Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel Chapters Objectives Canto The purpose of this integrated exercise is to demonstrate the interrelationship between cost estimation techniques and subsequent use of cost information. In particular, this exercise Hustrates how the variable and fixed cost information estimated from a high low analysis can be used in a single and multiple product CVP analysis Using the High-Low Method to Estimate Variable and Fixed Costs Located on Swiftcurrent Lake in Glacier National Park, Mary Glacier Hotel was built in 1915 by the Great Northern Railway, in an effort to supplement its lodging revenue, the hotel decided in 2003 to begin manufacturing and selling small wooden canons decorated with symbols hand painted by Native Americans living near the park. Due to the great success of the canoes, the hotel began manufacturing and selling paddles as well in 2006. Many hotel guests purchase a cance and paddles for use in self guided tours of Switcurrent take. Because production of the two products began in different years, the cances and paddles are produced in separate production facilities and employ different laborers Each canoe sells for 5500, and each paddle sells for $50. A 2006 fire destroyed the hotel's accounting records. However, a new system put into place before the 2007 season provides the following aggre- gated data for the hotel's cance and paddle manufacturing and marketing activities Manufacturing Data Number of cances Manufactured Total Cance Manufacturing Costs Number of Paddles Manufactured Year 2012 250 275 2011 Total Paddle Manufacturing Costs S8.500 9000 42000 45.500 56.000 66.500 $106.000 115 000 100 000 122.000 130 000 2010 2008 Number of Canoes Sold Total Cancel Marketing Costs Year Number of Paddles Sold Total Paddle Marketing Costs - MG-7612.09 NG-760 Year Marketing Date: Number of Year Canoes Sold 2012 250 2011 2010 Total Canoe Mariating Costs $45,000 47.500 44,000 51,000 55,000 60,000 Number of Paddles Sold 900 1.200 1,000 1,100 1,400 1,700 Total Paddle Marketing Costs $ 7,500 9,000 2012 2011 2010 2009 2009 2007 8,000 2009 2008 2007 8,500 10,000 11,500 Required: 1. High-Low Cost Estimation Method a. Use the high low method to estimate the per unit variable costs and total fed 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 fi.e.,single-product setting) b. The paddle product line only G.e.,single-product setting) 3. Cost Volume-Profit Analysis, Multiple Product Setting The hotel's accounting system data show an average sales mix of approximately 300 canoes and 1,200 paddles each season. Significantly more paddles are sold relative to canoes because some inexperienced canoe guests accidentally break one or more paddles, while other guests purchase additional paddles as presents for friends and relatives. In addition, for this multiple product CVP analysis, assume the existence of an additional $30,000 of common fixed costs for a customer service hotline used for both cance and paddle customers. Use CVP analysis to calculate the break-even point in units for both the cance and paddle product lines combined G. the multiple-product setting) Cost Classification Classify the manufacturing costs, marketing costs, and customer service hotline costs either as production expenses or period expenses b. For the period expenses, further classify into other song expenses or general and administrative expenses Sensitivity Cost Volume-Profit Analysis and Production Versus Period Expenses, Multiple Product Setting If both the variable and fixed production est to your answer to Requirement t o ated with the cance product line increased by 55 beyond the estimate from the high-low analys is how many canoes and paddles would need to be sold in order to com a target income of m/webapps/blackboard/content/listContent.jsp?course id=1128980 1&content id= 1887235 18 Required 1. High-Low Cost Estimation Method Use the high low method to estimate the p unt valable costs and feed for the canoe product line . U the glow method to the parent costs and tol d costs for the padidle product line 2. Cost-Volume-Profit Analysis, Single Product Setting Use CVP analysis to calculate the break even point in units for . The cance product line only a single product setting) The paddle product line only s ingle producting 3. Cost-Volume-Profit Analysis, Multiple Product Setting The hotel's accounting system data show an average les mix of approximately 300 cances and 1.200 paddles each season. Significantly more paddles are sold relative to cances because some inexperienced cance guests accidentally break one or more paddles, while other guests purchase additional paddles as presents for friends and relatives. In addition, for this multiple product CVP analysis, assume the existence of an additional 530,000 of common fixed costs for a customer service hotline used for both cance and paddle customers. Use CVP analysis to calculate the break-even point in units for both the cance and paddle product lines combined fie, the multiple product setting Cost Classification . Classify the manufacturing costs, marketing costs, and customer service hotline costs either as production expenses or period expenses b. For the period expenses, further classify them into either selling expenses or general and administrative expenses 5 Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Expenses, Multiple Product Setting of both the variable and fed production expenses refer to your answer to Requirement 1) associ ated with the canoe product line increased by 5% beyond the estimate from the high-low analy. sid, how many cances and paddles would need to be sold in order to eam a target income of 596,000? Assume the same sales mix and additional food costs as in Requirement Margin of Safety Calculate the hotel's margin of safety both in units and in sales dollars) for Mary Glacier Hotel assuming the same facts as in Requirement 3. aridit sells 700 canoes and 2.500 paddles next year IMG-7611.jpg IMG-7613.jpg IMG-7612.jpg