Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Dana Rand owns a catering company that prepares banquets and parties for both individual and business functions throughout the year. Rand's business is seasonal, with
Dana Rand owns a catering company that prepares banquets and parties for both individual and business functions throughout the year. Rand's business is seasonal, with a heavy schedule during the summer months and the year-end holidays and a light schedule at other times. During peak periods, there are extra costs; however, even during nonpeak periods Rand must work more to cover her expenses. One of the major events Rand's customers request is a cocktail party. She offers a standard cocktail party and has developed the following cost structure on a per-person basis. Food and beverages Labor (0.6 hr. @ $11 per hour) Overhead (0.6 hr. @ $13 per hour) Total cost per person $ 13.00 6.60 7.80 $27.40 When bidding on cocktail parties, Rand adds a 15 percent markup to this cost structure as a profit margin. Rand is quite certain about her estimates of the prime costs but is not as comfortable with the overhead estimate. This estimate was based on the actual data for the past 12 months presented in the following table. These data indicate that overhead expenses vary with the direct-labor hours expended. The $13 estimate was determined by dividing total overhead expended for the 12 months ($756,000) by total labor hours (57,600) and rounding to the nearest dollar. Month January February March April May June July August September October November December Total Labor Hours 6,600 5,300 4,000 7,400 5,600 3,700 4,200 2,300 2,800 6,400 5,600 3,700 57,600 Overhead Expenses $ 81,000 42,000 57,000 64,000 68,000 70,000 76,000 69,000 54,000 76,000 52,000 47,000 $ 756,000 Rand recently attended a meeting of the local chamber of commerce and heard a business consultant discuss regression analysis and its business applications. After the meeting, Rand decided to do a regression analysis of the overhead data she had collected. The following results were obtained. 54,000 Intercept (a) metent bl Coefficient (b) Required: 2. Using data from the regression analysis, develop the following cost estimates per person for a cocktail party. Assume that the level of activity remains within the relevant range. 3. Dana Rand has been asked to prepare a bid for a 210-person cocktail party to be given next month. Determine the minimum bid price that Rand should be willing to submit. 4. What other factors should Dana Rand consider in developing the bid price for the cocktail party? Required 2 Required 3 Required 4 Using data from the regression analysis, devel level of activity remains within the relevant ra a. Variable cost per person b. Absorption (full) cost per person Required 2 Required 3 Required 4 Dana Rand has been asked to prepare a bic bid price that Rand should be willing to sub Minimum bid price Required 2 Required 3 Required 4 What other factors should Dana Rand consider in developing the bid price for the cocktail part
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started