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    Activity Table for Total Costs

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    Question 1: (11 points)

    Exercise 5-1 Fixed and Variable Cost Behavior [LO1]
    Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.26.

    Requirement 1:
    Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round cost of a cup of coffee to 3 decimal places. Omit the "$" sign in your response.)

    Cups of Coffee Served in a Week
    1,800 1,900 2,000
    Fixed cost $ ____________ $ ____________ $ ____________
    Variable cost ____________ ____________ ____________
    Total cost $ ____________ $ ____________ $ ____________
    Cost per cup of coffee served $ ____________ $ ____________ $ ____________
    ________________________________________
    Requirement 2:
    Does the cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?

    (a) Increases
    (b) Decreases
    (c) Remains the same

    ________________________________________
    Question 2: (11 points)
    Exercise 5-2 Scatter graph Analysis [LO2]

    The data below have been taken from the cost records of the Atlanta Processing Company. The data relate to the cost of operating one of the company's processing facilities at various levels of activity:

    Month Units processed Total cost
    January 8,000 $ 14,000
    February 4,500 $ 10,000
    March 7,000 $ 12,500
    April 9,000 $ 15,500
    May 3,750 $ 10,000
    June 6,000 $ 12,500
    July 3,000 $ 8,500
    August 5,000 $ 11,500
    ________________________________________

    Required:
    Using the quick-and-dirty method, what is the approximate monthly fixed cost? The approximate variable cost per unit processed? (Omit the "$" sign in your response.)

    Monthly fixed cost $ ____________
    Variable cost per unit $ ____________
    ________________________________________

    ________________________________________
    Question 3: (11 points)

    Exercise 5-3 High-Low Method [LO3]
    The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer.

    Month Occupancy-
    Days Electrical
    Costs
    January 2,604 $ 6,257
    February 2,856 $ 6,550
    March 3,534 $ 7,986
    April 1,440 $ 4,022
    May 540 $ 2,289
    June 1,116 $ 3,591
    July 3,162 $ 7,264
    August 3,608 $ 8,111
    September 1,260 $ 3,707
    October 186 $ 1,712
    November 1,080 $ 3,321
    December 2,046 $ 5,196
    ________________________________________

    Requirement 1:
    Using the high-low method, estimate the variable cost of electricity per occupancy-day and the fixed cost of electricity per month. (Round the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. Omit the "$" sign in your response.)

    Variable cost $ ____________ per occupancy day
    Fixed cost $ ____________ per month
    ________________________________________
    Requirement 2:
    Which of the following statement(s) is true? (Select all that apply.)

    (a) Less systematic factors such as frugality of individual guests may also affect electrical costs
    (b) Fixed cost will not be affected by the number of days in a month
    (c) Electrical cost may reflect seasonal factors other than just the variation in occupancy days

    ________________________________________
    Question 4: (11 points)

    Exercise 5-4 Contribution Format Income Statement [LO4]
    Haaki Shop, Inc., is a large retailer of water sports equipment. An income statement for the company's surfboard department for a recent quarter is presented below:

    The Haaki Shop, Inc.
    Income Statement—Surfboard Department
    For the Quarter Ended May 31
    Sales $ 800,000
    Cost of goods sold 300,000
    Gross margin 500,000
    Selling and administrative expenses:
    Selling expenses $ 250,000
    Administrative expenses. 160,000 410,000
    Net operating income $ 90,000
    ________________________________________

    The surfboards sell, on the average, for $400 each. The department's variable selling expenses are $50 per surfboard sold. The remaining selling expenses are fixed. The administrative expenses are 25% variable and 75% fixed. The company purchases its surfboards from a supplier at a cost of $150 per surfboard.

    Requirement 1:
    Prepare an income statement for the quarter using the contribution approach. (Omit the "$" sign in your response.)

    The Haaki Shop, Inc
    Income Statement—Surfboard Department
    For the Quarter Ended May 31
    __________ $ ____________
    Variable expenses:
    __________ $ ____________
    __________ ____________
    __________ ____________ ____________
    __________ ____________
    Fixed expenses:
    __________ ____________
    __________ ____________ ____________
    __________ $ ____________
    ________________________________________
    Requirement 2:
    What was the contribution toward fixed expenses and profits from each surfboard sold during the quarter? (State this figure in a single dollar amount per surfboard.) (Omit the "$" sign in your response.)

    Contribution margin per surfboard $ ____________

    ________________________________________
    Question 5: (11 points)
    Exercise 5-5 (Appendix 5A) Least-Squares Regression [LO5]
    EZ Rental Car offers rental cars in an off-airport location near a major tourist destination in Florida. Management would like to better understand the behavior of the company's costs. One of those costs is the cost of washing cars. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the costs of operating the car wash should be related to the number of rental returns. Accordingly, the following data have been compiled:

    Month Rental Returns Car Wash Costs
    January 2,310 $ 10,113
    February 2,453 $ 12,691
    March 2,641 $ 10,905
    April 2,874 $ 12,949
    May 3,540 $ 15,334
    June 4,861 $ 21,455
    July 5,432 $ 21,270
    August 5,268 $ 19,930
    September 4,628 $ 21,860
    October 3,720 $ 18,383
    November 2,106 $ 9,830
    December 2,495 $ 11,081
    ________________________________________

    Required:
    Using least-squares regression, estimate the fixed cost and variable cost elements of monthly car wash costs. (Round your fixed cost to the nearest dollar amount and the variable cost element to the nearest cent. Omit the "$" sign in your response.)

    Fixed cost $ ____________
    Variable cost $ ____________

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    https://brainmass.com/business/accounting/business-accounting-247713

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    Solution Summary

    The solution examines activity table for total costs for Koffee Express.

    $2.19