.494px;=”” block;=”” baseline;=”” 14px;=”” sans-serif;=”” arial,=”” helvetica,=”” neue”,=”” “helvetica=”” web”,=”” grot=”” “haas=”” inherit;=”” 6px;=”” 0px=”” border-box;=””>Exercise 4-7 Scattergraph
Reef Office Supplies is interested in estimating the relationship between customer service costs
and sales. The following data are available: Month May
June
July
August
September Customer
Service
Cost $9,740
$10,100
$10,690
$12,750
$13,830 Sales $170,000
$210,000
$230,000
$255,000
$275,000 Required
a. Prepare a scattergraph of customer service cost (vertical axis) and sales (horizontal axis). b. Comment on whether there appears to be a linear relation between cost and sales and whether
any of the observations appear to be outliers. Exercise 4-12 CVP Analysis, Profit Equation
Lake Stevens Marina has estimated that fixed costs per month are
variable cost per dollar of sales is
$0.30 . $350,000 Required
a. What is the break-even point per month in sales dollars?
Selling price per dollar of sales
Variable cost per dollar of sales
Contribution margin per dollar of sales
Break-even point = $ 350,000 ÷ 0.30 (1-0.30) b. What level of sales is needed for a monthly profit of
Sales required = 350000+70000) ÷ (1-0.30) c. For the month of July, the marina anticipates sales of
expected level of profit?
Expected profit = 1000000*(1-0.30) ? $ 350,000 = $70,000
= $ 500,000 ?
$ 600,000 $1,000,000 . What is the = $ 350,000 and Problem 4-6 Account Analysis, High-Low, Contribution Margin
Information on occupancy and costs at the Light House Hotel for April, May, and June are indicated
below:
Occupancy
Day manager salary
Night manager salary
Cleaning staff
Depreciation
Complimentary continental breakfast:
food and beverages
Total April
1,700
$4,500
3,900
15,960
12,500 May
1,850
$4,500
3,900
16,275
12,500 June
1,950
$4,500
3,900
16,590
12,500 5,050 5,205 5,225 $41,910 $42,380 $42,715 Required
a. Calculate the fixed costs per month and the variable cost per occupied room using account
analysis for April.
Fixed costs per month (April data):
Day manager salary
$4,500
night manager salary
3,900
depreciation
12,500
$20,900
Variable costs per room (April data):
Cleaning Staff
$15,960
complimentary continental breakfast:food & beverage
5,050
21,010
Number of rooms
Variable costs per room 1,700
$12.36 b. Calculate the fixed costs per month and the variable cost per occupied room using the high-low
method.
Variable cost per room =
Fixed costs per month =
$41,900 $805
250
? $1,700 = $3.22 = $36,810 21,815-21,010/250=3.22 c. Average rates per room are
$120
per night. What is the contribution margin per
occupied room? In answering this question, use your variable cost estimate from Part b.
Contribution margin per room:
$120.00
? $3.22 = $116.78 Problem 4-9 High-Low, Profit Equation
Crux, Inc. produces amplifiers. Each unit sells for
on production/sales and costs for 2016:
Production
and
Sales in
Units Production
Costs $900 Selling and
Admin. Costs January
February
March
April
May
June
July
August 105
117
97
106
115
125
128
132 $88,860
97,600
83,007
89,600
96,200
103,500
105,670
108,550 $23,570
25,200
22,495
23,720
24,950
26,250
26,690
27,200 September
October
November
December 138
126
124
108 112,978
104,200
102,750
91,050 28,030
26,400
26,150
23,990 1,421 $1,183,965 $304,645 $833.19141 $214.38776 Total Average cost per unit . Below is information Required
a. Use the high-low method to identify the fixed and variable cost components for both
production costs and selling and administrative costs.
Production costs:
Variable cost per unit = $29,971
= $731.00 $100,878 = = $135.00 $18,630 = 41
Fixed costs per month =
$112,978 ? Selling and administrative costs:
Variable cost per unit =
$5,535
41
Fixed costs per month =
$28,030 ? b. The company estimates that production and sales in 2017 will be
Based on this estimate, forecast income before taxes for 2017. $12,100 $9,400 1,650 units. Total Units in 2017=1650
Average Cost per unit= 214
Selling and admin cost=165 Average Production cost per
Total Production cost= 1650 Sales
Less production costs:
Variable
Fixed
Less selling and administrative costs:
Variable
Fixed
Income (loss) Total Units in 2017=1650
Average Cost per unit= 214
Selling and admin cost=165 Average Production cost per
Total Production cost= 1650 Total Sales= 1650*900 = $ Total income before tax =(1
1374765.83
=
1373765.83
= Problem 4-13 Multiproduct, Contribution Margin Ratio
ComputerGuard offers computer consulting, training, and repair services. For the most recent fiscal
year, profit was $328,100, as follows:
Consulting Training
Repair
Total
$ 600,000 $ 525,000 $ 375,000 $ 1,500,000 Sales
Less variable costs:
Salaries
Supplies/parts
Other
Contribution margin
Less common fixed costs:
Rent
Owner’s salary
Utilities
Other
Profit $ 300,000
210,000
225,000
24,000
39,000
75,000
1,200
2,700
5,000
274,800 $ 273,300 $ 70,000 735,000
138,000
8,900
618,100
55,000
212,000
13,000
10,000
$ 328,100 Required
a. Linda O’Flaherty, the owner of ComputerGuard, believes that in the coming year, she can
increase sales by 15 percent. Assuming the current mix of services, what will be the percentage
15%
increase in profit associated with a
increase in sales?
Weighted-average contribution margin ratio =
=
Increase in sales =
Increase in sales
Weighted-average contribution margin ratio
Dollar increase in profit
Percentage increase in profit
Why will profit increase at a greater percent than sales? b. If Linda were to focus on the contribution margin per unit (rather than the contribution margin
ratio), what would be a likely unit of service?