost information? Explain.

Quizplus · Accepted Answer

The Answer of Fun and Games, Inc. (FGI), headquartered in Boston, is a software consulting company specializing in games. It has been growing at an alarming pace. Mr. Furst, president of the company is considering expanding his operations by opening his seventh office in Portsmouth. FGI recently completed an ABC analysis of its Boston office to better understand the supply and use of facility-level resources. Mr. Furst does not expect the Portsmouth office to be different from the one in Boston in terms of resource requirement and consumption. For example, he expects to hire as many employees as in the Portsmouth office and also exert as much sales effort. However, he expects that business ( of projects) and sales revenue will be only 75% of that in Boston during the first year. Miss Bridges tracked the following information to assist in the decision.
  Required
(a) Using the information given above, estimate the cost of supporting the new office in Portsmouth. Assume that the resources used is the same as resources supplied.
(b) Should the level of resources used always be equal to the level of resources supplied? Why or why not?
(c) Is activity-based information always better than average-cost information? Explain.