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 2003 to begin manufacturing and selling small wooden canoes decorated with symbols hand painted by Native Americans living the park. Due to the great success of the canoes, the hotel began manufacturing and selling paddles as well in 2006, Mary hotel guests purchase a cance 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 cance sells for $500, and each paddle sells for $50. A 2006 fire destroyed the hotel's accounting records. However, a new system put into place before the 2007 season provides the following aggre Gated data for the hotel's cance and paddi manufacturing and marketing activities Manufacturing Data: Number of Canoes Manufactured 250 Number of Paddles Manufactured Year 275 Total Cance Manufacturing Costs $106.000 115.000 108,000 122.000 130.000 140,000 Year 2012 2011 2010 2009 2008 2007 1200 Total Paddle Manufacturing Costs $38.500 49,000 42.000 45.500 56.000 66,500 240 310 11200 Maling the Connection in Behavior in Cost-Volume-Profit Analysis for Mary Gl e Marketing Data: Number of Year Canoes Sold 2012 250 2011 275 2010 2009 310 2008 350 400 Total Canoe Marketing Costs $45,000 47.500 44,000 51,000 55.000 60,000 240 Total Paddle Marketing Costs $ 7.500 9.000 Number of Paddles Sold 900 1.200 1.000 1,100 1.400 1,700 Year 2012 2011 2010 2009 2008 2007 8.000 10,000 8.500 2007 11.500 Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Expenses. Multiple Product Setting If both the variable and fixed production expenses (refer to your answer to Requirement 1) associ: ated with the canoe product line increased by 5% (beyond the estimate from the high-low analy. sis), 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, 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 it sells 700 canoes and 2.500 paddles next year. 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 2003 to begin manufacturing and selling small wooden canoes decorated with symbols hand painted by Native Americans living the park. Due to the great success of the canoes, the hotel began manufacturing and selling paddles as well in 2006, Mary hotel guests purchase a cance 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 cance sells for $500, and each paddle sells for $50. A 2006 fire destroyed the hotel's accounting records. However, a new system put into place before the 2007 season provides the following aggre Gated data for the hotel's cance and paddi manufacturing and marketing activities Manufacturing Data: Number of Canoes Manufactured 250 Number of Paddles Manufactured Year 275 Total Cance Manufacturing Costs $106.000 115.000 108,000 122.000 130.000 140,000 Year 2012 2011 2010 2009 2008 2007 1200 Total Paddle Manufacturing Costs $38.500 49,000 42.000 45.500 56.000 66,500 240 310 11200 Maling the Connection in Behavior in Cost-Volume-Profit Analysis for Mary Gl e Marketing Data: Number of Year Canoes Sold 2012 250 2011 275 2010 2009 310 2008 350 400 Total Canoe Marketing Costs $45,000 47.500 44,000 51,000 55.000 60,000 240 Total Paddle Marketing Costs $ 7.500 9.000 Number of Paddles Sold 900 1.200 1.000 1,100 1.400 1,700 Year 2012 2011 2010 2009 2008 2007 8.000 10,000 8.500 2007 11.500 Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Expenses. Multiple Product Setting If both the variable and fixed production expenses (refer to your answer to Requirement 1) associ: ated with the canoe product line increased by 5% (beyond the estimate from the high-low analy. sis), 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, 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 it sells 700 canoes and 2.500 paddles next year