Please answer my homework questions
WHEN ANSWERING THE FOLLOWING QUESTIONS SHOW THE EQUATION/CALCULATIONS USED TO FIND EACH ANSWER 1. The Empire Hotel is a four-star hotel located in downtown Seattle. Required: For each of the following costs incurred at the Empire Hotel, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object. Cost Cost Object Direct cost/Indirect cost Ex. Room service beverages A particular hotel guest Direct cost 1. The salary of the head chef The hotel's restaurant 2. The salary of the head chef A particular restaurant customer 3. Room cleaning supplies 4. Flowers for the reception desk 5. The wages of the doorman 6. Room cleaning supplies 7. Fire insurance on the hotel building The hotel's gym 8. Towels used in the gym Direct A particular hotel guest A particular hotel guest A particular hotel guest The housecleaning department The hotel's gym Please fill out as a direct or indirect cost 2. The Sorrento Hotel is a four-star hotel located in downtown Seattle. The hotel's operations vice president would like to replace the hotel's antiquated computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, would consume less power than the old computer terminals, and would provide additional security since they can only be viewed from a restrictive angle. The new computer displays would not require any new wiring. The hotel's chef believes the funds would be better spent on a new bulk freezer for the kitchen. Required: Classify each item as a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel displays. If none of the categories apply for a particular item, select "None" Item Ex. Cost of electricity to run terminals Differential Cost 1. Cost of the new flat panel displays ? 2. Cost of the old computer terminals ? 3. Rent on the space occupied by the registration desk ? 4. Wages of registration desk personel ? 5. Benefits from a new freezer ? 6. Costs of mainataining the old computer terminals ? 7. Cost of removing the old computer terminals? 8. Cost of existing registration desk wiring ? 3. Several years ago Medex Company purchased a small building adjacent to its manufacturing plant in order to have room for expansion when needed. Since the company had no immediate need for the extra space, the building was rented out to another company for rental revenue of $40,000 per year. The renter's lease will expire next month, and rather than renewing the lease, Medex Company has decided to use the building itself to manufacture a new product. Direct materials cost for the new product will total $40 per unit. It will be necessary to hire a supervisor to oversee production. Her salary will be $2,500 per month. Workers will be hired to manufacture the new product, with direct labor cost amounting to $18 per unit. Manufacturing operations will occupy all of the building space, so it will be necessary to rent space in a warehouse nearby in order to store finished units of product. The rental cost will be $1,000 per month. In addition, the company will need to rent equipment for use in producing the new product; the rental cost will be $3,000 per month. The company will continue to depreciate the building on a straight-line basis, as in past years. Depreciation on the building is $10,000 per year. Advertising costs for the new product will total $50,000 per year. Costs of shipping the new product to customers will be $10 per unit. Electrical costs of operating machines will be $2 per unit. To have funds to purchase materials, meet payrolls, and so forth, the company will have to liquidate some temporary investments. These investments are presently yielding a return of $6,000 per year.. Required: For each of the costs associated with the new product decision, indicate whether it would be variable or fixed. If it is a product cost, indicate whether it would be direct materials, direct labor or a manufacturing overhead cost. If it is not a product cost, indicate whether it is a period, opportunity or a sunk cost. Select "None" if none of the categories apply for a particular item. NOTE: Opportunity cost is a special category, and to avoid confusion, do not attempt to classify the cost in any other way except as an opportunity cost. Please fill out the cost behavior, product cost classification, and non product cost classificatioin for each element on the left Name of the Cost Cost Behavior Product Cost Classification Non-product Cost Classification Rental revenue forgone, $40,000 per year ? ? ? Direct materials cost, $40 per unit ? ? ? Supervisor's salary, $2,500 per month ? ? ? Direct labor cost, $18 per unit ? ? ? Rental cost of warehouse, $1,000 per month ? ? ? Rental cost of equipment, $3,000 per month ? ? ? Cost Behavior Product Cost Classification Non-product Cost Classification Depreciation of the building, $10,000 per year Advertising cost, $50,000 per year ? ? ? ? ? ? Shipping cost, $10 per unit ? ? ? Electrical costs, $2 per unit ? ? ? Return earned on investments, $6,000 per year ? ? ? 4. Haaki Shop, Inc., is a large retailer of surfboards. The company assembled the information shown below for the quarter ended May 31: Amount Total sales revenue $ 800,000 Selling price per surfboard $ 400 Variable selling expense per surfboard $ 50 Variable administrative expense per surfboard $ 20 Total fixed selling expense $ 150,000 Total fixed administrative expense $ 120,000 Merchandise inventory, beginning balance $ 80,000 Merchandise inventory, ending balance $ 100,000 Merchandise purchases $ 320,000 Required: 1. Prepare a traditional income statement for the quarter ended May 31. Haaki Sop, Inc Traditional Income statement (selling and administrative expenses included) 2. Prepare a contribution format income statement for the quarter ended May 31 Haaki Shop, Inc. Contribution Format Income Statement (Variable expenses included) with fixed expenses as well 3. What was the contribution toward fixed expenses and profits for each surfboard sold during the quarter? Contribution of each surfboard was ?- 5. Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company's cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 cents per mile. Required: 1.& 2. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the "Variable cost per mile" to 3 decimal places.) Miles Driven Total Annual Cost High level of activity Low level of activity Change Variable cost per mile Fixed cost per year 0$ 0 per unit Required: 6. Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company's revenues and expenses (in British pounds) for the last three months are given below: Frankel Ltd. Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units 3,000 3,750 4,500 Sales revenue 420, 000 525,000 630,000 Cost of goods sold 168,000 210,000 252,000 Gross margin 252,000 315,000 378,000 Selling and administrative expenses: Shipping expense 44,000 50,000 56,000 Advertising expense 70,000 70,000 70,000 Salaries and commissions 107,000 125,000 143,000 Insurance expense 9,000 9,000 9,000 Depreciation expense 42,000 42,000 42,000 Total selling and administrative expenses 272,000 296,000 320,000 Net operating income (loss) (20,000) 19,000 58,000 (Note: Frankel Ltd.'s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by .) Required: 1. Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed Expenses Cost of goods sold Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense Classification 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. Variable Cost Fixed Cost Formula Per unit y= + Per unit y= + 2. Redo the company's income statement at the 4,500-unit level of activity using the contribution format Frankel Ltd. Contribution Format Income Statement For the Month Ended June 30 Variable Expense 1. 2. 3. 4. 5. 6. Fixed Expense 1. 2. 3. 4. 5. 6
