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1. BUS 630 Week 3 DQ 1 Fixed Labor
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Far North Telecom, Ltd., of Ontario, has organized a
new division to manufacture and sell specialty
cellular telephones. The division’s monthly costs
are shown in the table below. Far North Telecom
regards all of its workers as full-time employees
and the company has a long-standing no layoff
policy. Furthermore, production is highly
automated. Accordingly, the company includes its
labor costs in its fixed manufacturing overhead.
The cellular phones sell for $150 each. During
September, the first month of operations, the
following activity was recorded: 12,000 units
produced, 10,000 units sold. Comment on the five

2. questions below the table. Respond to at least two
of your fellow students’ postings.
Manufacturing costs:
Variable costs per
unit:
Direct Materials $48
Variable
manufacturing
overhead
$2
Fixed manufacturing
overhead costs (total)
$360,000
Selling and
administration costs:
Variable
12% of
sales
Fixed (total) $470,000
a. Compute the unit product cost under:
i. absorption costing
ii. variable costing

3. b. Prepare an absorption costing income statement
for September
c. Prepare a contribution format income statement
for September using variable costing.
d. Assume that the company must obtain
additional financing in order to continue
operations. As a member of top management,
would you prefer to rely n the statement in (b)
above or in (3) above when meeting with a group of
prospective investors?
e. Reconcile the absorption costing and variable
costing net operating incomes in (2) and (3) above.
Complete the following exercise (Research and
Application 7-20) and submit to your instructor.
The questions in this exercise are based on JetBlue
Airways Corporation. To answer the questions, you
will need to download JetBlue’s 10-K/A for the year
ended December 31, 2004 (10K/A with a filing date
of March 8, 2005). You do not need to print the 10-
K/A to answer the questions.
Required:

4. • What is JetBlue’s strategy for success in the
marketplace? Does the company rely primarily on
a customer intimacy, operational excellence, or
product leadership customer value proposition?
What evidence supports your conclusion?
• What business risks does JetBlue face that may
threaten the company’s ability to satisfy
stockholder expectations? What are some
examples of control activities that the company
could use to reduce these risks? (Hint: Focus on
pages 17-23 of the 10-K/A.)
• How can the concept of unit-level activities be
applies to an airline? More specifically, what are
two examples of unit-level activities for JetBlue?
What steps has JetBlue taken to manage these
unit-level activities more efficiently?
• How can the concept of batch-level activities be
applied to an airline? What are two examples of
batch-level activities for JetBlue? What steps has
JetBlue taken to manage these batch-level activities
more efficiently?
• What is one example of a customer-level
activity and an organization-sustaining activity for
JetBlue?

5. Noreen, E. W., Brewer, P. B., Garrison R. H. (2011).
Managerial accounting for managers (2nd ed.).
New York, NY: McGraw Hill. ISBN: 978-0-07-
352713-0.

6. Noreen, E. W., Brewer, P. B., Garrison R. H. (2011).
Managerial accounting for managers (2nd ed.).
New York, NY: McGraw Hill. ISBN: 978-0-07-
352713-0.