Outdoors Unlimited operates a fishing lodge in northern Canada. The following cost information has been developed by
Question:
Outdoors Unlimited operates a fishing lodge in northern Canada. The following cost information has been developed by the company’s accountant:
Fixed costs:
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$68,000
Mortgage payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,000
Variable costs (per guest):
Fishing tackle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20
Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1. In planning for its 2010 summer season, Outdoors Unlimited does not know exactly how many guests to expect and, hence, how much to charge per guest. Prepare a flexible budget showing expected total costs at 200, 300, 400, and 500 guests.
2. Assume that Outdoors Unlimited conservatively estimates 300 guests for the year. If it wants to earn profits of $100,000 for the 300 guests, how much should it charge per guest?
Step by Step Answer:
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain