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Chapter 6
ACTIVITY-BASED COSTING,
CUSTOMER PROFITABILITY
AND ACTIVITY-BASED MANAGEMENT
DISCUSSION QUESTIONS
Q6-1. The following two sentences summarize the concepts underlying activity-based
costing:
1. Activities performed to serve customer needs cost money.

2. The cost of resources consumed by activities should be assigned to cost
objectives on the basis of the units of activity consumed by the cost
objective.
Q6-2. Implementing the two-stage model requires:
1. Identifying activities.
2. Assigning costs to activities.
3. Determining the basis for assigning the cost of activities to cost objectives.
4. Determining the cost per unit of activity.
5. Reassigning costs from the activity to the cost objective on the basis of the
cost objective's consumption of activities.
Q6-3. An activity cost pool consists of the total costs identified that relate to a given
activity conducted as part of a process. An activity cost driver is the unit of
measurement of the activity level that causes costs to be incurred. Cost per
unit of activity is simply the total amount of the activity cost pool divided by the
level of the activity cost driver.
©Cambridge Business Publishers, 2012

Solutions Manual, Chapter 6 6-1
Q6-4. Cost Pool Possible Cost Drivers
Maintenance Number of maintenance hours
Number of repair orders
Number of machine hours
Materials movement Number of movements

Weight or volume of material
Dollar value of material
Machine setup Number of setups

Number of setup hours
Number of production runs
Inspection Number of inspections

Number of inspection hours
Weight or volume of goods inspected
Materials purchases Number of purchase orders

Number of vendors
Dollar value of purchases
Customer service Number of customers

Dollar value of sales to customers
Number of customer service calls
Q6-5. Activity-based costing is based on the premise that activities drive costs and
that the cost of activities should be assigned to cost objectives on the basis of
the activities they consume.

6-2 Managerial Accounting, 6th Edition
Q6-6. Activity-based costing differs from traditional approaches to cost allocation in
terms of the number of cost pools used, the assignment of costs to pools based
on activities, the rejection of volume-based allocation that is not related to cost-
causing activities, the need to understand the production process, and the
frequent use of judgment.
Q6-7. ABC often reveals product cross-subsidization problems if it produces costs for
some products that are higher, and costs for other products that are lower, than
costs produced by traditional costing methods. ABC often reveals that some
products are undercosted and others are overcosted. This is referred to as
cross- subsidization.
Q6-8. Customers make varying demands on companies with some customers

requiring little support and others requiring substantial amounts of support.
Using ABC companies can determine the amount of its various customer
support activities, and their related costs that are incurred for the benefit of
each customer, thereby determining customer profitability after taking into
account these customer support costs.
Q6-9. Activity-Based Management (ABM) is the identification and selection of

activities to maximize the value of activities while minimizing their cost from the
perspective of the final consumer. Whereas activity-based costing (ABC) is
concerned with measuring the cost of activities used to produce a cost
objective (e.g., a product or service), ABM is concerned with how to efficiently
and effectively manage activities and processes to provide value to the final
consumer.

MINI EXERCISES
M6-10.
1. i 6. d
2. h 7. b*
3. f 8. c
4. a 9. e
5. j 10. g
* (Note: (d) cannot be used because it is the most logical answer to item 6, and each
answer can be used only once.)
M6-11.
There is no single correct answer to this exercise. The purposes of the exercise are
to develop skills in thinking about activities and to organize them sequentially.
1. Open cargo hatch.

2. Unload aircraft.
3. Move baggage to baggage sorting area.
4. Sort baggage by outgoing flight numbers and/or destination.
5. Move baggage for which hub is final destination to baggage claim area.
6. Accumulate baggage for each outgoing flight.
7. Move baggage to outgoing aircraft.
8. Load aircraft.
9. Secure baggage.
10. Close cargo hatch.
M6-12.
Introductory Graduate
Course Course
Assignment of salary:
$135,000  0.50 portion teaching  0.50 $33,750 $33,750
Annual enrollment:
Introductory course
50 students  2 semesters  100
Graduate course
30 students  2 semesters _____  60
Cost of instruction per student $337.50 $562.50

M6-13.
The easiest way to solve this assignment is to classify each of the activities Brenda
performed as unit, batch, product, or facility level. Next, total the percentages in
each category. Finally, multiply the percentages by Brenda’s salary.
Assignment of
Salary
Unit level:
Supervising production 20 percent
Total 20 $26,400
Batch level:
Job scheduling 15 percent
Supervising setup 5 percent
First unit inspection 2 percent
Total 22 29,040
Product level:
Product design 12 percent
Preparing bills of materials 5 percent
Preparing operations lists 12 percent
Total 29 38,280
Facility level:
Employee training 18 percent
Facility maintenance 7 percent
Attending professional meetings 4 percent
Total 29 38,280
Grand total 100 $132,000

M6-14.
Sales revenue $122,200
Less:
Cost of goods sold $68,940
Customer relations ($100  25) 2,500
Selling expenses ($122,200  0.06) 7,332
Accounting (235  $5) 1,175
Warehousing (4,700  $0.50) 2,350
Packing (4,700  $0.25) 1,175
Shipping (70,500  $0.20) 14,100 (97,572)
Profitability of March 2012 sales in Massachusetts $ 24,628
M6-15.
Activity cost of converting raw materials into 40 fireplace inserts:
Setup $ 60
Movement:
Batch ($15  3 moves) $ 45
Weight
($0.10  50 units  150 lbs.  3 moves) 2,250 2,295
Inspection ($2  2  50) 200
Drilling ($3  5  50) 750
Welding ($4  80  50) 16,000
Shaping ($25  0.50  50) 625
Assembly ($18  1  50) 900
Total $20,830

M6-16.
Activity cost calculations:
Machine setup cost = $600,000  12,000 setup hours = $50 per setup hour
Material handling cost = $120,000  2,000 tons = $60 per ton of materials
Machine operation = $500,000  10,000 = $50 per machine hour
Product costs: C23 Cams U2 Shafts
Direct materials $30,000 $20,000

Direct labor 5,000 10,000
Manufacturing overhead:
Machine setups (3 setup hours  $50) 150 (7 setup hours  $50) 350
Material handling (12.5 tons  $60) 750 (8 tons  $60)480
Machine operation (4 hours  $50) 200 (5 machine hours  $50) 250
Total job costs $36,100 $31,080
Units produced  500  300
Cost per unit produced $ 72.20 $103.60
M6-17.
Activity cost calculations:
Machine setup cost = $950,000  2,500 setups = $380 per setup hour
Material handling cost = $820,000  5,000 = $164 per material move
Machine operation = $200,000  20,000 = $10 per machine hour
Product costs:
Mirlite Subdue

Manufacturing overhead:
Machine setups (15 setup hrs.  $380) 5,700 (12 setup hrs.  $380) 4,560
Material handling (60 moves  $164) 9,840 (35 moves  $164) 5,740
Machine operation (800 hours  $10) 8,000 (250 hours  $10) 2,500
Total cost per batch $383,540 $170,300
Gallons produced  50,000  30,000
Cost per gallon $ 7.67 $ 5.68

M6-18.
Activity Alpine Blue Ridge Pineola
Refinishes (@ $60) $ 4,800 $ 2,100 $ 2,520
Touchups (@ $100) 15,000 11,000 11,500
Communication (@ $40) 14,400 8,200 7,600
Total support costs 34,200 21,300 21,620

Gross Profit 100,000 100,000 100,000
Customer profits $ 65,800 $ 78,700 $ 78,380
The instructor may want to ask the students to comment on the usefulness of this
type analysis, and ask what reasonable actions HyStandard might take as a result of
this analysis (see discussion below).
This analysis is beneficial to HyStandard because it shows that the Alpine Company
is a definite outlier among the three builders in terms of support services required.
Alpine is a significantly larger consumer of activities for refinishes, touchups and
communication. Note that Alpine requires 360 communications (calls, emails, etc.)
for 230 refinishes and touchup procedures, or 1.57 communications per procedure;
whereas, the ratios for Blue Ridge and Pineola are 1.41 and 1.21, respectively.
HyStandard should consider sharing some of these data with the Alpine Company to
demonstrate to them that they are not in line with the other builder/customers in
terms of the level of support required. If Alpine cannot be brought in line,
HyStandard may consider replacing Alpine, possibly by seeking another builder as a
third customer. Of course, despite Alpine’s poor performance as a customer, it is
still quite profitable – this analysis may simply serve to help make it more profitable.
Also, by determining the cost of each unit of activity for refinishes, touchups, and
communications, HyStandard should assess its cost management of these activities
and attempt to lower the cost per unit without reducing the level of effectiveness.

