High-Low Method for a Service CompanyBoston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costsThe activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the milesmoved.Transportation CostsGross-Ton MilesJanuary$1,324,700294,000February1,476,900329,000March1,043,800213,000April1,416,000318,000May1,187,600256,000June1,522,600346,000Determine the variable cost per gross-ton mile and the fixed cost.Variable cost (Round to two decimal places.)%$4per gross-ton mileTotal fixed costCheck My Work 4 more Check My Work uses remaining.PreviousNextAll work saved.Email InstructorSave and ExitSubmit Assignment for Gra%24%24

High low method: Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8E

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Variable costing income statement for a service company East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows: Operating statistics from the management information system reveal the following for April: A. Prepare a contribution margin by route report for East Coast Railroad Company for the month of April. Compute the contribution margin ratio in whole percents, rounded to one decimal place. B. Evaluate the route performance of the railroad using the report in (A).
Cost Classification Loring Company incurred the following costs last year: Required: 1. Classify each of the costs using the following table format. Be sure to total the amounts in each column. Example: Direct materials, 216,000. 2. What was the total product cost for last year? 3. What was the total period cost for last year? 4. If 30,000 units were produced last year, what was the unit product cost?
Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and variable costs for the current year are as follows: Bolgers total fixed costs aggregate to 360,000. Bolgers labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10-per-unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, the break-even point would: a. decrease by 1,000 units. b. decrease by 125 units. c. increase by 375 units. d. increase by 500 units.
Western Trucking operates a fleet of delivery trucks. The fixed expenses to operate the fleet are $79,900 in March and rose to $93,120 in April. It costs Western Trucking $0.15 per mile in variable costs. In March, the delivery trucks were driven a total of 85,000 miles, and in April,. they were driven a total of 96,000 miles. Using this information, answer the following: A. What were the total costs to operate the fleet in March and April, respectively? B. What were the cost per mile to operate the fleet in March and April, respectively?
Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by 300,000. b. Overall operating income will increase by 2,600. c. Overall operating income will decrease by 25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by 27,600.
Segment variable costing income statement and effect on operating income of change in operations Valdespin Company manufactures three sizes of camping tentssmall (S), medium (M), and large (L). The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by 46,080 and 32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of 34,560 for the rental of additional warehouse space would yield an additional 130% in Size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M. The sales and costs have been relatively stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended June 30, 20Y9, is as follows: Instructions 1. Prepare an income statement for the past year in the variable costing format. Use the following headings: Data for each size should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin, as reported in the Total column, to determine operating income. 2. Based on the income statement prepared in (1) and the other data presented, determine the amount by which total annual operating income would be reduced below its present level if Proposal 2 is accepted. 3. Prepare an income statement in the variable costing format, indicating the projected annual operating income if Proposal 3 is accepted. Use the following headings: Data for each style should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin as reported in the Total column. For purposes of this problem, the expenditure of 34,560 for the rental of additional warehouse space can be added to the fixed operating expenses. 4. By how much would total annual operating income increase above its present level if Proposal 3 is accepted? Explain.
High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $669,600 243,000 February 746,500 272,000 March 527,600 176,000 April 715,700 263,000 May 600,300 212,000 June 769,600 286,000 Determine the variable cost per gross-ton mile and the fixed cost. Variable cost (Round to two decimal places.) $fill in the blank 1 per gross-ton mile Total fixed cost $fill in the blank 2
High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $999,000 347,000 February 1,113,900 388,000 March 787,200 251,000 April 1,067,900 375,000 May 895,700 302,000 June 1,148,300 408,000 Determine the variable cost per gross-ton mile and the total fixed cost. Variable cost (Round to two decimal places.) $fill in the blank 1 per gross-ton mile Total fixed cost $fill in the blank 2
High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved.
High-Low Method for a Service Company Continental Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Continental Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $831,600 369000 February 927,200 412000 March 655,300 267000 April 889,000 399,000 May 745,600 321,000 June 955,900 434,000 Determine the variable cost per gross-ton mile and the total fixed cost. Variable cost (Round to two decimal places.) $____ per gross-ton mile Total fixed cost $____
High-Low Method for Service Company Miss River Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Miss River Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $1,346,500 347,000 February 1,501,300 388,000 March 1,061,000 251,000 April 1,439,400 375,000 May 1,207,200 302,000 June 1,547,700 408,000 Determine the variable cost per gross-ton mile and the fixed cost. Round variable cost per unit to the nearest cent. Variable cost $fill in the blank 1 per gross-ton mile Fixed cost $fill in the blank 2

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