Accounting Exam 2
Farnsworth Drycleaners has capacity to clean up to 7,500 garments per month. 1. Complete the schedule below for the three volumes shown.
4500 6000 7500 Garments. Garments Garments TVC (3,150) (4,200) (5250) TFC (14,400). 14,400 (14,400) TOC (17,550) (18,600). (19,650) VCPU. (0.70) (0.70) (0.70) FCPU (3.20) 2.40 (1.92) ACPU (3.90) (3.10) (2.62)
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 5. If the plant manager uses the cost equation to predict total costs, what would the forecast be for 1,500 mailboxes?
The total cost is $33,702
60,000 units. 90,000 units Cost A $75,000 $75,000 Cost B $120,000 $180,000 Cost C $65,000 $80,000 Total Costs $260,000 $335,000 Cost B is a _______________ cost.
variable
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 3. Write Rollins Mailbox's cost equation.
y= 9x+20202
The following data pertain to costs at Upside Company: Total fixed costs $320,000 Total variable costs $76,000 Production level. 24,000 units The variable cost per unit is
$3.17
The Willowick Ice Cream Shoppe sold 8,700 servings of ice cream during June for $3 per serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs the shop $12 and has enough ice cream to fill 30 ice cream cones. The shop purchases the ice cream cones for $0.25 each from a local warehouse club. Located in an outdoor mall, the rent for the shop space is $1,600 per month. The shop expenses $200 a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional $2,600 of other operating expenses (75% of these were fixed costs). 1. Prepare The Willowick Ice Cream Shoppe's June
1. Prepare The Willowick Ice Cream Shoppe's June income statement using a traditional format. The Willowick Ice Cream Shop Income Statement For the Month Ended June 30 Sales Revenue 26,100 Less: COGS 5,655 Gross Profit 20,445 Less: Operating Expenses Lease Expense 1,600 Depreciation Expense 200 Other Operating Expenses 2,600 Operating Income 16,045
The Willowick Ice Cream Shoppe sold 8,700 servings of ice cream during June for $3 per serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs the shop $12 and has enough ice cream to fill 30 ice cream cones. The shop purchases the ice cream cones for $0.25 each from a local warehouse club. Located in an outdoor mall, the rent for the shop space is $1,600 per month. The shop expenses $200 a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional $2,600 of other operating expenses (75% of these were fixed costs). 2. Prepare The Willowick Ice Cream Shoppe's June income statement using a contribution margin format.
2. Prepare The Willowick Ice Cream Shoppe's June income statement using a contribution margin format. The Willowick Ice Cream Shop Income Statement For the Month Ended June 30 Sales Revenue 26,100 Less: Variable expenses Cost of goods sold 5,655 Other variable operating expenses. 650 Contribution margin 19,795 Less: Fixed expenses Lease expense 1,600 Depreciation expense 200 Other fixed operating expenses 1,950 Operating income 16,045
Farnsworth Drycleaners has capacity to clean up to 7,500 garments per month. 3. Suppose the owner, Dustin Farnsworth, erroneously uses the average cost per unit at full capacity to predict total costs at a volume of 4,500 garments. Would he overestimate or underestimate his total costs? By how much?
He would underestimate his costs by 5760
Farnsworth Drycleaners has capacity to clean up to 7,500 garments per month. 2. Why does the average cost per garment change?
The average cost per garment changes as volume changes, due to the (fixed) component of the dry cleaner's costs. The (fixed) cost per unit decreases as volume (increases), while the variable cost per unit (remains constant)
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 6. What is the dollar difference between your answers to Questions 4 and 5? Which approach to forecasting costs is appropriate? Why?
The plant manager's forecast would be ($1443) too high if he/she uses the (average cost per unit) to predict costs. The (average cost per unit) is based on a mixed cost that will change as volume changes. If the manager uses this method, he/she is erroneously assuming that the (average cost per unit) does not change at different volumes. The manager should use the (cost equation) to predict costs since it correctly takes into account the variable and fixed components of producing mailboxes.
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 4. If the plant manager uses the average cost per unit to predict total costs, what would the forecast be for 1,500 mailboxes?
The total cost is $35,145
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 1. What is the total cost of producing 1,400 mailboxes?
The total cost of producing 1,400 mailboxes is $32,802
Rollins Mailbox produces decorative mailboxes. Thecompany's average cost per unit is $23.43 when it produces 1,400 mailboxes. 2. If $20,202 of the total costs are fixed, what is the variable cost of producing each mailbox?
The variable cost per unit is 9
Melody Leigh, owner of Broadway Floral, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Leigh wants to set the delivery fee based on the distance driven to deliver the flowers. Leigh wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past sevenmonths: Month. Miles Driven Van Operating Costs January 15,500 $5,390 February 17,400 $5,280 March 15,400 $4,960 April 16,300 $5,340 May 16,500 $5,450 June 15,200 $5,230 July 14,400 $4,680 Use the high-low method to determine Broadway Floral's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles.
a. Let's begin by determining the formula that is used to calculate the variable cost (slope). - Change in Cost / Change in Volume b. Now determine the formula that is used to calculate the fixed cost component. - Total Operating Costs - Total Variable Costs c. Use the high-low method to determine Broadway Floral's operating cost equation. - y=0.20x +1800 - (5280-4680)/(17,400-14,400) = 0.2 - 5280=17,400(0.20) + f - f=1800 d. Use the operating cost equation you determined above to predict van operating costs at a volume of 16,500 miles. - $5,100