EXERCISES
E6-19.
a. Cost per Unit
Activity Cost Pools Cost Cost Drivers of Activity
Setup costs $ 56,000  350 setups = $160
Materials handling costs 12,800  640 material moves = $ 20
Machine operating costs 240,000  20,000 machine hours = $ 12
Packing costs 60,000  1,200 packing orders = $ 50
Total indirect
manufacturing costs $368,800
b. Manufacturing overhead cost of producing metal casements:
Number of setups 20  $160 = $ 3,200

Number of material moves 80  $20 = 1,600
Number of machine hours 1,900  $12 = 22,800
Number of packing orders 150  $50 = 7,500
Total manufacturing overhead cost $35,100
Casements produced  500
Cost per casement $ 70.20
The instructor may want to ask the students to comment on the adequacy of
Merlot’s cost system (see below).
Merlot’s cost system should provide an accurate measurement of manufacturing

overhead because it recognizes the activities that go into making a product, and
it assigns cost to the product based on the cost of performing the activities used
to produce it.

E6-20.
a. Plantwide manufacturing overhead = Total manufacturing overhead
Total allocation base activity
Plantwide overhead rate

based on machine hours = $464,000 / 12,000 machine hours
= $38.67 per machine hour
b. Plantwide manufacturing overhead

rate based on direct labor hours = $464,000 / 2,000 direct labor hours
= $232 per direct labor hour
c. Milling department overhead rate

based on machine hours = $344,000/10,000 machine hours
= $34.40 per Milling Dept. machine hour
Finishing department overhead rate

based direct labor hours = $120,000/1,000 direct labor hours
= $120 per Finishing Dept. direct labor

hour
d. Milling department overhead rate

based on direct labor hours = $344,000/1,000 direct labor hours
= $344 per Milling Dept. direct labor hour
Finishing department overhead rate

based on machine hours = $120,000/2,000 machine hours
= $60 per Finishing Dept. machine hour
e. Part c. allocation rates, which use machine hours as the allocation base in the
Milling Department and direct labor hours as the allocation base in the Finishing
Department, are probably the best of the four alternatives illustrated, because
they reflect the nature of the activity in the respective departments. The
processes in the Milling Department are machine-activity intensive whereas the
Finishing Department conducts processes that are direct-labor-activity intensive.

E6-21.
a. Activity cost calculations
Setup cost: $144,000/1,000 setup hours = $144 per setup hour
Production scheduling cost: $60,000/400 batches = $150 per batch
Production engineering cost: $120,000/60 change orders = $2,000 per change
Supervision cost: $56,000/2,000 direct labor hours = $28 per direct labor hour
Machine operating cost: $84,000/12,000 machine hrs. = $7 per machine hr.
b. Job 845
Direct materials cost $ 7,000
Direct labor cost 1,000
Manufacturing overhead costs:
Setup costs (5 hours  $144) 720
Production scheduling (1 batch  $150) 150
Production engineering (3 orders  $2,000) 6,000
Supervision (40 direct labor hours  $28) 1,120
Machine operations (30 machine hours  $7) 210
Total Job 845 cost $16,200
c. Cost of Job 845 using a plantwide overhead rate based on machine hours
Job 845
Direct materials cost $7,000
Manufacturing overhead cost:
(30 machine hours  $38.67)* 1,160
*$464,000/12,000 = $38.67 per machine hour
d. Cost of Job 845 using departmental overhead rates based on machine hours in
the Milling Department and direct labor hours in the Finishing Department
Job 845
Direct materials cost $ 7,000
Manufacturing overhead cost
Milling Department (25 machine hours  $34.40) 860
Finishing Department (35 labor hours  $120) 4,200
The instructor may want to ask the students what additional data management
will need for Job 845 to adequately evaluate its price and profitability. This
problem takes into account only manufacturing costs, which are all that are
allowed to be included in product costs for financial statement purposes;
however, for managerial purposes, management will want to know what
additional costs are incurred with respect to Job 845. This will include shipping,
distribution, as well as service to the customer after the sale and delivery of the
job.
E6-22.
a. Overhead rate per direct labor dollar: $83,000  $45,000 = 1.8444 or 184.44%
Gas Charcoal
Cooker Smoker Total
Direct materials $40,000 $100,000 $140,000

Direct labor 20,000 25,000 45,000
Overhead (1.8444 × direct labor) 36,888 46,110 82,998
Total cost $96,888 $171,110 $267,998
Units 1,000 5,000
Unit cost $ 96.89 $ 34.22
b. Rate per unit of activity cost driver:

(a) (b) (a) ÷ (b)
Cost Driver
Activity Cost Cost driver Quantity Rate
Materials acquisition Direct Materials

and inspection $30,800 Cost $140,000 0.22 per DM$
Materials movement 16,200 Number of moves 100 $162 per move
Scheduling 36,000 Number of batches 60 $600 per batch
Gas Charcoal
Cooker Smoker Total
Total direct materials costs $ 40,000 $ 100,000 $140,000

Total direct labor costs 20,000 25,000 45,000
Overhead costs:
Materials acquisition
$40,000 & $100,000 @ 0.22/DM$ 8,800 22,000 30,800
Materials movement
80 & 20 @ $162/batch move 12,960 3,240 16,200
Scheduling 50 & 10 @ $600/batch 30,000 6,000 36,000
Total costs $111,760 $156,240 $268,000
Units produced 1,000 5,000
Unit cost $ 111.76 $ 31.25

E6-23.
a. The solution to (b) using activity-based costing is more accurate. If the solution
to (a) using traditional costing is followed, prices developed on the basis of costs
will be inaccurate and result in lost profits and lost profit opportunities.
In particular, the Gas Cooker, which is more complicated and produced in much
smaller batches, may be priced too low, resulting in lost revenues and profits in
the premium grill market. The Charcoal Smoker, which is less complicated and
can be produced in very large batches, may be priced too high, resulting in lost
sales and inability to compete in the discount market. Under traditional costing,
Charcoal Smokers are subsidizing the cost of Gas Cookers because part of the
cost of the Cookers is being assigned to the Smokers.
b. Subtracting product costs from revenues will yield the gross margin on the
products, but to determine the net profitability of Cookers and Smokers, the costs
incurred after the products are manufactured, for selling and distribution
activities, must be determined. Because all customer types may not be equally
profitable (due to variations in servicing demands), management may also want
to determine the profitability for the various categories of customers (e.g.,
discount stores, buying clubs, and specialty shops) that buy Smokers and
Cookers from Hickory Grill Company.
E6-24.
a. Overhead rate per direct labor hour: $204,000  8,000 DLH = $25.50
X301 Z205

Overhead ($25.50  500 hours each) 12,750 12,750
Total cost $40,250 $40,250
Units 1,000 1,000
Unit cost $40.25 $40.25
continued next page

E6-24. continued
b. Rate per unit of cost driver:
Driver
Activity Cost activity Rate
Assembly setups $ 45,000 1,500 $30/setup hour
Materials handling 15,000 300 $50/move
Assembly 120,000 12,000 $10/Assembly hr.
Maintenance 24,000 1,200 $20/maint. hr.
X301 Z205
Total direct materials costs $15,000 $ 15,000
Total direct labor costs 12,500 12,500
Overhead costs:
Assembly setup — 50 & 100 hours
@ $30 per hour 1,500 3,000
Materials handling — 25 & 50 moves
@ $50 per move 1,250 2,500
Assembly — 800 & 800 assembly hours
@ $10 per assembly hour 8,000 8,000
Maintenance — 10 & 40 maintenance
hours @ $20 per hour 200 800
Total costs $38,450 $41,800
Units produced 1,000 1,000
Unit cost $ 38.45 $ 41.80
c. In (a), X301 and Z205 had the same total manufacturing cost because they have
identical direct materials and direct labor costs, and because manufacturing
overhead is assigned based on direct labor hours, which were also identical.
However, in (b), using activity-based costing, the differences between the two
products and the activities required to produce them are reflected in the total
product costs. Z205 required more setup hours, more material moves, and more
maintenance hours than X301, thus causing Z205 to have $3.35 per unit more
cost than X301.
continued next page

