Concept explainers
Working with More Than One Cost Driver
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports−the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 50 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:
For example, administrative expenses should be 53.270 per month plus S15 per course plus 54 per student. The companys sales should average 5800 per student.
The company planned to run three courses with a total of 45 students: however, it actually ran three courses with a total of only 42 students. The actual operating results for September appear below:
cRequired:
1. Using Exhibit 9-2 as your guide, prepare the company’s planning budget for September.
2. Using Exhibit 9-5 as your guide. prepare the company’s flexible budget for September.
3. Calculate the revenue and spending variances for September. (Hint: Refer to Exhibit 9−6.)
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Chapter 9 Solutions
INTRO MGRL ACCT LL W CONNECT
- Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost Refer to the information for Pizza Vesuvio on the previous page. Coefficients shown by a regression program for Pizza Vesuvios data are: Required: Use the results of regression to make the following calculations: 1. Calculate the fixed cost of labor and the variable rate per employee hour. 2. Construct the cost formula for total labor cost. 3. Calculate the budgeted cost for next month, assuming that 675 employee hours are budgeted. (Note: Round answers to the nearest dollar.) Use the following information for Brief Exercises 3-17 through 3-20: Pizza Vesuvio makes specialty pizzas. Data for the past 8 months were collected:arrow_forwardAlyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 88 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $ 6,400 $ 478.00 $ 3.20 Advertising $ 2,600 Administrative costs $ 5,000 $ 32.00 $ 1.50 Insurance $ 3,300 For example, vessel operating costs should be $6,400 per month plus $478.00 per cruise plus $3.20 per passenger. The company’s sales should average $35.00 per passenger. In July, the company provided 51 cruises for a total of 3,000 passengers. Required: Prepare the company’s flexible budget for…arrow_forwardAlyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 85 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $ 6,400 $ 478.00 $ 3.50 Advertising $ 2,900 Administrative costs $ 5,100 $ 40.00 $ 1.50 Insurance $ 3,600 For example, vessel operating costs should be $6,400 per month plus $478.00 per cruise plus $3.50 per passenger. The company’s sales should average $32.00 per passenger. In July, the company provided 58 cruises for a total of 3,150 passengers. Required: Prepare…arrow_forward
- Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 81 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $ 6,300 $ 478.00 $ 3.40 Advertising $ 2,700 Administrative costs $ 5,500 $ 33.00 $ 1.50 Insurance $ 3,800 For example, vessel operating costs should be $6,300 per month plus $478.00 per cruise plus $3.40 per passenger. The company’s sales should average $29.00 per passenger. In July, the company provided 59 cruises for a total of 3,100 passengers. Required: Prepare…arrow_forwardAlyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers-the number of cruises and the number of passengers-that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 85 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month $ 6,100 $ 2,400 $ 5,300 $ 3,900 Cost per Cruise $ 472.00 Cost per Passenger $ 3.30 Vessel operating costs Advertising Administrative costs $ 38.00 $ 1.50 Insurance For example, vessel operating costs should be $6,100 per month plus $472.00 per cruise plus $3.30 per passenger. The company's sales should average $30.00 per passenger. In July, the company provided 60 cruises for a total of 3,050 passengers. Required: Prepare the company's flexible budget for July. Alyeski Tours Flexible…arrow_forwardAlyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers-the number of cruises and the number of passengers-that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 86 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month $ 6,400 $ 2,500 $ 5,600 $ 3,300 Cost per Cruise $ 480.00 Cost per Passenger $ 3.30 Vessel operating costs Advertising Administrative costs $ 38.00 $ 1.50 Insurance For example, vessel operating costs should be $6,400 per month plus $480.00 per cruise plus $3.30 per passenger. The company's sales should average $30.00 per passenger. In July, the company provided 58 cruises for a total of 3,200 passengers. Required: Prepare the company's flexible budget for July. Alyeski Tours Flexible…arrow_forward
- Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers-the number of cruises and the number of passengers-that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 90 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $6,700 $ 476.00 $3.30 Advertising $ 3,000 Administrative costs $5,100 $ 32.00 $ 1.50 Insurance $3,700 For example, vessel operating costs should be $6,700 per month plus $476.00 per cruise plus $3.30 per passenger. The company's sales should average $34.00 per passenger. In July, the company provided 56 cruises for a total of 3,050 passengers. Required: Prepare the company's flexible budget for July.arrow_forwardAngie March owns a catering company that stages banquets and parties for both individuals and companies. The business is seasonal, with heavy demand during the summer months and year-end holidays and light demand at other times. Angle has gathered the following cost information from the past year: A.) Identify the high and low points (Activity level) $ High Low Using the high-low method, compute the overhead cost per labor hour and the fixed overhead cost per month. (Round variable cost to 2 decimal places, eg. 15.25 and fixed cost 5 O decimal places, e.g. 5,275.) Variable cost = $________ per labor hour. Fixed cost=$____________ B.) Angie has booked 4,200 labor hours for the coming month. How much overhead should she expect to incur? Total Cost =$______ C.) If Angie books one more catering job for the month, requiring 350 labor hours. how much additional overhead should she expect to incur? Additional…arrow_forwardChandler Packaged Treats (CPT) sells a specialty pet food to pet stores. CPT management prides itself on its scientific management methods. Applying those methods, the controller estimates the following monthly costs based on 10,000 units (produced and sold): Direct material Direct labor Manufacturing overhead Selling, general, and administrative Total Required: a. Compute CPT's unit selling price that will yield a profit of $200,000, given sales of 10,000 units. b. What dollar sales does CPT need to achieve to generate a 15 percent profit on sales, assuming variable costs per unit are 55 percent of the selling price per unit and fixed costs are $188,100. c. Management believes that a selling price of $100.00 per unit is reasonable given current market conditions. How many units must CPT sell to generate the revenues (dollar sales) determined in requirement (b)? Total Annual Costs (10,000 units) $ 128,000 60,000 132,000 100,000 $ 420,000 Complete this question by entering your answers…arrow_forward
- Ritner Corporation manufactures a product that has the following costs: Per Unit $ 22. 30 Per Year Direct materials Direct labor $ 13. 80 Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 2. 20 $449,600 $ 1.60 $591,700 The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calcuiations are based on budgeted production and sales of 29,100 units per year. The company has invested $360,100 in this product and expects a return on investment of 9%. Required: b. Compute the selling price of the product using the absorption costing approach. (Round your intermediate and final answer to 2 decimal places.) a Markup percentage on absorption cost b Selling pricearrow_forwardAlyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier, Management has identified two cost drivers-the number of cruises and the number of passengers-that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special salings I if there is sufficient demand. Up to 82 passengers can be accommodated on the tour boat. Data concerning the company's cost formulas appear below: Fixed Cost per Month Cost per Cruise Cost per Passenger Vessel operating costs $ 6, 600 S 473.00 $ 3.00 Advertising S 3,000 Administrative costs $ 6,000 S 37.00 $ 1.50 Insurance S-3,300 For example, vessel operating costs should be $6, 600 per month plus $473.00 per cruise plus $3.00 per passenger. The company's sales should average $32.00 per passenger. In July, the company provided 50 cruises for a total of 3, 050 passengers. Required: Prepare the company's flexible budget for July.arrow_forwardA new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $132.00 per unit. The company requires a profit of 0.20 of selling price. How much is the target cost per unit? Round to two decimal places.arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
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