costs and the total contribution margin for the company. E21-23 Using variable costing, service company Herman's Helpers provides locksmith services. One type of service call is to evalu- ate private residences for security concerns and make recommendations for a safety plan. Use the data below to determine the company's total contribution margin, contribution margin per service call, and contribution margin ratio when 50 service calls are made in the month of June. Service Revenue $ 100 per service call Variable Costs 35 per service call Fixed Costs 2,000 per month

costs and the total contribution margin for the company. E21-23 Using variable costing, service company Herman's Helpers provides locksmith services. One type of service call is to evalu- ate private residences for security concerns and make recommendations for a safety plan. Use the data below to determine the company's total contribution margin, contribution margin per service call, and contribution margin ratio when 50 service calls are made in the month of June. Service Revenue $ 100 per service call Variable Costs 35 per service call Fixed Costs 2,000 per month

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 3CE: Health-Temp Company is a placement agency for temporary nurses. It serves hospitals and clinics...

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A company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950
Lising Therapy has a physical therapist who performs electro-mechanical treatments for its patients. During April, Lising had the following cost and output information: Required: 1. Calculate the cost per treatment for April. 2. Calculate the cost of services sold for April. 3. What if Lising found a way to reduce overhead costs by 20 percent? How would this affect the profit per treatment?
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
A local picnic table manufacturer has budgeted the following overhead costs: They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown: Recent success has yielded an order for 1,500 tables. Determine how much the job would cost given the following activities, and assuming an hourly rate for direct labor of $25 per hour:
Health-Temp Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Health-Temp Company believes it will place temporary nurses for a total of 23,500 hours next year. Health-Temp charges the hospitals and clinics 90 per hour and has variable costs of 75.60 per hour (this includes the payment to the nurse). Total fixed costs equal 321,000. Required: 1. Calculate the contribution margin per unit and the contribution margin ratio. 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 100,000. 4. What if Health-Temp had target operating income (profit) of 110,000? Would sales revenue be larger or smaller than the one calculated in Requirement 3? Why? By how much?
Identifying Fixed, Variable, Mixed, and Step Costs Consider each of the following independent situations: a. A computer service agreement in which a company pays 150 per month and 15 per hour of technical time b. Fuel cost of the companys fleet of motor vehicles c. The cost of beer for a bar d. The cost of computer printers and copiers at your college e. Rent for a dental office f. The salary of a receptionist in a law firm g. The wages of counter help in a fast-food restaurant h. The salaries of dental hygienists in a three-dentist office. One hygienist can take care of 120 cleanings per month. i. Electricity cost which includes a 15 per month billing charge and an additional amount depending on the number of kilowatt-hours used Required: 1. For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost. (Hint: First, consider what the driver or output measure is. If additional assumptions are necessary to support your cost type decision, be sure to write them down.) Example: Raw materials used in productionVariable cost 2. CONCEPTUAL CONNECTION Change your assumption(s) for each situation so that the cost type changes to a different cost type. List the new cost type and the changed assumption(s) that gave rise to it. Example: Raw materials used in production. Changed assumptionthe materials are difficult to obtain, and a years worth must be contracted for in advance. Now, this is a fixed cost. (This is the case with diamond sales by DeBeers Inc. to its sightholders. See the following website for information: www.keyguide.net/sightholders/.)
A local picnic table manufacturer has budgeted these overhead costs: They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown: Recent success has yielded an order for 1,000 tables. Assume direct labor costs per hour of $20. Determine how much the job would cost given the following activities:
Using variable costing, service company Henry’s Helpers provides locksmith services. One type of service call is to evaluate private residences for security concerns and make recommendations for Safety plan. Use the data below to determine the company’s total contribution margin, contribution margin per service call, and contribution margin ratio when 220 service calls are made in the month of June.
Spruce−Up Company provides cleaning services to commercial and residential customers. The commercial business segment provided services to 290 customers and the residential business segment provided services to 645 customers. Commercial Residential Total Service Revenue $93,000 $123,000 $216,000 Variable Costs 26,000 49,000 75,000 Fixed Costs 47,000 53,000 100,000 Operating Income $20,000 $21,000 $41,000 Identify the segment with the lower contribution margin ratio and show the amount of its contribution margin ratio. (Round your answer to two decimals.) A. Residential, 60.16% B. Residential, 39.84% C. Commercial, 21.51% D. Commercial, 44.96%
Harmon Recycling Services (HRS), a not-for-profit organization, has two drop-off centers, Westside and Eastside. The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product profits. More detailed financial information for HRS follows: Eastside Westside Total Clients 25,000 6,250 31,250 Revenues $ 270,000 $ 180,000 $ 450,000 Staff hours 8,100 2,700 10,800 Staff costs $ 99,000 $ 81,000 $ 180,000 General operating costs: User-related $ 135,000 Staff-related 135,000 Total general operating costs $ 270,000 The company plans to use Clients to allocate user-related costs and Staff Costs to allocate staff-related costs. Required: Compute the predetermined overhead rate used to apply the two general operating costs pools to the two centers (Eastside and Westside) assuming HRS uses the proposed two-stage cost system to allocate general operating costs. Based on the rates computed in…
Using variable costing, service company Divine Pool Cleaning Service provides pool cleaning services to residential customers. The company has three employees, each assigned to specific customers The company considers each employee’s territory as a business segment The company incurs variable costs that include the employees’ wages, pool chemicals, and gas for the service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of August: Requirements Calculate the contribution margin ratio for each business Segment. The business segments had the following number of customers Byson, 80; Moore, 50; and Freeman, 110. Compute the service revenue per customer variable cost per customer, and contribution margin per customer for each business segment. Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the company in the long term?
Cost BehaviorSmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Over-head cost = $543,000 + $1.34X, where X equals number of smokers. Last year, SmokeCity pro-duced 20,000 smokers. Actual overhead costs for the year were as expected. Required:1. What is the driver for the overhead activity?2. What is the total overhead cost incurred by SmokeCity last year?3. What is the total fixed overhead cost incurred by SmokeCity last year?4. What is the total variable overhead cost incurred by SmokeCity last year?5. What is the overhead cost per unit produced?6. What is the fixed overhead cost per unit?7. What is the variable overhead cost per unit?8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 unitsand (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.