E6-24. continued
d. A company like Panasonic operates in a highly competitive worldwide market
that often forces companies to price products at levels that result in very low
profit margins. In such cases, relying on product costs that include even small
errors can result in bad pricing and product mix decisions. By overcosting Model
X301 and undercosting Model Z205, the Panasonic brand manager could
possibly be promoting the sale of the wrong product, or could even be
considering dropping Model X301 because the product could not compete
profitably at the current price the market would support. An error of $1.80 per
unit could lead the company to make the wrong decision about that product. On
the other hand, Panasonic’s brand manager may have the opposite assessments
about Model Z205. The current cost under traditional costing gives the
impression that its cost is $1.55 less than its activity cost. This could cause the
manager to promote this product, which actually may not be profitable at all at
the product’s current market price.
E6-25.
a. Total overhead costs:
Setup $ 936,000
Ordering 240,000
Maintenance 1,200,000
Power 120,000
$2,496,000
Direct labor hours ÷ 60,000
Overhead cost per direct labor hour $ 41.60
Job cost calculations: Job 201 Job 202

Overhead ($41.60 × 270) and ($41.60 × 330) 11,232 13,728
$43,857 $99,978
Units produced ÷ 1,125 ÷ 915
Cost per unit $ 38.98 $109.27
continued next page

E6-25. continued
b. Calculation of activity costs:
Setup costs $936,000 ÷ 7,200 setups = $130 per setup
Ordering costs $240,000 ÷ 60,000 orders = $4 per order
Maintenance costs $1,200,000 ÷ 80,000 mach. hours = $15 per mach. hr.
Power $120,000 ÷ 600,000 kilowatt hours = $0.20 per kwh
Job cost calculations: Job 201 Job 202

Setup cost ($130 × 18) and ($130 × 22) 2,340 2,860
Ordering costs ($4 × 24) and ($4 × 45) 96 180
Maintenance costs ($15 × 540) & ($15 × 450) 8,100 6,750
Power ($0.20 × 270) and ($0.20 × 360) 54 72
Total job costs $43,215 $96,112
Units produced ÷ 1,125 ÷ 915
Cost per unit $38.41 $105.04
c. In addition to the manufacturing cost information provided by ABC, management

will need to have additional information about non-manufacturing costs, such as
distribution and customer service.
d. The findings in the above requirements could have multiple implications for High
Country Outfitters. The manager should be pleased that both Jobs 201 and 202
had ABC costs less than their costs under traditional overhead costing.
However, what this also means is that traditional costing would have to be
undercosting some other jobs. While it may be encouraging that the two jobs in
this exercise are more profitable than previously thought, it should be of serious
concern that other jobs are not as profitable as management previously thought.
A full cost analysis of all jobs should be conducted before management can
assess the full impact of failing to account for the actual activities used in
producing the jobs.

E6-26.
E6-27.
a. Dropping the two customers that have losses totaling $362,000 will not likely
cause an immediate increase in profits of $362,000 because some of those costs
are not avoidable. For example some of those costs may be fixed costs that will
continue, even if the two customers to which some of the costs are assigned
cease to be customers. In the long run, the company should be able to use
those costs to help serve new, hopefully profitable, customers, or possibly
eliminate the costs.
b. The benefit of this type analysis is that it clearly focuses management’s attention
on the fact that not all customers are equally profitable because the activities
consumed in serving customers are not equal for all customers. Without
customer profitability analysis, management may not even be aware that some
customers are unprofitable, and that the customers that produce the most sales
revenue may not be producing the most profits.

PROBLEMS
P6-28.
a. Budgeted Budgeted Cost per Unit
Cost Activity of Activity
Purchasing and materials handling $675,000  900,000 = $0.75
Setup $700,000  1,120 = $625.00
Machine operations $954,000  12,000 = $ 79.50
First unit inspection $ 50,000  1,000 = $ 50.00
Packaging $250,000  312,500 = $ 0.80
Standard Standard Specialty

Product A Product B Products
Direct materials $900,000 $600,000 $820,000
Purchasing and handling:
Product A ($0.75  400,000) 300,000
Product B ($0.75  300,000) 225,000
Specialty ($0.75  200,000) 150,000
Setup:
Product A ($625  300) 187,500
Product B ($625  160) 100,000
Specialty ($625  900) 562,500
Machine operations:
Product A ($79.50  6,000) 477,000
Product B ($79.50  3,000) 238,500
Specialty ($79.50  2,000) 159,000
First unit inspection:
Product A ($50  100) 5,000
Product B ($50  80) 4,000
Specialty ($50  600) 30,000
Packaging:
Product A ($0.80  150,000) 120,000
Product B ($0.80  100,000) 80,000
Specialty ($0.80  50,000) ________ ________ 40,000
Total $1,989,500 $1,247,500 $1,761,500
Units  150,000  100,000  50,000
Unit cost $ 13.263 $ 12.475 $ 35.23
continued next page

P6-28. continued
b. Although the unit materials cost of the specialty products is somewhat higher
than the average materials cost of the standard products, the primary cause of
the high unit cost of the specialty products is the small number of units in each
batch:
Standard Product A 150,000 units/100 batches = 1,500 units per batch

Standard Product B 100,000 units/80 batches = 1,250 units per batch
Specialty Products 50,000 units/600 batches = 83.33 units per batch
Consequently, setup costs and first unit inspection costs are averaged over a
smaller number of units.
P6-29.
Calculation of meals & residential cost per resident day:
Total cost of meals and residential space ÷ Annual resident days =
$1,642,500 ÷ 21,900 = $75 cost per day
a. Total cost of medical services ÷ Annual assistance hours = Cost per hour
$2,500,000 ÷ 90,000 = $27.78 per hour
ABC cost per resident day based on annual assistance hours

Cost per resident day (medical services cost plus food and residential cost):
Class A: $27.78 × 15,000 = $416,700 ÷ 8,760 = $47.57 + $75 = $122.57
Class B: $27.78 × 20,000 = $555,600 ÷ 6,570 = $84.57 + $75 = $159.57
Class C: $27.78 × 22,500 = $625,050 ÷ 4,380 = $142.71 + $75 = $217.71
Class D: $27.78 × 32,500 = $902,850 ÷ 2,190 = $412.26 + $75 = $487.26
b. Total cost of medical services ÷ No. of assistance contacts = Cost per contact
$2,500,000 ÷ 216,000 = $11.57
ABC cost per resident day based on number of assistance contacts

Cost per resident day (medical services cost plus food and residential cost):
Class A: $11.57 × 60,000 = $694,200 ÷ 8,760 = $79.25 + $75 = $154.25
Class B: $11.57 × 52,000 = $601,640 ÷ 6,570 = $91.57 + $75 = $166.57
Class C: $11.57 × 52,000 = $601,640 ÷ 4,380 = $137.36 + $75 = $212.36
Class D: $11.57 × 52,000 = $601,640 ÷ 2,190 = $274.72 + $75 = $349.72
continued next page

P6-29. continued
c. Under the current costing system the cost per resident day is $189.16 (or
[$2,500,000 + $1,642,500] ÷ 21,900 days) per day for all resident classifications.
While classifications C and D account for the lowest number of resident days,
they account for the largest amount of assistance hours and almost the same
amount of assistance contacts as the other classifications. The best cost driver
is the driver that has the greatest influence on cost. Intuitively, both assistance
hours and contacts would seem to influence costs; however, since much of the
cost is probably related to staff time, annual assistance hours is probably a better
cost driver.
P6-30.
a. Activity cost per unit of activity
Taking applications: $300,000 ÷ 12,000 hours = $25.00 per hour

Conducting credit investigations: $450,000 ÷ 16,500 hours = $27.27 per hour
Underwriting: $525,000 ÷ 10,000 hours = $52.50 per hour
Preparing loan packages: $200,000 ÷ 8,000 hours = $25 per hour
Closing loans: $600,000 ÷ 6,000 hours = $100 per hour
b. Loan # 5066
Taking applications ($25.00 per hour × 1.5) $ 37.50
Investigations ($27.27 per hour × 4.0) 109.08
Underwriting ($52.50 per hour × 2.50) 131.25
Loan packages ($25 per hour × 3.5) 87.50
Closing loans ($100 per hour × 1.5) 150.00
$515.33
Loan # 5429
Taking applications ($25.00 per hour × 2.75) $ 68.75
Investigations ($27.27 per hour × 3.0) 81.81
Underwriting ($52.50 per hour × 4.75) 249.38
Loan packages ($25 per hour × 3.0) 75.00
Closing loans ($100 per hour × 1.5) 150.00
$624.94
continued next page

P6-30. continued
c. Average cost per hour = $2,075,000 ÷ 52,500 = $39.52
Cost of loan #5066 ($39.52 × 13 hours) = $513.76
Cost of loan #5429 ($39.52 × 15 hours) = $592.80
d. Both loan 5066 and loan 5429 are undercosted when using average cost
compared with ABC:
Loan #5066 Loan #5429

ABC cost $515.33 $624.94
Average cost -513.76 -592.80
Difference $ 1.57 $ 32.14
Since individual jobs use different mixes of the various categories of labor, ABC
accounts for these differences; whereas, the average method does not. ABC
recognizes the unique combination of the various activities used to process each
individual loan and provides a more accurate measure of cost.

