Cost Behavior Analysis in a Restaurant: High-Low Cost
Estimation
Assume a Potbelly’s restaurant has the following information
available regarding costs at representative levels of monthly sales
(meals served):
| Monthly sales in units | |||
|---|---|---|---|
| 5,000 | 7,000 | 10,000 | |
| Cost of food sold | $ 7,500 | $10,500 | $15,000 |
| Wages and fringe benefits | 5,900 | 5,940 | 6,000 |
| Fees paid delivery help | 6,000 | 8,400 | 12,000 |
| Rent on building | 3,500 | 3,500 | 3,500 |
| Depreciation on equipment | 850 | 850 | 850 |
| Utilities | 600 | 640 | 700 |
| Supplies (soap, floor wax, etc.) | 400 | 480 | 600 |
| Administrative costs | 1,200 | 1,200 | 1,200 |
| Total | $25,950 | $31,510 | $39,850 |
(a) Identify each cost as being variable, fixed, or mixed.
| Cost of food sold | AnswerVariableFixedMixed |
| Wages and fringe benefits | AnswerVariableFixedMixed |
| Fees paid delivery help | AnswerVariableFixedMixed |
| Rent on building | AnswerVariableFixedMixed |
| Depreciation on equipment | AnswerVariableFixedMixed |
| Utilities | AnswerVariableFixedMixed |
| Supplies (soap, floor wax, etc.) | AnswerVariableFixedMixed |
| Administrative costs | AnswerVariableFixedMixed |
(b) Use the high-low method to develop a schedule identifying the amount of each cost that is mixed or variable per unit. Total the amounts under each category to develop an equation for total monthly costs.
Round variable cost answers to two decimal places.
| Fixed Costs | Variable Costs | ||
|---|---|---|---|
| Cost of food sold | Answer | Answer | X |
| Wages and fringe benefits | Answer | Answer | X |
| Fees paid delivery help | Answer | Answer | X |
| Rent on building | Answer | Answer | X |
| Depreciation on equipment | Answer | Answer | X |
| Utilities | Answer | Answer | X |
| Supplies (soap, floor wax, etc.) | Answer | Answer | X |
| Administrative costs | Answer | Answer | X |
| Total costs equation | Answer | Answer | X |
* where X = Unit sales
(c) Predict total costs for a monthly sales volume of 8,500
units.
In: Accounting
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In April 2016, SoCal Trailers Co. had the following cost data: |
| COST DATA | |
| a. |
Raw materials costing $92,000 were purchased. |
| b. |
Raw materials costing $91,000 were used: direct materials, $85,000; indirect materials $6,000. |
| c. |
Factory wages of $72,000 were incurred: direct labor $60,000; indirect labor $12,000. Social security tax deductions were $4,464, Medicare tax deductions were $1,044, federal income tax deductions were $10,800. |
| d. |
Other overhead costs of $29,000 were incurred. (Credit Accounts Payable.) |
| e. |
Estimated manufacturing overhead costs were applied to jobs in production at the rate of 75 percent of direct labor costs. |
| f. |
Finished goods costing $160,000 were transferred from production to the warehouse. |
| g. |
The cost of goods sold was $130,000. |
| h. |
Sales on account for the month were $220,000. |
1. Compute the amount of overapplied or underapplied overhead for the month.
|
|
Based on the partial income statement you have prepared, what portion of each sales dollar is realized as gross profit? (Round your answer to 2 decimal places.)
In: Accounting
Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation
Assume a
Potbelly’s restaurant has the following information available regarding costs at representa-
tive levels of monthly sales:
Monthly sales in units
5,000 8,000 10,000
Cost of food sold ...................................$10,000$16,000$20,000
Wages and fringe benefits ............................4,2004,3204,400
Fees paid delivery help...............................1,100 1,760 2,200
Rent on building ....................................1,100 1,100 1,100
Depreciation on equipment ...........................900900900
Utilities ...........................................8009201,000
Supplies (soap, floor wax, etc.) ........................250340400
Administrative costs.................................1,700
1,700 1,700
Total .............................................$20,050$27,040 $31,700
Required
a. Identify each cost as being variable, fixed, or mixed.
