Answered: John (Head of New York's Golf Club) has…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 1CE: The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:...

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Question

John (Head of New York's Golf Club) has given you the following per unit estimates going into his second year of operation (beginning May 1,2021) for his only product at this point; the Duffer Club:

Direct material: $94

Direct labour: $31

Variable overhead: $7.72

Selling price: $168

Tax rate: 20%

Monthly fixed costs: $12.67 ($38,000 total fixed costs)

Practical capacity and current production level: 3,000 units

A) Calculate New York's Club monthly break-even sales of the Duffer Club in both units and dollars (round to nearest dollar and next unit)

B) If New York Golf Club's strategy is to just break-even for the near future, how many additional Duffer clubs (units) above the current break-even point would need to be sold each month if the company wishes to increase their currently budgeted advertising costs by $12,000 per month. Assume no changes to the selling price or to any of Duffmeister'svariable costs given above.

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