P6-31.
a. Costs assigned to machines 7 and 8: $34,100 ÷ 10 = $3,410
b. Activity costs:
Routine Maintenance
Trips Hour
Maintenance salaries ($1,800  2) $3,600.00

Cashiers' salaries:
Routine visits ($1,800  2  0.50) $1,800.00
Maintenance visits ($1,800  2  0.50) 1,800.00
Head cashier's salary and office space:
Routine visits
[($3,000 + {$2,300/2}*)  0.75] 3,112.50
Maintenance
[($3,000 + {$2,300/2})  0.25] 1,037.50
Supervisor's salary and office space:
Routine visits
[($4,000 + {$2,300/2})  0.20] 1,030.00
Supervising maintenance employees
[($4,000 +{$2,300/2})  0.80  2/5] 1,648.00
Supervising head cashier:
[($4,000 + {$2,300/2})  0.80  1/5  0.75] 618.00
[($4,000 + {$2,300/2})  0.80  1/5  0.25] 206.00
Supervising cashiers:
[($4,000 + {$2,300/2})  0.80  2/5  0.5] 824.00
[($4,000 + {$2,300/2})  0.80  2/5  0.5] 824.00
Cashiers' service vehicle 1,200.00
Maintenance service vehicle ________ 1,400.00
Total cost 8,584.50 10,515.50
Total activity  720  160
Activity cost $ 11.92 $ 65.72
*One-half office costs.
continued next page

P6-31. continued
c. Cost assignments and reassignments:
Machine 7 Machine 8
Machine lease, space rent, and utilities $1,500.00 $1,500.00
Routine trips:
(90  $11.92) 1,072.80
(120  $11.92) 1,430.40
Maintenance:
(25  $65.72) 1,643.00
(5  $65.72) ________ 328.60
Total $4,215.80 $3,259.00
d. Although determining accurate cost information is one of the primary benefits of

activity-cost systems, the greatest potential benefit is the basis it provides for
evaluating the cost-benefit of activities performed. Often, when the true cost of
an activity is determined, management will conclude that it is either not worth the
cost to continue the activity, or possibly it is more cost-effective to outsource the
activity to another organization. Calculating ABC costs is simply the first step in
activity-based management, which should be the ultimate goal of any activity-
based cost system

P6-32.
a. $705,000  27,500 = $25.64 per direct labor hour
b. Overhead cost for shafts:

$25.64  25,000 hours = $641,000  50,000 units = $12.82 per unit
Overhead cost for gears:

$25.64  2,500 hours = $64,100  10,500 units = $6.10 per unit
c. Setup activity cost based on number of production runs:

$30,000  30 runs = $1,000 per production run
Machine activity cost based on number of machine hours:

$175,000  18,750 hours = $9.33 per machine hour
Purchasing and receiving activity cost based on number of orders processed:

$210,000  140 = $1,500 per order
Engineering activity cost based on number of engineering hours:

$200,000  10,000 hours = $20 per hour
Materials handling activity cost based on number of material moves:

$90,000  90 = $1,000 per move
Activity costs of shafts and gears: Shafts Gears

Setup (10 & 20 runs @ $1,000) $ 10,000 $ 20,000
Machine (12,750 & 6,000 hours @ $9.33) 118,958 55,980
Purchasing (40 & 100 @ $1,500) 60,000 150,000
Engineering (5,000 & 5,000 @ $20) 100,000 100,000
Materials Handling (50 & 40 @ $1,000) 50,000 40,000
Total ABC overhead cost 338,958 365,980

Number of units produced 50,000 10,500
ABC manufacturing overhead per unit $6.779 $34.855
d. Using a plantwide manufacturing overhead rate of $25.64 per hour, LaMesa

assigned $12.82 of overhead cost to each shaft and $6.10 of overhead cost to
each gear. By recognizing that shafts and gears make different demands on the
activities of the manufacturing process, ABC produces an overhead cost of
$6.779 for shafts and $34.855 for gears. This shows that LaMesa is over-
assigning costs to shafts by $6.041 per unit ($12.82 – $6.779), and it is under-
assigning costs to gears by $28.755 per unit ($6.10 - $34.855). These cost
assignment errors clearly explain why the company is having difficulty competing
in the shafts market (because its product is overcosted by $6.041), and why it is
cornering the market in the gears market (because its product is undercosted by
$28.755).
P6-33.
a. Customer Customer Customer Customer Customer
#1 #2 #3 #4 #5
($ 000)
Sales $17,000 $12,000 $3,000 $4,000 $3,000
Cost of goods -13,600 -9,600 -2,400 -3,200 -2,400
Gross profit 3,400 2,400 600 800 600
Less expenses:
Sales commissions (@ 5%) 850.0 600.0 150.0 200.0 150.0
Sales visits (@1,200) 127.2 156.0 62.4 40.8 19.2
Product adjustments (@ 1,500) 34.5 54.0 15.0 9.0 7.5
Phone and other remote contacts (@ $150) 33.0 53.1 27.0 20.7 15.6
Promotion and entertainment (@ $1,500) 123.0 99.0 111.0 27.0 15.0
Corporate jet expense 19.2 28.8 4.0 0.0 4.8
Customer profitability $2,213.1 $1,409.1 $ 230.6 $502.5 $387.9
Net customer return on sales 13.02% 11.74% 7.69% 12.56% 12.93%
b. Customer Customer Customer Customer Customer

#1 #2 #3 #4 #5
($ 000)
Customer profitability (before G&A exp.) $2,213.10 $1,409.10 $230.60 $502.50 $387.90
Less G&A expense*:
17/39 × [2,500 – (19.2 + 28.8 + 4.0 + 4.8)] 1,064.98
12/39 × [2,500 – (19.2 + 28.8 + 4.0 + 4.8)] 751.75
3/39 × [2,500 – (19.2 + 28.8 + 4.0 + 4.8)] 187.94
4/39 × [2,500 – (19.2 + 28.8 + 4.0 + 4.8)] 250.58
3/39 × [2,500 – (19.2 + 28.8 + 4.0 + 4.8)] _______ _____ ______ _____ 187.95
Net customer profitability $1,148.12 $657.35 $ 42.66 $251.92 $ 199.95
Net customer return on sales 6.75% 5.48% 1.42% 6.30% 6.67%
*Corporate jet cost previously assigned to the customers is subtracted from total G&A overhead in
this calculation.
continued next page

P6-33. continued
c. The above analyses provide insight into how Roger’s Aeronautics is using its
resources to generate sales and support customers. Although all five customers
appear to be profitable before assigning corporate G&A expense, there is a wide
variance in the percentage of “customer profitability,” ranging from 13.02% to
7.69%. This difference is attributable to differences in the amount of activity
costs incurred for the benefit of the customers, because cost of goods sold (@
80%) and sales commissions (@ 5%) are the same percentages for all
customers. Although Customers #3 & #5 have the same amount of sales
revenue, there is significantly more activity cost incurred for the benefit of
Customer 3 than for Customer 5. This should provide an opportunity for
management to assess the level of activity being expended for the benefit of
customer 3, which has the lowest return-on-sales percentage.
Management should be cautioned about placing too much reliance on the “Net
Customer Profitability” calculations since G&A expenses (except for the cost of
the corporate jet assigned to the customers) are allocated based on total sales,
not based on activity incurred for the customers. There may be a temptation to
conclude that Customer 3 is barely breaking even and that the company should
consider dropping the customer. However, unless the G&A costs allocated to
Customer 3 could be eliminated, the total profits of the company would decline
from such an action. On the other hand, the net profitability numbers provide
some insight into how well the various customers are bearing what may be
regarded as their reasonable share of corporate overhead. In that sense, one
could conclude that Customer 3 is covering its share of overhead, but adding
little additional profit to the company.