b. Use the high-low method to develop a schedule identifying the amount of each cost that is mixed or
variable per unit. Total the amounts under each category to develop an equation for total monthly
costs.
c. Predict total costs for a monthly sales volume of 9,800 units
In: Accounting
Unit Cost and Cost Assignment, Nonuniform Inputs
Loran Inc. had the following equivalent units schedule and cost for its fabrication department during September:
| Materials | Conversion | ||
| Units completed | 180,000 | 180,000 | |
| Add: Units in ending WIP x Fraction complete | 72,000 | 41,040 | |
| (72,000 x 57%) | |||
| Equivalent units of output | 252,000 | 221,040 | |
| Costs: | |||
| Work in process, September 1: | |||
| Materials | $147,000 | ||
| Conversion costs | 7,875 | ||
| Total | $154,875 | ||
| Current costs: | |||
| Materials | $1,080,000 | ||
| Conversion costs | 451,860 | ||
| Total | $1,531,860 |
Required:
1. Calculate the unit cost for materials, for conversion, and in total for the fabrication department for September. If required, round your answers to the nearest cent.
| Unit materials cost | $ |
| Unit conversion cost | $ |
| Total unit cost | $ |
2. Calculate the cost of units transferred out and the cost of EWIP. Round unit cost value to the nearest cent in intermediate calculations. If required, round final answers to the nearest dollar.
| Cost transferred out | $ |
| Cost of ending work in process |
In: Accounting
Cost of Production Report: Average Cost Method
Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:
| ACCOUNT Work in Process-Roasting Department | ACCOUNT NO. | |||||||
| Date | Item | Debit | Credit | Balance | ||||
| Debit | Credit | |||||||
| Dec. | 1 | Bal., 18,300 units, 75% completed | 36,600 | |||||
| 31 | Direct materials, 316,600 units | 357,758 | 394,358 | |||||
| 31 | Direct labor | 196,096 | 590,454 | |||||
| 31 | Factory overhead | 282,186 | 872,640 | |||||
| 31 | Goods transferred, 319,300 units | ? | ? | |||||
| 31 | Bal., ? units, 25% completed | ? | ||||||
Required:
Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to two decimal places.
| Sunrise Coffee Company | ||
| Cost of Production Report-Roasting Department | ||
| For the Month Ended December 31 | ||
| Unit Information | ||
| Units to account for during production: | ||
| Inventory in process, December 1 | ||
| Received from materials storeroom | ||
| Total units accounted for by the Roasting Department | ||
| Units to be assigned costs: | ||
| Whole Units | Equivalent Units of Production | |
| Transferred to Packing Department in December | ||
| Inventory in process, December 31 | ||
| Total units to be assigned costs | ||
| Cost Information | ||
| Unit costs: | ||
| Costs | ||
| Total costs for December in Roasting Department | $ | |
| Total equivalent units | ||
| Cost per equivalent unit | $ | |
| Costs assigned to production: | ||
| Inventory in process, December 1 | $ | |
| Costs incurred in December | ||
| Total costs accounted for by the Roasting Department | $ | |
| Costs allocated to completed and partially completed units: | ||
| Transferred to Packing Department in December | $ | |
| Inventory in process, December 31 | ||
| Total costs assigned by the Roasting Department | $ | |
In: Accounting
In April 2016 a pound of apples cost $1.51, while oranges cost $1.15. Three years earlier the price of apples was only $1.30 a pound and that of oranges was $1.01 a pound.
a. What was the annual compound rate of growth in the price of apples? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
b. What was the annual compound rate of growth in the price of oranges? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. If the same rates of growth persist in the future, what will be the price of apples in 2030? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. What about the price of oranges? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
In: Finance
A. X-treme Vitamin Company is considering two investments, both
of which cost $20,000. The firm’s cost of capital is 15 percent.
The cash flows are as follows:
| Year | Project A | Project B |
| 1 | 12000 | 10000 |
| 2 | 8000 | 6000 |
| 3 | 6000 | 16000 |
(a) What is the payback period for each project? Which project
would you accept based on the payback period?
(b) What is the discounted payback for each project? Which project
would you accept based on the discounted payback criterion?
(c) Calculate the NPV of each project? Which project would you
choose based on the NPV criterion?
