QUESTION 1

The following information applies to the questions displayed below.]

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two officesone in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the companys most recent year is given below:

					Office
	Total Company				Chicago				Minneapolis
Sales	$	675,000	100.0	%	$	135,000	100	%	$	540,000	100	%
Variable expenses		364,500	54.0	%		40,500	30	%		324,000	60	%
Contribution margin		310,500	46.0	%		94,500	70	%		216,000	40	%
Traceable fixed expenses		151,200	22.4	%		70,200	52	%		81,000	15	%
Office segment margin		159,300	23.6	%	$	24,300	18	%	$	135,000	25	%
Common fixed expenses not traceable to offices		108,000	16.0	%
Net operating income	$	51,300	7.6	%

1.

value: 2.00 points

Required information

Required:

1-a. Compute the companywide break-even point in dollar sales. (Round "CM ratio" to 2 decimal places and final answer to the nearest whole dollar amount.)

1-b. Compute the break-even point in sales dollars for the Chicago office and for the Minneapolis office. (Round "CM ratio" to 2 decimal places and final answers to the nearest whole dollar amount.)

1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?

	Greater than
	Less than
	Equal to

QUESTION 2

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow:

	Direct Labor-Hours per Unit	Annual Production
Hubs	0.80	23,000	units
Sprockets	0.40	55,000	units

Additional information about the company follows:

a. Hubs require $36 in direct materials per unit, and Sprockets require $20.

b. The direct labor wage rate is $19 per hour.

c. Hubs are more complex to manufacture than Sprockets and they require special equipment.

d. The ABC system has the following activity cost pools:

	Estimated		Activity
Activity Cost Pool (Activity Measure)	Overhead Cost		Hubs	Sprockets	Total
Machine setups (number of setups)	$	23,760	110	88	198
Special processing (machine-hours)	$	157,500	4,500	0	4,500
General factory (organization-sustaining)	$	260,400	NA	NA	NA

Required:

1. Compute the activity rate for each activity cost pool.

2. Determine the unit product cost of each product according to the ABC system. (Round intermediate calculations and final answers to 2 decimal places.)

QUESTION 3

Hirams Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below.

Activity Cost Pool	Activity Measure	Total Cost		Total Activity
Serving a party of diners	Number of parties served	$	19,040	5,600	parties
Serving a diner	Number of diners served	$	119,700	12,600	diners
Serving a drink	Number of drinks ordered	$	37,080	10,300	drinks

The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries.

Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depend on the number of diners served or the number of drinks served.

Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15.

Required:

1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)

2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations and final answers to 2 decimal places.)