MANAGEMENT APPLICATIONS
MA6-34.
a. One of the most difficult tasks in implementing an ABC system is assigning
resource costs to the activity pools. This often involves significant subjective
judgments and estimation. In this case, the vast majority of overhead costs are
related to indirect labor, and these costs should readily be assignable to the four
activity cost pools by asking each of the employees to estimate the amount of
time they spend on each activity. For the membership manager and the
controller, this should be very easy since virtually all of their time is probably
spent, respectively, on maintaining the membership roster and maintaining the
financial records. The general manager and the assistant manager will have to
depend on best estimates of the use of their time. They may want to keep a log
of time spent on the four activities for a typical month, and then use the data from
that log as a basis for estimating the allocation of their time.
Computers and information systems maintenance could also be assigned to the

activity pools in the same proportion as the allocation of indirect labor cost, or
possibly the controller could determine the amount of the computer cost that is
related to supporting the financial system, and then allocate the remainder to the
other activities in proportion to the indirect labor assigned to those activities.
Postage is probably largely related to the activity of maintaining the membership
roster and communicating with members, with some smaller amount related to
the other activities. The controller should be able to use actual data to assign
these costs to the four key activities.
b. Some possible activity cost drivers are:

Recruiting and providing orientation for new members
Number of new members recruited during the year
Number of new member recruiting packages sent out during the year
Number of existing members
Maintaining the membership roster and communicating with members
Maximum number of members approved for each category
Planning, scheduling and managing Club events
Number of events for each category of members
Number of event days for each category of members
Total cost spent on events for each category of members
Maintaining the financial records and reporting for the Club

Maximum number of members approved for each category
continued next page

MA6-34. continued
c. The remaining overhead costs not mentioned in part a. fall into the category of
“facility” level costs, and they would be difficult to assign to the activity cost pools.
Generally these types of costs are either not assigned to the cost objectives (in
this case, the membership categories), or else they are assigned based on some
relationship that the costs have to the cost objectives. Here, the best way to
assign these costs to the three membership categories is probably on the basis
of either the number of members or the number of member visits. For example,
clubhouse maintenance and depreciation, liability insurance, and security could
be assigned based on the number of members in the three categories, and
utilities could be based on the number of visits to the Club.
d. A golf and country club seems to be a reasonable situation for applying ABC.
Even though it requires considerable judgment in determining the key activities,
assigning resource costs to activity pools, and selecting activity cost drivers, it
should provide results that are more reliable on some sort of direct cost allocation
of overhead costs to the three membership categories. To ensure that the
results are perceived by the members to be fair and reasonable, Dess Rosmond
should form an implementation committee of staff, and possibly Club members.
Hiring an ABC consultant who has worked on such implementations in various
types of service organizations may also lead to more successful results.
MA6-35.
Traditional cost accounting allocated $9,800,000 of ATI's total overhead cost of
$17,500,000 to "Published Advertising" and $7,700,000 to "Online,” based on Direct
Labor Cost — 56% of which must have been incurred by "Published" and 44% by
"Online ($9.8 million/$17.5 million = 56%, and $7.7 million/$17.5 million = 44%)."
The following analysis shows that ABC results in a very different cost allocation:
$14,825,000 to Published Advertising and only $2,675,000 to Online. The first step
in the ABC analysis assigns the $17.5 million total overhead cost to the primary
process activities related to the product lines. These were given in the problem:
Selling $7,500,000
Design 3,000,000
Creative services 5,000,000
Customer services 2,000,000
continued next page

MA6-35. continued
Next, we select an activity cost driver for each activity.
Activity: Cost Driver:

Selling Salesperson days
Design Art & design hours
Creative services Subcontract hours
Customer services No. of service calls
Calculations of activity costs per cost driver unit:
Selling: $7,500,000/37,500 days = $200 per day

Design: $3,000,000/40,000 hours = $75 per hour
Creative services: $5,000,000/125,000 hours = $40 per hour
Customer service: $2,000,000/80,000 calls = $25 per call
ABC cost assignments:
Selling: Published On-Line

Publishing — 32,000 days × $200 = $6,400,000
Online — 5,500 days × $200 = $1,100,000
Design:
Publishing — 35,000 hours  $75 = 2,625,000
Online — 5,000 hours  $75 = 375,000
Creative Services:
Publishing — 100,000 hours × $40 = 4,000,000
Online — 25,000 hours × $40 = 1,000,000
Customer Service:
Publishing — 72,000 calls × $25 = 1,800,000
Online — 8,000 calls × $25 = _________ 200,000
Total ABC cost assignments 14,825,000 2,675,000

Total production units 200,000 10,000,000
ABC unit cost assignment 74.125 0.2675
Traditional indirect cost assignments 49.000 0.7700
Difference $ 25.125 $ (0.5025)
Total ABC production costs:

Published ($105 direct + $74.125 ABC) $179.125
Online ($0.50 direct + $0.2675 ABC) $0.7675
Total Traditional Production Costs:

Publishing ($105 direct + $49) $154
Online ($0.50 direct + $0.77 indirect) $1.27
continued next page

MA6-35. continued
Questions:
Should ATI give up trying to compete in the "Online" market? Probably not. Using
ABC it costs only 76.75¢ per unit and not $1.27 per unit to produce a minute of
"Online" service. If it matches Tel-a-Ad’s price of $1 per minute it will still have a
profit margin of 23.25%; whereas, if it switches to Publishing, at its current price of
$200, its profit margin only 10.44%.
Does the charge of predatory pricing seem valid? No! Predatory pricing involves
selling below cost to try to drive the competition from the market. At a price of $1
per minute, Tel-a-Ad was probably making a profit almost 25%.
Why are customers willing to pay a higher price to get publishing services? At a
price of $200 per unit, there is not likely to be a great deal of competition because it
produces a margin of only 10%, compared to almost 25% in the "online" sector of
the market. The closer the selling price is to total cost, the more likely the market
will tolerate a price increase.
Do traditional costing and ABC lead to similar conclusions? Obviously not.

Inaccurate cost data will almost always lead a manager to incorrect conclusions. Of
course, the greater the error, the greater the likelihood that the error will lead to bad
decisions.

MA6-36.
a. When product costs are calculated using ABC, the costs are first assigned to the
activities causing the costs and then to the products based on the activities they
consume. The following illustrates how the factory overhead costs are assigned.
Purchasing Department
The activity driving the purchasing department costs is the number of purchase
orders. With 100 purchase orders and costs of $6,000, the cost per purchase
order is $60. The final assignment of costs to products is then made based on
the quantity of materials used in producing each product. For example, 10,000
sq. yds. of leather were used in producing standard briefcases and 1,250 sq. yds.
(0.5  2,500) were used in producing specialty briefcases. Using these quantities
assigns 88.9 percent (10,000  11,250) of the purchasing department costs for
leather to standard briefcases and 11.1 percent (1,250  11,250) to specialty. As
shown in the following, similar calculations are used for the other materials.
Standard Specialty
Leather (20  $60  .889) $1,067 (20  $60  .111) $ 133
Fabric (30  $60  .80) 1,440 (30  $60  .20) 360
Synthetic _____ (50  $60) 3,000
$2,507 $3,493
Receiving and Inspecting Materials

The activity driving the cost of receiving and inspecting materials is the number of
deliveries. The receiving and inspection cost per delivery is $50 ($7,500/150).
As with the purchasing department costs, the cost is then assigned to the
products based on the materials used. The assignment is as follows:
Standard Specialty
Leather (30  $50  .889) $1,333 (30  $50  .111) $ 167
Fabric (40  $50  .80) 1,600 (40  $50  .20) 400
Synthetic _____ (80  $50) 4,000
$2,933 $4,567
Setting Up Production Line

The costs of setting up the production line are assigned to products based on the
time spent performing the activity. Since there were 50 setups for the standard
product and each requires one hour, a total of 50 hours relate to standard
briefcases. Similarly, the 100 setups for the specialty briefcases each required
two hours for a total of 200 hours. Thus, the cost per setup hour is $40 ($10,000
 250). This results in $2,000 (50  $40) assigned to the standard line and
$8,000 (200  $40) to the specialty line.
continued next page

