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Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of $2,400 and the variable cost per cup of coffee served is $0.21. Required: 1. Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activ stand. (Round the Average cost per cup of coffee served to 3 decimal places.) Cups of Coffee Served in a Week 2,500 2,600 2,700 Fixed cost Variable cost Total cost Average cost per cup of coffee served The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the num days over the last year. An occupancy-day represents a room rented out for one day. The hotel's business is highly sea occurring during the ski season and in the summer. Month January February March April May June July August September October November December OccupancyDays 3,410 3,250 4,470 1,940 1,050 450 3,270 4,510 1,350 1,640 1,860 2,970 Electrical Costs $ 13,889 $ 13,008 $ 15,158 $ 8,342 $ 4,515 $ 1,935 $ 13,094 $ 15,333 $ 5,805 $ 7,052 $ 7,998 $ 12,578 Required: 1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per oc not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed c answer to nearest whole dollar amount) Occupancy Electrical Days Costs High activity level Low activity level Change $0 Variable cost per occupancy-day Fixed cost element Cherokee Inc. is a merchandiser that provided the following information: Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ $ $ $ $ $ $ $ 14,000 15 2 2 19,000 13,000 11,000 22,000 89,000 Required: 1. Prepare a traditional income statement. CHEROKEE, INC. Traditional Income Statement Selling and administrative expenses: 2. Prepare a contribution format income statement. CHEROKEE, INC. Contribution Format Income Statement Variable expenses: Fixed expenses: Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck kilometers during a year, the average operating cost is 14.2 cents per kilometer. If a truck is driven only 88,000 kilomete average operating cost increases to 17.6 cents per kilometer. Required: 1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answe dollar amount.) Kilometers Total Annual Driven Cost High level of activity Low level of activity Change Variable cost per kilometer per kilometer Fixed cost per year 2. Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.) Y= ______+__________X 3. If a truck were driven 110,000 kilometers during a year, what total cost would you expect to be incurred? (Do not r calculations.) TOTAL ANNUAL COST= Required: 1. A partially completed schedule of the company's total and per unit costs over the relevant range of 69,000 to 109,0 and sold annually is given below: Complete the schedule of the company's total and unit costs. Round the variabl cost to 2 decimal places.) Units Produced and Sold 69,000 89,000 109,000 Total costs: Variable costs Fixed costs Total costs $207,000 410,000 $617,000 Cost per unit: Variable cost Fixed cost Total cost per unit 2. Assume that the company produces and sells 99,000 units during the year at a selling price of $8.61 per unit. Prep format income statement for the year. (Do not round intermediate calculations.) Harris Company Contribution Format Income Statement The Lakeshore Hotel's guest-days of occupancy and custodial supplies expense over the last seven months were: Month March April May June July August September Guest-Days of Occupancy 8,000 7,500 10,000 11,500 13,500 12,500 10,000 Custodial Supplies Expense $ 11,200 $ 11,000 $ 12,000 $ 12,600 $ 13,400 $ 13,000 $ 12,000 Guest-days is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is counted as three guest-days. Required: 1. Using the high-low method, estimate a cost formula for custodial supplies expense. (Round the Variable cost per decimal points.) Guest-Days Custodial Supplies Expense High activity level Low activity level Change Variable cost per guest-day per guest-day Fixed cost per month 2. Using the cost formula you derived above, what amount of custodial supplies expense would you expect to be inc occupancy level of 12,300 guest-days? (Do not round your intermediate calculations.) Variable cost Fixed cost Total cost Whirly Corporation's most recent income statement is shown below: Total Sales (8,800 units) Variable expenses $ Per Unit 290,400 $ 167,200 Contribu tion margin Fixed expenses 123,200 33.00 19.00 $ 14.00 54,200 Net operating income $ 69,000 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case indepe 1. The sales volume increases by 40 units. Whirly Corporation Contribution Income Statement Total Per Unit 2. The sales volume decreases by 40 units. Whirly Corporation Contribution Income Statement Total Per Unit 3. The sales volume is 7,800 units. Whirly Corporation Contribution Income Statement Total Per Unit Last month when Holiday Creations, Inc., sold 35,000 units, total sales were $313,000, total variable expenses were $2 expenses were $39,600. Required: 1. What is the company's contribution margin (CM) ratio? Contribution Margin Ratio = 2. % Estimate the change in the company's net operating income if it were to increase its total sales by $1,300. Estimated change in net operating income= [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contributio $ $ Per Unit Percent of Sales 75 100% 51 68% 24 32% n margin Fixed expenses are $75,000 per month and the company is selling 4,000 units per month. Required: 1-a. The marketing manager argues that a $9,900 increase in the monthly advertising budget would increase monthl Calculate the increase or decrease in net operating income. Net Operating income ______________by_______________ 1-b. Should the advertising budget be increased? Yes No 2-a. Refer to the original data. Management is considering using higher-quality components that would increase the $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 25% per m change in total contribution margin. Total contribution margin___________by___________ 2-b. Should the higher-quality components be used? Yes No [The following information applies to the questions displayed below.] Lin Corporation has a single product whose selling price is $136 and whose variable expense is $68 per unit. The comp expense is $32,000. Required: 1. Using the equation method, determine for the unit sales that are required to earn a target profit of $7,100. Unit Sales ____________ 2. Using the formula method, determine for the unit sales that are required to earn a target profit of $9,200. (Round u the nearest whole number.) Unit Sales________________ Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget Selling price Variable expenses Fixed expenses Unit sales $30 per unit $18 per unit $9,720 per month 960 units per month Required: 1. Compute the company's margin of safety. Margin of Safety_____________ 2. Compute the company's margin of safety as a percentage of its sales. Round your percentage answer to 2 deci should be entered as 12.34). Margin of safety __________% Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income sta Sales Variable expenses $ Contribution margin Fixed expenses Net operating income Amount 142,000 Percent of Sales 100% 56,800 40% 85,200 60% 16,000 $ 69,200 Required: 1. Compute the