Cont Behavior and Cost-volume-Profit Analysis for Many Clacier Hotel Uaing the High-tow Method to Estimate Variable and Fixed Costs Located on Swifturtent Lake in Glader National Park, Many Glacier Hoted was bult in 1915 by the Great Northern fallway. To supplenent its lodging revenue, the hotel dedded to begia manufacturing and selling small wooden canoes decorated wath symbols hand painted by Native Amerkans living near the park. The canoes were a great success, so a couple of vears later the hotel began manufacturing and selling paddes. Many hotel guests purchase a canoe and paddies for use in self-guided tours of Swiftcurrent Lake. Because production of the two products began in different years, the cances and paddles are produced in separate production faclities and employ different laborers. Each canoe sells for $540, and each paddie sells for s60. About 15 years ago, a fire destroyed the hotel's accounting records. A nea system put inte place before the neet season provides the following aggregated data for the hotel's cance and paddie manufactueing and marketing activities (Years 1 through 12 give the data for the years in which the new accounting system was active): 89101112430450470480500132,000146,100155,000136,000167,000891011121,8501,9002,0202,0502,20071,75072,00078,90078,20084,000 Manufacturing Data 1. High-Low Cost Estimation Method a. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the canoe product line. b. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the paddle product line. 2. Cost-Volume-Profit Analysis, Single-Product Setting Use CVP analysis to calculate the break-even point in units for a. The canoe product line only (i.e., single-product setting) BE units canoes b. The paddle product line only (1.e., single-product setting) BE units paddles The hotel's accounting svitem data show an average sales mix of approximately 300 canoes and 1,200 paddles each season. 5 ilgnificantly more paddles are sold relative to canees because some inexperienced canoe guests acoldentally break one or more paddles, whle other guests purchase additional paddles as presents for friends and rebatives. In addition, for this mulifiple product CVP analysis, assume there is an additional $28,000 of common fixed costs for a customer service hotline used for both cance and paddle customeri. Use CVP analrsis to caloulate the break even point is units for both the canoe and paddle product lines combined (i.e., the multiple-product settieg). Canoe is ourits cances Paddie be units 4. Cout Clasification a. Clasify the manufacturing costs, maarketing costs, and customer service hotline costs either as production coots or period costs. Al manulactuine costs are costs. Ali ratkebne costs and custemer hotline costs are costs b. For the period costs, further dassily them inte either seling expenses or general and adirinitrative eupenass: Marketing costs are seling eriented; therefore, the marketing period cosh would be further dassified as C Cutomer hotline costs relate to the custamer service section of the yalue chain and would be further dasified as 5. Sensitivity Cost-volume-profit Analysis and Production Verwe Period Costs. Moltiole- Product setting If both the variable and fixed production conts (refer to vour arower to Requirement 1) associated aith the canoe product line increaseil by 5 . (herond the estimate from the high- low analysis), hiow many canoes and paddles would need to be sold in order to eam a target income of 596,0007 Assume the same cales mix and additional fired costs as in Requiremant x. Canoe target income unias: canoes Paddie target inceene units 6. Marola of sarety (mos) Calculate the hotef's margin of safety (both in units and in sales dollars) for Many Glacier Hotel, assuming the same facts as in Requirement 3 , and assuming that it seils 650 canoes and 2,400 paddies next year. The total Mos units equal The Mos in sales dollars equals 1