MA6-36. a. continued
Inspecting Finished Goods
The costs of inspecting the final products are assigned directly to the products
based on the time spent on each product. The cost per hour is $20 ($8,000 
400). Thus, the total inspection cost for the standard briefcases is $3,000 (150 
$20) and for the specialty line, $5,000 (250  $20).
Equipment-Related Costs
Although the equipment-related costs are caused by the process rather than a
specific product, they must be allocated to determine the total costs for each
product. The cost per machine hours is $0.60 ($6,000  10,000), and the cost
assigned to each product is $3,000 (5,000  $0.60).
Plant-Related Costs
Plant related costs are also allocated on the basis of machine hours. The cost is
$1.30 ($13,000  10,000) per machine hour, and the cost assigned each product
is $6,500 (5,000  $1.30).
ABC Overhead Costs Summary

When costs are assigned to products using an ABC system, the factory overhead
costs for each product differ from those calculated using a direct labor hour
basis. The following summary shows the total manufacturing overhead assigned
to each product using activity-based costing:
Standard Specialty
Purchasing Department:
Leather $ 1,067 $ 133
Fabric 1,440 360
Synthetic _____ 3,000
2,507 3,493
Receiving & Inspecting Materials:
Leather 1,333 167
Fabric 1,600 400
Synthetic ______ 4,000
2,933 4,567
Other:
Setup activities 2,000 8,000
Inspecting final products 3,000 5,000
Machine-related costs 3,000 3,000
Plant-related costs 6,500 6,500
14,500 22,500
Total costs $19,940 $30,560
continued next page

MA6-36. continued
b. With overhead costs assigned on the basis of activities as far as practicable,
standard briefcases cost $27.99 per unit and specialty briefcases, $32.72:
Standard Specialty
Direct materials $20.00 $17.50
Direct labor 6.00 3.00
Overhead ($19,940  10,000) 1.99 ($30,560  2,500) 12.22
Total $27.99 $32.72
If these ABC costs are compared with the traditional system’s product costs, the
standard briefcase shows a lower cost while the specialty briefcase shows a
higher cost. The differences in the unit costs using the two systems are:
Product Costs
Standard Specialty
Traditional $30.49 $22.75
ABC 27.99 32.72
Difference $ 2.50 $(9.97)
Difference as a percent of traditional cost 8.20% (43.82)%
c. With ABC costing, the standard briefcase line now shows a gross profit of $2.01
($30.00 − $27.99) per unit while the specialty line shows a loss of $0.72 ($32.00
− $32.72) per unit. Thus, CarryAll is really making a profit on the product which
shows the loss using a direct labor hour basis for allocating overhead and losing
on the specialty line which appears profitable using traditional allocation
procedures. The president was correct in being concerned about the profitability
of the products, but the problem is with the specialty product line, not with the
standard line. Traditional allocation using a volume-based measure results in the
high-volume product subsidizing the low-volume product, affecting the profitability
of each. When costs are traced to products based on the activity causing the
costs, better costing data are available for evaluating the profitability of the
various products.
d. It is certainly important for CarryAll to determine that its traditional cost system
was distorting the cost of its products; and this should lead to important strategic
changes regarding the company’s product mix and efforts. However, a
potentially greater benefit is that it can now move to the next level of using ABC
to manage its activities better, and better control the cost of activities. By
measuring the cost of key activities, CarryAll can determine whether all activities
are adding value to the products and, if so, whether there may be ways to
improve its processes so that the activities can be performed more efficiently and
possibly more effectively. Alternatively, it may want to consider outsourcing
some of its key activities, if it is determined that outsourcing can lead to more
cost-effectiveness.

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The Project Gutenberg eBook of A private
chivalry
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eBook.
Title: A private chivalry

a novel
Author: Francis Lynde
Release date: February 1, 2024 [eBook #72849]
Language: English
Original publication: New York: D. Appleton and Company, 1900
Credits: D A Alexander, David E. Brown, and the Online

Distributed Proofreading Team at https://www.pgdp.net
(This book was produced from images made available
by the HathiTrust Digital Library.)
*** START OF THE PROJECT GUTENBERG EBOOK A PRIVATE

CHIVALRY ***
Appletons’
Town and Country Library
No. 291
A PRIVATE CHIVALRY
PRIVATE CHIVALRY
A NOVEL
BY
FRANCIS LYNDE
AUTHOR OF A ROMANCE IN TRANSIT,
THE HELPERS, ETC.
Acts more dangerous, but less famous

because they were but private chivalries.
Sir Philip Sidney
NEW YORK
D. APPLETON AND COMPANY
1900
Copyright, 1900,
By D. APPLETON AND COMPANY.
All rights reserved.

