Contribution Margin Per call
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- A manufacturing plant wishes to buy a new equipment so the purchasing department did some research different types of this equipment. In the monthly meeting, the purchasing department presented a report about the two types of equipment that they have found. Pertinent data follows: If the minimum required rate of return is 19%,Johnson Filtration. Inc., provides maintenance service for water filtration systems throughout southern Florida. Customers contact Johnson with requests for maintenance service on their water filtration systems. To estimate the service time and the service cost. Johnson’s managers want to predict the repair time necessary for each maintenance request. Hence, repair time in hours is the dependent variable. Repair time is believed to be related to three factors: the number of months since the last maintenance service, the type of repair problem (mechanical or electrical), and the repairperson who performs the repair (Donna Newton or Bob Jones). Data for a sample of 10 service calls are reported in the following table: Develop the simple linear regression equation to predict repair time given the number of months since the last maintenance service, and use the results to test the hypothesis that no relationship exists between repair time and the number of months since the last maintenance service at the 0.05 level of significance. What is the interpretation of this relationship? What does the coefficient of determination tell you about this model? Using the simple linear regression model developed in part (a), calculate the predicted repair time and residual for each of the 10 repairs in the data. Sort the data in ascending order by value of the residual. Do you see any pattern in the residuals for the two types of repair? Do you see any pattern in the residuals for the two repairpersons? Do these results suggest any potential modifications to your simple linear regression model? Now create a scatter chart with months since last service on the x-axis and repair time in hours on the y-axis for which the points representing electrical and mechanical repairs are shown in different shapes and/or colors. Create a similar scatter chart of months since last service and repair time in hours for which the points representing repairs by Bob Jones and Donna Newton are shown in different shapes and/or colors. Do these charts and the results of your residual analysis suggest the same potential modifications to your simple linear regression model? Create a new dummy variable that is equal to zero if the type of repair is mechanical and one if the type of repair is electrical. Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service and the type of repair. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Create a new dummy variable that is equal to zero if the repairperson is Bob Jones and one if the repairperson is Donna Newton. Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service and the repairperson. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service, the type of repair, and the repairperson. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Which of these models would you use? Why?Ventana Window and Wall Treatments Company provides draperies, shades, and various window treatments. Ventana works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Ventanas income statement for last year is as follows: Ventana wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year. Required: 1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round the percentage to two significant digits.) 2. A customer orders draperies and shades for a remodeling job. The job will have the following costs: What is the price that Ventana will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.) 3. What if Ventana wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round the percentage to two significant digits.) What is the bid price Ventana will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.)
- Haysbert Company provides management services for apartments and rental units. In general, Haysbert packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, and collecting monthly rent and remitting it to the owner. The complete package adds maintenance of units and bookkeeping to the basic package. Packages are priced on a per-rental unit basis. Actual results from last year are as follows: Haysbert had budgeted the following amounts: Required: 1. Calculate the contribution margin variance. 2. Calculate the contribution margin volume variance. 3. Calculate the sales mix variance.The Northwest regional manager of Logan Outdoor Equipment Company has conducted a study to determine how her store managers are allocating their time. A study was undertaken over three weeks that collected the following data related to the percentage of time each store manager spent on the tasks of attending required meetings, preparing business reports, customer interaction, and being idle. The results of the data collection appear in the following table: a. Create a stacked-bar chart with locations along the vertical axis. Reformat the bar chart to best display these data by adding axis labels, a chart title, and so on. b. Create a clustered-bar chart with locations along the vertical axis and clusters of tasks. Reformat the bar chart to best display these data by adding axis labels, a chart title, and the like. c. Create multiple bar charts in which each location becomes a single bar chart showing the percentage of time spent on tasks. Reformat the bar charts to best display these data by adding axis labels, a chart title, and so forth. d. Which form of bar chart (stacked, clustered, or multiple) is preferable for these data? Why? e. What can we infer about the differences among how store managers are allocating their time at the different locations?Assume you are the manager for the semi-trucks division at the Speedy Delivery Company. The semi-truck division is a cost center and you are reviewing the driver overtime costs for the previous year, shown here: A. Microsoft Excel or another spreadsheet application, create a line chart with markers showing the driver overtime expense. Describe your observations. B. Knowing that safety is important in your industry and weather plays a significant role in the safety of drivers, you decide to talk with the safety manager and obtained the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the average snowfall and non-company highway accidents. Describe your observations and actions you might consider.
- Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?Assume you are the leather department manager at the Famous Football Factory. The leather department is a cost center and you are reviewing the scrap costs for the previous year, shown here: A. Using Microsoft Excel or another spreadsheet application, create a line chart with markers showing the leather scrap expense. Describe your observations. B. Knowing that leather is susceptible to indoor temperature, you decide to talk with the maintenance manager and obtain the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the indoor temperature, spare parts inventory, and breakdowns. Describe your observations and actions you might consider.You are a management accountant for Time Treasures Company, whose company has recently signed an outsourcing agreement with Spotless. Inc., a janitorial service company. Spotless will provide all of Time Treasures janitorial services, including sweeping floors, hauling trash, washing windows, stocking restrooms, and performing minor repairs. Time Treasures will be billed at an hourly rate based on the type of service performed. The work of common laborers (sweeping, hauling trash) is to be billed at $8 per hour. More skilled (repairs) and more dangerous work (washing outside windows on the 23rd floor) are to be billed at $18 per hour. Supervisory time is to be billed at $20 per hour. Spotless will submit monthly invoices, which will show the number and types of hours for which Time Treasures is being charged. The outsourcing contract is simple and straightforward. A. What are some of the internal control problems you foresee as a result of our sourcing the janitorial service with this contract? B. Explain recommendations to control risk that would you suggest after reviewing the contract.
- Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Required: 1. Calculate the prime cost per cleaning. 2. Calculate the conversion cost per cleaning. 3. Calculate the total variable cost per cleaning. 4. Calculate the total service cost per cleaning. 5. What if rent on the office that Jean and Tom use to run HHH increased by 1,500? Explain the impact on the following: a. Prime cost per cleaning b. Conversion cost per cleaning c. Total variable cost per cleaning d. Total service cost per cleaningGreenLawns provides a lawn fertilizing and weed control service. The company is adding a special aeration treatment as a low-cost extra service option that it hopes will help attract new customers. Management is planning to promote this new service in two media: radio and direct-mail advertising. A media budget of 3,000 is available for this promotional campaign. Based on past experience in promoting its other services, GreenLawns has obtained the following estimate of the relationship between sales and the amount spent on promotion in these two media: S=2R210M28RM+18R+34M, where S = total sales in thousands of dollars R = thousands of dollars spent on radio advertising M = thousands of dollars spent on direct-mail advertising GreenLawns would like to develop a promotional strategy that will lead to maximum sales subject to the restriction provided by the media budget. a. What is the value of sales if 2,000 is spent on radio advertising and 1,000 is spent on direct-mail advertising? b. Formulate an optimization problem that can be solved to maximize sales subject to the media budget of spending no more than 3,000 on total advertising. c. Determine the optimal amount to spend on radio and direct-mail advertising. How much in sales will be generated?Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity: Required: Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity. For non-value-added activities, indicate why they are non-value-added.