company's degree of operating leverage. (Round your answer to 2 decimal places.) Degree of operating leverage_______________ 2. Using the degree of operating leverage, estimate the impact on net operating income of a 11% increase in sales. ( intermediate calculations to 2 decimal places. Round your percentage answer to 2 decimal places (i.e .1234 as 12.34).) Net Operating income _____________by____________% 3. Construct a new contribution format income statement for the company assuming a 11% increase in sales. Engberg Company Contribution Income Statement Total Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for the two games appears below: Sales Variabl e expense s Contrib ution margin Fixed expense s Claimjumper $ 96,000 Makeover $48,000 Total $144,000 35,560 7,640 43,200 $ 60,440 $40,360 100,800 Net operatin g income 78,330 $ 22,470 Required: 1. Compute the overall contribution margin (CM) ratio for the company. Overall CM ratio _________% 2. Compute the overall break-even point for the company in dollar sales. (Do not round intermediate calculations. to the nearest dollar amount.) Overall break-even point__________ 3. Complete the contribution format income statement at break-even point for the company showing the appropriate two products. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Lucido Products Contribution Income Statement Claimjumper Makeover Total Olongapo Sports Corporation distributes two premium golf ballsthe Flight Dynamic and the Sure Shot. Monthly sales margin ratios for the two products follow: Sales CM ratio Product Flight Dynamic Sure Shot Total $650,000 $350,000 $1,000,000 68% 79% ? Fixed expenses total $589,500 per month. Required: 1. Prepare a contribution format income statement for the company as a whole. Round your percentage answers to (i.e. .1234 is considered as 12.34). Olongapo Sports Corporation Flight Dynamic Amount 2. Sure Shot % Amount Total Company % Amount % % % % % % % % % % Compute the break-even point for the company based on the current sales mix. (Do not round intermediate calc your answer to the nearest whole dollar amount.) Break-even point in sales_________ 3. If sales increase by $48,000 a month, by how much would you expect net operating income to increase? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net operating income increases by _______________ Lindon Company is the exclusive distributor for an automotive product that sells for $24.00 per unit and has a CM ratio company's fixed expenses are $131,760 per year. The company plans to sell 11,600 units this year. Required: 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.) Variable expenses___________per unit 2. Use the equation method: a. What is the break-even point in unit sales and in dollar sales? b. What amount of unit sales and dollar sales is required to earn an annual profit of $36,000? c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.40 pe company's new break-even point in unit sales and in dollar sales? Break-even point in unit sales____________ Break-even point in dollar sales___________ Sales level in units_________________ Sales level in dollars_____________ New break-even point in unit sales _____________ New break-even point in dollar sales_______________ 3. Repeat (2) above using the formula method. a. What is the break-even point in unit sales and in dollar sales? Break-even point in unit sales_____________ Break-even point in dollar sales ________________ b. What amount of unit sales and dollar sales is required to earn an annual profit of $36,000? c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.40 per un company's new break-even point in unit sales and in dollar sales? Sales level in units______________ Sales level in dollars______________ New break-even point in unit sales _________________ New break-even point in dollar sales_________________ Magic Realm, Inc., has developed a new fantasy board game. The company sold 9,600 games last year at a selling pri Fixed expenses associated with the game total $96,000 per year, and variable expenses are $43 per game. Production entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1-a. Prepare a contribution format income statement for the game last year. Magic Realm, Inc., Contribution Income Statement Total 1-b. Compute the degree of operating leverage. Degree of operating leverage________________ 2. Management is confident that the company can sell 12,384 games next year (an increase of 2,784 games, or 29% a. Compute the expected percentage increase in net operating income for next year. b. Compute the expected total dollar net operating income for next year. (Do not prepare an income statement; us operating leverage to compute your answer.) Net operating income increases by______________% Total expected net operating income_________________ Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $120 per expenses are $84 per stove, and fixed expenses associated with the stove total $172,800 per month. Required: 1. Compute the company's break-even point in unit sales and in dollar sales. Break-Even PointNumber of stoves: Total sales dollars: 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower b (Assume that the fixed expenses remain unchanged.) Higher break-even point Or Lower break-even point 3. At present, the company is selling 8,000 stoves per month. The sales manager is convinced that a 10% reduction i would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one operating conditions, and one as operations would appear after the proposed changes. Outback Outfitters Present Proposed 8,000 Stoves Total 4. Stoves Per unit Total Per unit Refer to the data in (3) above. How many stoves would have to be sold at the new selling price to yield a minimum of $71,000 per month? (Round your answer to the nearest whole number.) Number of stoves to be sold____________ Menlo Company distributes a single product. The company's sales and expenses for last month follow: Sales Variable expenses $ Per Unit $ 445,200 Contributi on margin Fixed expenses Net operating income Total 636,000 190,800 40 28 $ 12 148,800 $ 42,000 Required: 1. What is the monthly break-even point in unit sales and in dollar sales? Required: 1. What is the monthly break-even point in unit sales and in dollar sales? Break even point in unit sales______________ Break even point in sales dollars ____________ 2. Without resorting to computations, what is the total contribution margin at the break-even point? Total contribution margin___________ 3-a. How many units would have to be sold each month to earn a target profit of $60,000? Use the formula method. Units sold______________ 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. Menlo Company Contribution Income Statement Total Per unit 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34). Dollars & Percentage Margin of safety_________________________________% 5. What is the company's CM ratio? If monthly sales increase by $96,000 and there is no change in fixed expenses, you expect monthly net operating income to increase? CM Ratio________________ Net operating income increases by _____________