CONTENTS
CHAPTER PAGE
I.— The woman ... whose hands are as bands 1
II.— The vintage of Abi-Ezer 13
III.— “The wreck of the Hesperus” 23
IV.— The migrants 33
V.— The scale ascending 44
VI.— A molehill levelled 49
VII.— And a mountain upreared 55
VIII.— A blow in the dark 64
IX.— The eye to the string 72
X.— The string to the shaft 78
XI.— And the shaft to the mark 85
XII.— The way of a maid with a man 88
XIII.— “Through a glass darkly” 99
XIV.— The anchor comes home 107
XV.— When hate and fear strike hands 118
XVI.— The goodly company of misery 125
XVII.— “As apples of gold in pictures of silver” 131
XVIII.— “Let the righteous smite me friendly” 139
XIX.— The leading of the blind 149
XX.— The demoniac 159
XXI.— “A rod for the fool’s back” 166
XXII.— How the smoking flax was quenched 177
XXIII.— How Dorothy blew the embers alive 190
XXIV.— “Whoso diggeth a pit shall fall therein” 201
XXV.— “Silence is an answer to a wise man” 213
XXVI.— In the valley of the shadow 221
XXVII.— Showing how faith may out-buffet a fact 234
XXVIII.— How the judge gave of his best 243
XXIX.— In which a wilful man has his way 255
XXX.— How love and friendship threw a main 260
XXXI.— A feast of mingled cups 266
XXXII.— Such friends are exultation’s agony 276
XXXIII.— Te morituri salutamus 281
XXXIV.— The wing-beat of Azrael 290
XXXV.— The wisdom of many and the wit of one 297
XXXVI.— In which a fox doubles once too often 310
XXXVII.— The law of the Medes and Persians 321
XXXVIII.— In which darts are counted as stubble 326
A PRIVATE CHIVALRY
CHAPTER I
THE WOMAN ... WHOSE HANDS ARE AS BANDS
The lights of Silverette were beginning to prick the dusk in the valley,
and the clanging of a piano, diminished to a harmonious tinkling,
floated up the mountain on the still air of the evening. At the Jessica
workings, a thousand feet above the valley, even the clangour of a
tuneless piano had its compensations; and to one of the two men
sitting on the puncheon-floored porch of the assayer’s cabin the
minimized tinkling was remindful of care-free student ramblings in
the land of the zither. But the other had no such pleasant memories,
and he rose and relighted his cigar.
“That is my cue, Ned. I must go down and do that whereunto I have
set my hand.”
“‘Must,’ you say; that implies necessity. I don’t see it.”
“I couldn’t expect you to see or to understand the necessity; but it is
there, all the same.”
The objector was silent while one might count ten, but the silence
was not of convincement. It was rather a lack of strong words to add
to those which had gone before. And when he began again it was
only to clinch insistence with iteration.
“I say I don’t see it. There is no necessity greater than a man’s will;
and when you try to make me believe that the honour man of my
class is constrained to come down to dealing faro in a mining camp
——”
“I know, Ned; but you don’t understand. You saw the fair beginning
ten years ago, and now you are getting a glimpse of the ending. To
you, I suppose, it seems like Lucifer’s fall—a drop from heaven to
hell; and so it is in effect. But, as a matter of fact, a man doesn’t fall;
he climbs down into the pit a step at a time—and there are more
steps behind me than I can ever retrace.”
“But you can’t go on indefinitely,” insisted the other.
The fallen one shook his head. “That is a true word. But there is only
one adequate ending to such a fiasco of a life as mine.”
“And that?”
“Is a forty-five calibre bullet, well aimed.”
“Bah! That is a coward’s alternative, and if you haven’t altogether
parted company with the George Brant I used to know, we needn’t
consider it. Why don’t you turn over a clean leaf and cut the whole
despicable business?”
Brant sat down on the porch step and clasped his hands over his
knee. Friendship has its key wherewith to unlock any door of
confidence, but from disuse the lock was rusted and it yielded
reluctantly.
“I have half a mind to let the game wait while I tell you,” he said at
length. “It isn’t a pleasant tale, and if you are disgusted you can call
me down.”
“Never mind about that; go on.”
“I’ll have to go back a bit first—back to the old college days. Do you
remember the old woman who lived on the flat below the campus?
the one who used to smuggle liquor and other contraband into the
dormitories when she came to scrub?”
“Mother Harding? Yes.”
“Well, you don’t remember any good of her, I fancy—or of her
daughter. But let that pass. The year after you went to Heidelberg
the girl blossomed out into a woman between two days, and went
wrong the day after, as the daughter of such a mother was bound to.
I got it into my callow brain that I was responsible. I know better now;
I ought to have known better then; but—well, to shorten a long story,
she has managed to spoil my life for me, root and branch.”
The assayer got upon his feet and swore out of a full heart.
“Good God, Brant! You don’t mean to say that you married that
brazen——”
But Brant stopped him with a quick gesture. “Don’t call her hard
names, Ned; I shot a man once for doing that. No, I didn’t marry her;
I did a worse thing. Now you know why I can’t turn the clean leaf. Let
the blame lie where it will—and it is pretty evenly divided between us
now—I’m not cur enough to turn my back on her at this stage of the
game.”
Hobart tramped up and down the slab-floored porch, four strides and
a turn, for two full minutes before he could frame the final question.
“Where is she now, George?”
Brant’s laugh was of hardihood. “Do you hear that piano going down
there in Dick Gaynard’s dance hall? She is playing it.”
“Heavens and earth! Then she is here—in Silverette?”
“Certainly. Where else would she be?”
Hobart stopped short and flung the stump of his cigar far out down
the slope.
“Brant,” he said solemnly, “I thank God your mother is dead.”
“Amen,” said Brant softly.
There was another pause, and then Hobart spoke again. “There was
a brother, George; what became of him?”
“He went to the bad, too—the worst kind of bad. He laid hold of the
situation in the earliest stages, and bled me like a leech year in and
year out, until one day I got him at a disadvantage and choked him
off.”
“How did you manage it?”
“It was easy enough. He is an outlaw of the camps, and he has killed
his man now and then when it seemed perfectly safe to do so. But
the last time he slipped a cog in the safety wheel, and I took the
trouble to get the evidence in shape to hang him. He knows I have it,
and he’d sell his soul, if he had one, to get his fingers on the
documents. In the meantime he lets me alone.”
“He will murder you some day for safety’s sake,” Hobart suggested.
“No, he won’t. I have made him believe that his life hangs on mine;
that when I die the dogs of the law will be let loose.”
“Oh!” The assayer made another turn or two and then came to sit on
the step beside his guest. “One more question, George, and then I’ll
let up on you,” he said. “Do you love the woman?”
Brant shook his head slowly. “No, Ned; I never did; at least, not in
the way you mean. And for years now it has been a matter of simple
justice. She was bad enough in the beginning, but she is worse now,
and that is my doing. I can’t leave her to go down into the hotter
parts of the pit alone.”
For a few other minutes neither of them spoke; then Brant rose and
girded himself for the tramp down the mountain.
“I must be going,” he said. “I’m glad to have had an hour with you; it
has given me a glimpse of the old life that is like the shadow of a
great rock in a thirsty land. And I want to see more of you, if you will
let me.”
“It will be your own fault if you don’t. Have you got to go now?”
“Yes. There is a tough crowd up from Carbonado, and Gaynard will
have his hands full to-night.”
“Wait a minute till I get my overcoat, and I’ll go with you.”
Brant waited, but when Hobart reappeared he made difficulties.
“You’d better stay where you are, Ned. It’s likely there will be trouble
and a free fight; and you are new to the place.”
“New to Silverette, but not to mining camps and rough crowds,”
Hobart amended.
Brant still hesitated. “I know, but there is always the risk—the
bystander’s risk, which is usually bigger than that of the fellow with
his gun out. Besides, you have a wife——”
Hobart pushed him into the downward path.
“You don’t know Kate,” he objected. “She would drive me to it if she
were here and knew the circumstances. She knows the camps better
than either of us.”
Fifteen minutes later they entered Dick Gaynard’s dance hall
together, and the assayer loitered in the barroom while Brant edged
his way back to the alcove in the rear, where stood the faro table.
Presently Hobart saw the dealer rise and give his chair to Brant; then
the loiterer felt free to look about him.
There was nothing new or redeeming in the scene. There was the
typical perspiring crowd of rough men and tawdry women surging to
and fro, pounding the dusty floor to the time beaten out of the
discordant piano; the same flaring oil lamps and murky atmosphere
thick with tobacco smoke and reeking with the fumes of alcohol; the
same silent groups ringing the roulette boards and the faro table.
Hobart looked on, and was conscious of a little shiver of disgust—a
vicarious thrill of shame for all concerned, but chiefly for his friend.
And Brant had come to this for his daily bread! Brant, the honour
man, the athlete, the well-beloved of all who knew him!
Hobart let himself drift with the ebb and flow of those who, like
himself, were as yet only onlookers, coming to anchor when he had
found a vantage point from which he could see and study the face of
the fallen one. For all the hardening years it was not yet an evil face.
The cheeks of the man were thinner and browner than those of the
boy, and the heavy mustache hid the mouth, the feature which
changes most with the changing years; but the resolute jaw was the
same, and the steady gray eyes, though these had caught the
gambler’s trick of looking out through half-closed lids when they saw
most. On the whole the promise of youth had been kept. The
handsome boy had come to be a man good to look upon; a man
upon whom any woman might look once, and turning, look again.
The assayer was not given to profanity, but he swore softly in an
upflash of angry grief at the thought that the passing years had
marred Brant’s soul rather than his body.
None the less, it was shipwreck, hopeless and unrelieved, as Brant
had asserted; and from contemplating the effect of it in the man,
Hobart was moved to look upon the cause of it in the woman.
Perhaps there was that in her which might make the descent into the
pit less unaccountable. Hobart would see.
He worked his way slowly around two sides of the crowded room,
and so came to the piano. One glance at the performer was enough.
It revealed a woman who had once been beautiful, as the sons of
God once found the daughters of men; nay, the wreck of her was still
beautiful, but it was the soulless beauty whose appeal is to that
which is least worthy in any man. Hobart saw and understood. There
be drunkards a-many who look not upon the wine when it is red in
the cup; and Brant was of these—an inebriate of passion. The
assayer turned his back upon the woman that he might the better
make excuses for his friend.
Gaynard’s bar did a thriving business that night, and the throng in
the gambling alcove thinned out early. The dance hall was the
greater attraction, and here the din and clamour grew apace until the
raucous voice of the caller shouting the figures of the dance could no
longer be heard above the clanging of the piano, the yells and
catcalls, and the shuffling and pounding of feet on the floor. Hilarity
was as yet the keynote of all the uproar, but Hobart knew that the
ceaseless activity of the bartenders must shortly change the pitch to
the key quarrelsome, and he began to wish himself well out of it.
Brant glanced up from time to time, always without pause in the
monotonous running of the cards, and when he finally succeeded in
catching Hobart’s eye he beckoned with a nod. The assayer made
his way around to the dealer’s chair, and Brant spoke without looking
up:
“Get out of here, Ned, while you can. There will be the devil to pay
before midnight, and there is no earthly use in your being mixed up
in it.”
Hobart leaned over the table and placed a coin on one of the inlaid
cards to keep up appearances.
“I’m here with you, and I mean to stay,” he insisted. “You may need—
By Jove! it’s begun.”
The dance stopped and the clamour sank into a hush, which was
sharply rent by a blast of profanity, a jangling crash of the piano
keys, and a woman’s scream. Then the two fought their way into the
thick of the crowd around the piano. A drunken ruffian was grasping
the woman’s arm and brandishing a revolver over her head.
“You won’t play it, won’t ye? And ye’ll give Ike Gasset a piece of yer
lip? By God, I’ll show ye!”
Brant’s pistol was out before he spoke. “Drop it right where you are,
and get out of here before I kill you,” he said quietly.
The man’s reply was a snap shot in Brant’s face, and, though his aim
was bad, both Hobart and Brant felt the wind of the bullet passing
between them. The crack of the pistol was the signal for a scene a
description of which no man has ever yet been able to set down
calmly in black on white. Shouts, oaths, a mad rush for the open air
foiled by a fiercer closing in of the crowd around the piano; all this
while the ruffian levelled his weapon and fired again. At the death-
speeding instant the woman started to her feet, and the bullet
intended for Brant struck her fairly in the breast. Hobart heard the
sharp snap of the steel corset stay, and saw Brant, catching her as
she reeled, fire once, twice, thrice at the desperado. Then the
assayer lifted up his voice in a shout that dominated the tumult:
“Silverettes! Out with them—they’ve killed a woman!”
There was a fierce affray, a surging charge, and when the place was
cleared Hobart ran back. Brant was on his knees beside the woman.
The smoking oil lamps burned yellow in the powder reek, but there
was light enough to show that she was past help. None the less,
Hobart offered to go for a doctor.
Brant shook his head and rose stiffly.
“She doesn’t need one; she is dead.”
Hobart grasped the situation with far-seeing prescience.
“Then you have nothing to stay here for; let us get out while we can.”
The din of the street battle rang clamorous at the front, and he took
Brant’s arm to lead him to the door, which opened upon the alley in
the rear. “Come on,” he urged; “they will be back here presently, and
you have nothing to fight for now.”
“No.” Brant yielded as one in a trance, but at the door he broke
away, to dart back with the gray eyes aflame and fierce wrath crying
for vengeance. Unnoted of all, the wounded desperado had lain
where Brant’s fusillade had dropped him. But now he was on hands
and knees, trying to drag himself out of the room. Brant was quick,
but the assayer pinioned him before the ready weapon could flash
from its holster.
“Good God, man, that would be murder!” he panted, wrestling with
the avenger of blood, and possessing himself of the pistol. “Come on
out of this!”
Again Brant yielded, and they made their way to the open air, and
through the alleyway to the mountain path, and so in silence up to
the Jessica and to the assayer’s cabin. Not until they were safe
within the four log walls did Hobart open his mouth. But when he had
struck a light and hung a blanket over the window which looked
valleyward he spoke tersely and to the point:
“A few hours ago, George, you told me why you couldn’t turn your
back on your shame, and I had nothing to say. But now the reason is
removed, and you have had an object lesson which ought to last you
as long as you live. What do you say?”
Brant spread his hands as one helpless. “What else am I good for?”
he asked.
“That question is unworthy of you, and you know it. You have your
profession; but without that you could still do as well as another.”
Brant was still afoot, and he fought his battle to a finish, pacing
slowly back and forth with his hands behind him and his head
bowed. For all his square jaw and steadfast eyes, rash impulse had
been the bane of his life thus far, and the knowledge of it made him
slow to decide even when the decision leaned toward the things
which make for righteousness. So he fought the battle to its
conclusion, and when it was ended was fain to sit down awearied
with the stress of it.
“I am not in love with the degradation of it; I think you must know
that, Ned. All these years I’ve had a yearning for decency and clean
living and respectability that I could not strangle, do what I would. So
you will understand that I am not halting between two opinions. It is
simply this: Can a man turn over a new leaf and bury such a past as
mine without being beset by a constant fear of its resurrection?
Won’t it come up and slap him in the face about the time he thinks
he has it decently buried and covered up and out of sight?”
Hobart’s rejoinder was prompt and definitive. “No. The world is wide,
and a few years of one man’s life are no more than so many texts
written in the sand.”
“You’re wrong there, Ned. The world is fearfully small, and its
memory of evil deeds is as long as its charity is short.”
“Let be, then. You are not a woman. You are a man, and you can
fight it out and live it down.”
Brant acquiesced without more ado. “I was merely stating the case,”
he said, as if the matter were quite extraneous to him. “You have
earned the right to set the pace for me, Ned; and I’ll do whatever you
say.”
“That is more like the George Brant I used to know. And this is what I
say: I know a trail across Jack Mountain that will take us to the
railroad in three hours. The night trains pass at Carbonado, and you
will be in good time to catch whichever one of them you elect to take,
east or west. There is no station on the other side of the mountain;
but there is a side track for the Hoopoee mine, and you can build a
fire to flag the train. Have you money?”
“Yes.”
“Enough?”
“Yes; enough to try whatever experiment you suggest.”
“I don’t know that I have anything to suggest more than your own
good judgment would anticipate. Find your allotted corner of the big
vineyard and go to work in it; that’s about all there is to it.”
“How deep shall I dive?”
“You will have to decide that for yourself. You are a Western man
now, and I suppose you don’t want to go back home. How about
Denver?”
Brant shook his head slowly. “Denver is good enough—too good, in
fact. I wonder if you will understand it if I say that I’d much rather
have my forty days in the wilderness before I have to face my kind,
even as a stranger in a strange city?”
“I can understand it perfectly, and the decency of the thing does you
credit. And if that is your notion, I can help you. You used to be the
best man in the ‘Tech.’ at map making; have you forgotten how to do
it?”
“No; a man doesn’t forget his trade.”
“Good. I met Davenport at Carbonado yesterday. He was on his way
to the Colorow district to do a lot of surveying and plotting, and was
sick because he couldn’t find an assistant before he left Denver.
Shall I give you a note to him?”
“It is exactly what I should crave if I had a shadow of the right to pick
and choose.”
Hobart found pen and paper and wrote the note.
“There you are,” he said. “Davenport is a good fellow, and you
needn’t tell him more than you want to. The job will last for two or
three months, and by that time you will know better what you want to
do with yourself. Now, if you are ready, we’ll get a move. It’s a stiffish
climb to the top of the pass.”
They forthfared together and presently set their feet in the trail
leading over the shoulder of the great mountain buttressing the slope
behind the Jessica. The sounds of strife had ceased in the town
below, and but for the twinkling lights the deep valley might have
been as Nature left it. Since the upward path was rough and difficult