(d) Based on the IRR criteria which project would you choose if
they were mutually exclusive? Show all the workings.
In: Finance
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Assume that a radiologist group practice has the following cost structure: |
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Fixed Costs |
$500,000 |
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Variable cost per procedure |
25 |
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Charge (revenue) per procedure |
100 |
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Furthermore, assume that the group expects to perform 7,500 procedures in the coming year. |
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a. Construct the group's base case projected P&L statement |
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Total revenues |
$ 750,000 |
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Total variable costs |
$ (187,500) |
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Total contribution margin |
$ 562,500 |
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Fixed costs |
$ (500,000) |
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Profit (net income) |
$ 625,000 |
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b. What is the group's contribution margin? What is its breakeven point? |
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|
Revenue per procedure |
$ 100 |
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Variable cost per procedure |
$ 25 |
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|
Contribution margin per procedure |
$ 562,500 |
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Fixed costs |
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Contribution margin per procedure |
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Accounting Breakeven |
visits |
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c.1 What volume is required to provide a pretax profit of $100,000? |
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Fixed costs |
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Target profit |
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Contribution margin per procedure |
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Economic Breakeven |
visits |
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c.2 What volume is required to provide a pretax profit of $200,000? |
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Fixed costs |
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Target profit |
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Contribution margin per procedure |
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Economic Breakeven |
visits |
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d. We are skipping |
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e. now assume a 20 percent discount from charges. Redo questions a, b, and c under these conditions. |
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redo a. Construct the group's base case projected P&L statement |
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Total revenues |
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Total variable costs |
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Total contribution margin |
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Fixed costs |
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Profit (net income) |
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redo b. What is the group's contribution margin? What is its breakeven point? |
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Revenue per procedure |
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Variable cost per procedure |
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|
Contribution margin per procedure |
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|
Fixed costs |
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|
Contribution margin per procedure |
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Accounting Breakeven |
visits |
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redo c.1 What volume is required to provide a pretax profit of $100,000? |
|||||
|
Fixed costs |
|||||
|
Target profit |
|||||
|
Contribution margin per procedure |
|||||
|
Economic Breakeven |
visits |
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redo c.2 What volume is required to provide a pretax profit of $200,000? |
|||||
|
Fixed costs |
|||||
|
Target profit |
|||||
|
Contribution margin per procedure |
|||||
|
Economic Breakeven |
visits |
||||
In: Accounting
Cost of Production Report: Average Cost Method
Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:
| ACCOUNT Work in Process-Roasting Department | ACCOUNT NO. | |||||||
| Date | Item | Debit | Credit | Balance | ||||
| Debit | Credit | |||||||
| Dec. | 1 | Bal., 13,700 units, 75% completed | 59,869 | |||||
| 31 | Direct materials, 237,000 units | 587,760 | 647,629 | |||||
| 31 | Direct labor | 319,870 | 967,499 | |||||
| 31 | Factory overhead | 460,301 | 1,427,800 | |||||
| 31 | Goods transferred, 239,100 units | ? | ? | |||||
| 31 | Bal., ? units, 25% completed | ? | ||||||
Required:
Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to two decimal places.
| Sunrise Coffee Company | ||
| Cost of Production Report-Roasting Department | ||
| For the Month Ended December 31 | ||
| Unit Information | ||
| Units to account for during production: | ||
| Inventory in process, December 1 | ||
| Received from materials storeroom | ||
| Total units accounted for by the Roasting Department | ||
| Units to be assigned costs: | ||
| Whole Units | Equivalent Units of Production | |
| Transferred to Packing Department in December | ||
| Inventory in process, December 31 | ||
| Total units to be assigned costs | ||
| Cost Information | ||
| Unit costs: | ||
| Costs | ||
| Total costs for December in Roasting Department | $ | |
| Total equivalent units | ||
| Cost per equivalent unit | $ | |
| Costs charged to production: | ||
| Inventory in process, December 1 | $ | |
| Costs incurred in December | ||
| Total costs accounted for by the Roasting Department | $ | |
| Costs allocated to completed and partially completed units: | ||
| Transferred to Packing Department in December | $ | |
| Inventory in process, December 31 | ||
| Total costs assigned by the Roasting Department | $ | |
In: Accounting
In: Accounting