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**Share your ideas on how management will be able to use the cost equations. Use sensitivity analysis to analyze different options for the canoe and paddle product lines.

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 hotels accounting records. However, a new system put into place before the 20X4 season provides the following aggregated data for the hotels canoe and paddle manufacturing and marketing activities:

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 =( (140000+60000)-(108000+44000))/(400-240) Variable cost per unit = 300 Total Fixed Cost = (140000+60000)-300*400 Total Fixed Cost = 80,000 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 =( (66500+11500)-(38500+7500))/(1700-900) Variable cost per unit = 40 Total Fixed Cost = (66500+11500)-40*1700 Total Fixed Cost = 10,000 Variable cost per unit $40 Total fixed cost $ 10,000

NEED To

NEED TO BE ANSWERED FOR PRESENTATION:

Share your ideas on how management will be able to use the cost equations. Use sensitivity analysis to analyze different options for the canoe and paddle product lines.

Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel The purpose of this integrated exercise is to demonstrate the interrelationship between cost estimation techniques and subsequent uses of cost information. In particular, this exercise illustrates how the variable and fixed cost information estimated from a high-low analysis can be used in a single- and multiple-product CVP analysis. 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 201 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 203. 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 203 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: Making the Connection Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel 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. b. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the paddle product line. 2. Cost-Volume-Profit Analysis, Single-Product Setting Use CVP analysis to calculate the break-even point in units for 1. The canoe product line only (i.e., single-product setting) b. The paddle product line only (i.e., single-product setting)