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Financial Managerial Accounting 6th Edition Horngren

Cornerstones of Managerial Accounting 6th Edition Mowen

Introduction to Managerial Accounting 6th Edition

Horngrens Financial and Managerial Accounting 6th

Cost Accounting A Managerial Emphasis Canadian 6th

Managerial Accounting 6th Edition Jiambalvo Test Bank

1. Activities performed to serve customer needs cost money.

Q6-2. Implementing the two-stage model requires:

©Cambridge Business Publishers, 2012

Materials movement Number of movements

Machine setup Number of setups

Inspection Number of inspections

Materials purchases Number of purchase orders

Customer service Number of customers

©Cambridge Business Publishers, 2012

Q6-8. Customers make varying demands on companies with some customers

Q6-9. Activity-Based Management (ABM) is the identification and selection of

©Cambridge Business Publishers, 2012

1. Open cargo hatch.

Cost of instruction per student $337.50 $562.50

©Cambridge Business Publishers, 2012

©Cambridge Business Publishers, 2012

©Cambridge Business Publishers, 2012

Product costs: C23 Cams U2 Shafts

Direct materials $30,000 $20,000

Direct materials $350,000 $150,000

Cost per gallon $ 7.67 $ 5.68

©Cambridge Business Publishers, 2012

Total support costs 34,200 21,300 21,620

Customer profits $ 65,800 $ 78,700 $ 78,380

©Cambridge Business Publishers, 2012

b. Manufacturing overhead cost of producing metal casements:

Number of setups 20  $160 = $ 3,200

Merlot’s cost system should provide an accurate measurement of manufacturing

©Cambridge Business Publishers, 2012

Plantwide overhead rate

= $38.67 per machine hour

b. Plantwide manufacturing overhead

= $232 per direct labor hour

c. Milling department overhead rate

= $34.40 per Milling Dept. machine hour

Finishing department overhead rate

= $120 per Finishing Dept. direct labor

d. Milling department overhead rate

= $344 per Milling Dept. direct labor hour

Finishing department overhead rate

= $60 per Finishing Dept. machine hour

©Cambridge Business Publishers, 2012

Direct materials $40,000 $100,000 $140,000

b. Rate per unit of activity cost driver:

Materials acquisition Direct Materials

Materials movement 16,200 Number of moves 100 $162 per move

Scheduling 36,000 Number of batches 60 $600 per batch

Total direct materials costs $ 40,000 $ 100,000 $140,000

©Cambridge Business Publishers, 2012