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Managerial Accounting - Cost Accounting

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Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is \$800 and the variable cost per cup of coffee served is \$.67.

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 average cost per cup of coffee to 3 decimal places. Omit the "\$" sign in your response.)
Cups of Coffee Served in a Week
1,400 1,500 1,600
Fixed cost \$
\$
\$

Variable cost

Total cost \$
\$
\$

Average cost per cup of coffee served \$
\$
\$

Requirement 2:
Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?

Increases

Decreases

Remains the same

The Alpine House, Inc., is a large retailer of winter sports equipment. An income statement for the company's Ski Department for a recent quarter is presented below:

The Alpine House, Inc.
Income Statement-Ski Department
For the Quarter Ended March 31
Sales \$842,540
Cost of goods sold 302,820
Gross margin 539,720
Selling expenses \$253,000
Net operating income \$132,720
________________________________________

Skis sell, on the average, for \$409 per pair. Variable selling expenses are \$49 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for \$147 per pair.

Requirement 1:
Prepare a contribution format income statement for the quarter. (Input all amounts as positive values. Omit the "\$" sign in your response.)

The Alpine House, Inc.
Income Statement-Ski Department
For the Quarter Ended March 31

\$

Variable expenses:

\$

Fixed expenses:

\$
___________________________________

Requirement 2:
For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits? (Round your answer to the nearest dollar amount. Omit the "\$" sign in your response.)

Contribution margin per pair \$

St. Mark's Hospital contains 450 beds. The average occupancy rate is 78% per month. In other words, on average, 78% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are \$21.10 per occupied bed per day, assuming a 30-day month. This \$21.10 figure contains both variable and fixed cost elements.

During June, the hospital's occupancy rate was only 38%. A total of \$200,583 in operating cost was incurred during the month.

Requirement 1:

(a) Estimate the variable cost per occupied bed on a daily basis using high-low method. (Round your answer to 2 decimal places. Omit the "\$" sign in your response.)

Variable cost per bed-day \$

(b) Estimate the total fixed operating costs per month using high-low method. (Omit the "\$" sign in your response.)

Fixed operating costs per month \$

Requirement 2:
Assume an occupancy rate of 62% per month. What amount of total operating cost would you expect the hospital to incur? (Omit the "\$" sign in your response.)

Fixed costs \$

Variable costs

Total expected costs \$

________________________________________

Solution Preview

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is \$800 and the variable cost per cup of coffee served is \$.67.

Fill in the following table with your ...

Solution Summary

The solution analyzes cost accounting and variable costs per day of beds in a hospital.

\$2.19