Integrative Exercise Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel Using the High-Low Method to Estimate Variable and Fixed Costs Located on Swiftcurrent Lake in Glacier National Park, Many Glacier Hotel was built in 1915 by the Great Northern Railway. In an effort to supplement its lodging revenue, the hotel decided in 20x1 to begin manufacturing and selling small wooden canoes 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 20x3. Many hotel guests purchase a canoe and paddles for use in self-guided tours of Swiftcurrent Lake. Because production of the two products began in different years, the canoes and paddles are produced in separate production facilities and employ different laborers. Each canoe sells for $500, and each paddle sells for $50. A 20x3 fire destroyed the hotel's accounting records. However, a new system put into place before the 20x4 season provides the following aggregated data for the hotel's canoe and paddle manufacturing and marketing activities: Manufacturing Data: Number of Total Canoe Number of Total Paddle Canoes Manufacturing Paddles Manufacturing Year Manufactured Costs Year Manufactured Costs 20x9 250 $103,000 20x9 900 $38,500 20X8 275 128,000 20X8 1,200 49,000 20x7 240 108,000 20X7 1,000 44,000 20X6 310 114,000 20X6 1,100 45,500 20x5 350 141,500 20X5 1,400 52,000 20X4 400 140,000 20X4 1,700 66,500 Marketing Data: Number of Total Canoe Canoes Sold Marketing Costs Number of Total Paddle Paddles Marketing Year Sold Costs Year 20x9 250 $45,000 20x9 900 $7,500 20X8 275 43,000 20X8 1,200 9,000 20X7 240 44,000 20X7 1,000 8,000 20X6 310 51,000 20X6 1,100 8,500 20X5 350 62,000 20X5 1,400 10,000 20X4 400 60,000 20X4 1,700 11,500 Required: 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. Variable cost per unit 300 Total fixed cost 80,000 b. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the paddle product line. Variable cost per unit 40 Total fixed cost 10,000 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 400 canoes 5. Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Costs, Multiple- Product Setting If both the variable and fixed production costs (refer to your answer to Requirement 1) associated with the canoe product line increased by 5% (beyond the estimate from the high-low analysis), how many canoes and paddles would need to be sold in order to earn a target income of $96,000? Assume the same sales mix and additional fixed costs as in Requirement 3. Canoe target income units 978 X canoes Paddle target income units 3,911 X paddles 6. Margin of Safety Calculate the hotel'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 sells 700 canoes and 2,500 paddles next year. 700 total MOS units above total BE units 125,000 MOS in sales dollars Integrative Exercise Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel Using the High-Low Method to Estimate Variable and Fixed Costs Located on Swiftcurrent Lake in Glacier National Park, Many Glacier Hotel was built in 1915 by the Great Northern Railway. In an effort to supplement its lodging revenue, the hotel decided in 20x1 to begin manufacturing and selling small wooden canoes 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 20x3. Many hotel guests purchase a canoe and paddles for use in self-guided tours of Swiftcurrent Lake. Because production of the two products began in different years, the canoes and paddles are produced in separate production facilities and employ different laborers. Each canoe sells for $500, and each paddle sells for $50. A 20x3 fire destroyed the hotel's accounting records. However, a new system put into place before the 20x4 season provides the following aggregated data for the hotel's canoe and paddle manufacturing and marketing activities: Manufacturing Data: Number of Total Canoe Number of Total Paddle Canoes Manufacturing Paddles Manufacturing Year Manufactured Costs Year Manufactured Costs 20x9 250 $103,000 20x9 900 $38,500 20X8 275 128,000 20X8 1,200 49,000 20x7 240 108,000 20X7 1,000 44,000 20X6 310 114,000 20X6 1,100 45,500 20x5 350 141,500 20X5 1,400 52,000 20X4 400 140,000 20X4 1,700 66,500 Marketing Data: Number of Total Canoe Canoes Sold Marketing Costs Number of Total Paddle Paddles Marketing Year Sold Costs Year 20x9 250 $45,000 20x9 900 $7,500 20X8 275 43,000 20X8 1,200 9,000 20X7 240 44,000 20X7 1,000 8,000 20X6 310 51,000 20X6 1,100 8,500 20X5 350 62,000 20X5 1,400 10,000 20X4 400 60,000 20X4 1,700 11,500 Required: 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. Variable cost per unit 300 Total fixed cost 80,000 b. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the paddle product line. Variable cost per unit 40 Total fixed cost 10,000 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 400 canoes 5. Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Costs, Multiple- Product Setting If both the variable and fixed production costs (refer to your answer to Requirement 1) associated with the canoe product line increased by 5% (beyond the estimate from the high-low analysis), how many canoes and paddles would need to be sold in order to earn a target income of $96,000? Assume the same sales mix and additional fixed costs as in Requirement 3. Canoe target income units 978 X canoes Paddle target income units 3,911 X paddles 6. Margin of Safety Calculate the hotel'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 sells 700 canoes and 2,500 paddles next year. 700 total MOS units above total BE units 125,000 MOS in sales dollars