Rooney Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in thespring and summer. Sales and production tend to decline in the fall and winter months. During year 2, the high point in activityoccurred in June when it produced 203 boats at a total cost of $157,530. The low point in production occurred in January when itproduced 30 boats at a total cost of $52,000.Requireda. Use the high-low method to estimate the amount of fixed cost incurred each month by Rooney Boat Company.b. Determine the total estimated cost if 170 boats are made.a.b.Fixed costTotal estimated cost

Variable cost is the cost that changes with change in activity of cost driver used. The variable…

Answered: Rooney Boat Company makes inexpensive…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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Campbell Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During year 2, the high point in activity occurred in June when it produced 200 boats at a total cost of $157,470. The low point in production occurred in January when it produced 37 boats at a total cost of $45,000. Required a. Use the high-low method to estimate the amount of fixed cost incurred each month by Campbell Boat Company. b. Determine the total estimated cost if 140 boats are made. a. Fixed cost b. Total estimated cost
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Cost Classification, Income Statement Gateway Construction Company, run by Jack Gateway, employs 25 to 30 people as subcontractors for laying gas, water, and sewage pipelines. Most of Gateways work comes from contracts with city and state agencies in Nebraska. The companys sales volume averages 3 million, and profits vary between 0 and 10% of sales. Sales and profits have been somewhat below average for the past 3 years due to a recession and intense competition. Because of this competition, Jack constantly reviews the prices that other companies bid for jobs. When a bid is lost, he analyzes the reasons for the differences between his bid and that of his competitors and uses this information to increase the competitiveness of future bids. Jack believes that Gateways current accounting system is deficient. Currently, all expenses are simply deducted from revenues to arrive at operating income. No effort is made to distinguish among the costs of laying pipe, obtaining contracts, and administering the company. Yet all bids are based on the costs of laying pipe. With these thoughts in mind, Jack looked more carefully at the income statement for the previous year (see below). First, he noted that jobs were priced on the basis of equipment hours, with an average price of 165 per equipment hour. However, when it came to classifying and assigning costs, he needed some help. One thing that really puzzled him was how to classify his own 114,000 salary. About half of his time was spent in bidding and securing contracts, and the other half was spent in general administrative matters. Required: 1. Classify the costs in the income statement as (1) costs of laying pipe (production costs), (2) costs of securing contracts (selling costs), or (3) costs of general administration. For production costs, identify direct materials, direct labor, and overhead costs. The company never has significant work in process (most jobs are started and completed within a day). 2. Assume that a significant driver is equipment hours. Identify the expenses that would likely be traced to jobs using this driver. Explain why you feel these costs are traceable using equipment hours. What is the cost per equipment hour for these traceable costs?
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CollegePak Company produced and sold 60,000 backpacks during the year just ended at an average price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were $4 per unit sold. Fixed costs amounted to $180,000 for manufacturing and $72,000 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.) Required: Compute CollegePak`s break-even point in sales dollars for the year. Compute the number of sales units required to earn a net income of $180,000 during the year. CollegePak`s variable manufacturing costs bare expected to increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year. If CollegePak`s variable manufacturing costs do increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year.
A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. 1. The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that The Swiss Interior Company is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss? 2. The President of The Swiss Interior Company is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?
A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. 1. The Swiss Interior Company's management team is concerned about the selling expenses associated with the product and wants to reduce the variable selling expense per unit by 30%, which will see a simultaneous reduction in the total fixed selling expenses by $30,000. If they are able to accomplish this feat, it is expected that sales volume for the year will fall by 162⁄3% below normal capacity. What must the new selling price per unit be if the company wishes to meet the shareholders’ profit objective for 2021? How will these changes impact the percentage margin of safety? 2. What are the advantages and disadvantages of the scattergram method as compared…
CollegePak Company produced and sold 60,000 backpacks during the year just ended at an average price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were $4 per unit sold. Fixed costs amounted to $180,000 for manufacturing and $72,000 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.) Required: CollegePak`s variable manufacturing costs are expected to increase by 10 percent in the coming year. Compute the firm`s break-even point in sales dollars for the coming year. If CollegePak`s variable manufacturing costs do increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year.
Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 25,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 20.100 tons. Based on projected production and sales of 20.100 tons, the company estimates the following income using absorption costing. Sales (20,100 tons at $148 per ton) Cost of goods sald (20,100 tons at 360 per ton) Gross profit Selling and administrative expenses Income Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment Direct materials Direct labor Variable overhead Fixed overhead ($884,098/28,100 tons) Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $213,400 per year. The company's president will not earn a bonus unless a positive income is reported. The…
Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Internet across the United States. To keep costs down, CGC maintains a warehouse, but no showroom or retail sales outlets. CGC has the following information for the second quarter of the year: Expected monthly sales for April, May, June, and July are $260,000, $230,000, $350,000, and $130,000, respectively. Cost of goods sold is 30 percent of expected sales. CGC’s desired ending inventory is 40 percent of the following month’s cost of goods sold. Monthly operating expenses are estimated to be: Salaries: $34,000 Delivery expense: 8 percent of monthly sales Rent expense on the warehouse: $6,500 Utilities: $1,300 Insurance: $240 Other expenses: $340 Required: 1. Compute the budgeted cost of purchases for each month in the second quarter. 2. Complete the budgeted income statement for each month in the second quarter.

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