CUSTOM COST ACCOUNTING 15E
15th Edition
ISBN: 9781269831338
Author: Horngren
Publisher: PEARSON C
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Chapter 3, Problem 3.39P
CVP, target operating income, service firm. Spotted Turtle provides daycare for children Mondays through Fridays. Its monthly variable costs per child are as follows:
| Lunch and snacks | $130 |
| Educational supplies | 75 |
| Other supplies (paper products, toiletries, etc.) | 35 |
| Total | $240 |
Monthly fixed costs consist of the following:
| Rent | $2,100 |
| Utilities | 400 |
| Insurance | 250 |
| Salaries | 1,400 |
| Miscellaneous | 650 |
| Total | $4,800 |
Spotted Turtle charges each parent $640 per child per month.
- 1. Calculate the breakeven point.
Required
- 2. Spotted Turtle’s target operating income is $10,800 per month. Compute the number of children who must be enrolled to achieve the target operating income.
- 3. Spotted Turtle lost its lease and had to move to another building. Monthly rent for the new building is $3,500. In addition, at the suggestion of parents, Spotted Turtle plans to take children on field trips. Monthly costs of the field trips are $2,500. By how much should Spotted Turtle increase fees per child to meet the target operating income of $10,800 per month, assuming the same number of children as in requirement 2?
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Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows:
CostSchedule
:
Variable Costs:
Lunch & snacks
$1,000
Education Supplies
750
Other supplies (toiletries etc.)
250
$2,000
Fixed Costs:
Rent
$20,000
Utilities
3,000
Insurance
3,000
Salaries
30,000
Miscellaneous
4,000
$60,000
Assume that Tiny Tots target operating income is $156,000 per month. Calculate the number of children that must be enrolled for this goal to be realized. Is this a realistic goal?
Tiny Tots lost its lease and had to move to another building. Monthly rental for the new building is $28,000. At the suggestion of the parents, Tiny Tots plans to take the children on outings. Monthly cost for the outing is $10,000. By how much should…
Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows:
CostSchedule
:
Variable Costs:
Lunch & snacks
$1,000
Education Supplies
750
Other supplies (toiletries etc.)
250
$2,000
Fixed Costs:
Rent
$20,000
Utilities
3,000
Insurance
3,000
Salaries
30,000
Miscellaneous
4,000
$60,000
Required:
a) Compute the charge per child, using the equation method.
b) What is the contribution per child? What is the contribution margin ratio?
c) Calculate Tiny Tot’s break-even point in number of children and in sales dollars.
d) Calculate the margin of safety in number of children and sales dollars.
e) Given the expected enrolment of 50 children, prepare a contribution margin…
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The monthly fixed costs to run this business are given below:
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Chapter 3 Solutions
CUSTOM COST ACCOUNTING 15E
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
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