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TOPIC: Overhead Costs and Break-Even Analysis As the management accountant for Superior Log Cabins, Inc. you have been asked to attend a planning meeting for
TOPIC: Overhead Costs and Break-Even Analysis As the management accountant for Superior Log Cabins, Inc. you have been asked to attend a planning meeting for the 2019 season. The owner specically wants to know how many log cabins must be sold to earn a prot of $450,000 in 2019. The company makes three models of cabins: deluxe, standard, and basic. At the end of 2018, the local utility company began charging Superior as a mixed cost: an annual fee plus a variable cost for each kilowatt of power the company uses (rather than solely at a xed rate). Each cabin type (all three models) requires approximately 8,000 kilowatt hours of electricity. The company needs to add that new utility cost to the projected income statement for 2019. Note that the current xed cost estimate of $18,000 per cabin type in Table 2 is NOT related to the new utility cost. Cabins are constructed at three separate locations (one for each model}, so the utility company will estimate costs separately for each model type. The owner estimates that sales in 2019 will be 25 basic cabins, 35 deluxe cabins, and 55 standard cabins, and they will produce exactly that quantity. The current selling price per unit is $79,000 for basic, $112,000 for deluxe, and $91,000 for standard cabins and will not increase next year. Assume that there are $150,000 of xed administrative expenses per model and $5,500 of variable selling expenses for each cabin sold, no matter what model it is. The company uses job order costing
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