Share
Explore BrainMass

Activity Table for Total Costs

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 $ ____________

Attachments

Solution Summary

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

$2.19