Question
In: Accounting
John Smith is requesting your assistance in determining a cost equation for forecasting his expenses for...
John Smith is requesting your assistance in determining a cost equation for forecasting his expenses for his ABC restaurant. He provides costs at two extremes as follows:
|
Monthly Covers |
||
|
1000 |
3000 |
|
|
Salaries |
$ 15,000 |
$ 15,000 |
|
Wages |
$ 5,000 |
$ 15,000 |
|
Employee benefits |
$ 4,000 |
$ 6,000 |
|
Supplies |
$ 2,000 |
$ 6,000 |
|
Utilities |
$ 5,000 |
$ 8,000 |
|
Rent |
$ 8,000 |
$ 8,000 |
|
Operating expenses |
$ 1,500 |
$ 4,500 |
|
Insurance |
$ 1,000 |
$ 1,000 |
Please use the table above to answer the question 37 to 40
37.
What costs are the mixed cost?
Group of answer choices
a. Salaries, Wage, and Supplies
b. Employee benefits and Supplies
c. Utilities, Rent, and Insurance
d. Employee benefits and Utilities
38.
What is the total fixed cost for ABC restaurant?
Group of answer choices
a. $30,000
b. $35,000
c. $30,500
d. $35,500
39.
What is the total variable cost per unit for ABC restaurant?
Group of answer choices
a. $11.00
b. $10.50
c. $12.00
d. $9.00
40.
If the restaurant 2,000 covers, what is the total cost?
Group of answer choices
a. $50,000
b. $50,500
c. $52,500
d. $55,000
Solutions
Expert Solution
| 37) | Correct Option: D i.e. Employee Benefit and Utilities | ||||||
| 38) | Correct Option C i.e. $30500 (See Note 1) | ||||||
| 39) | Correct Option A i.e. $11 | See Note 4 | |||||
| 40) | Correct Option C i.e. $52500 | See Note 5 | |||||
| Note 1: Foxed cost calculation | |||||||
| Salaries | 15,000 | ||||||
| Rent | 8,000 | ||||||
| Insurance | 1,000 | ||||||
| Fixed portion of Employee benefit | 3,000 | (see note 3 below) | |||||
| Fixed portion of Utilities | 3,500 | (see note 3 below) | |||||
| Total Fixed cost | 30,500 | ||||||
| Note: Cost which remains constant at both level of activity are fixed cost. Cost which increase in same proportion (3 times) are variable and all cost other than foxed and variable is called Mixed cost. | |||||||
| Note2 : Overall summary | |||||||
| Monthly Covers | Type of Cost | ||||||
| Qty | 1,000 | 3,000 | |||||
| Salaries | $ 15,000 | $ 15,000 | Fixed | ||||
| Wages | $ 5,000 | $ 15,000 | Variable | ||||
| Employee benefits | $ 4,000 | $ 6,000 | Mixed | ||||
| Supplies | $ 2,000 | $ 6,000 | Variable | ||||
| Utilities | $ 5,000 | $ 8,000 | Mixed | ||||
| Rent | $ 8,000 | $ 8,000 | Fixed | ||||
| Operating expenses | $ 1,500 | $ 4,500 | Variable | ||||
| Insurance | $ 1,000 | $ 1,000 | Fixed | ||||
| Note 3: | |||||||
| Calculate fixed and variable portion of mixed cost | |||||||
| Low Level | High level | Change | Variable cost per unit= (Change in cost / Change in activity) | Total variable cost at lower level | Fixe cost = Total cost at low level - variable cost at low level | ||
| Level of activity | 1000 | 3000 | 2000 | ||||
| Employee benefits | 4000 | 6000 | 2000 | 1 | 1000 | 3000 | |
| Utilities | 5000 | 8000 | 3000 | 1.5 | 1500 | 3500 | |
| Note 4 Variable cost per unit | |||||||
| Wages | 5,000 | ||||||
| Supplies | 2,000 | ||||||
| Operating expenses | 1,500 | ||||||
| Total | 8,500 | ||||||
| Divided by units | 1,000 | ||||||
| Variable cost per unit | 8.5 | ||||||
| Add per unit : | |||||||
| Portion of Employee benefit | 1 | (see note 3) | |||||
| Portion of Utilities | 1.5 | (see note 3) | |||||
| Total variable cost per unit | 11 | ||||||
| Note 5 : Total cost for 200 covers | |||||||
 ekkarill92 answered 1 year agoRelated SolutionsJohn Smith is requesting your assistance in determining a cost equation for forecasting his expenses for...John Smith is requesting your assistance in determining a cost
equation for forecasting his expenses for his ABC restaurant. He
provides costs at two extremes as follows:
Monthly Covers
1000
3000
Type of Cost
FC
VC/unit
Salaries
15000
15000
Wages
3000
9000
Employee benefits
4000
6000
Supplies
1500
4500
Utilities
5000
8000
Rent
5000
5000
Operating expenses
1500
4500
Insurance
1000
1000
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