Alexander owns an art gallery. He accepts paintings and sculpture on consignment and then receives 20 percent of the price of each piece as his fee. Space is limited, and there are costs involved, so Alexander is careful about accepting artists. When he does accept one, he arranges for an opening show (usually for three hours on a weekend night) and sends out invitations to his customer list. At the opening, he serves soft drinks and casual munchies to create a comfortable environment for prospective customers to view the new works and chat with the artist. On average, each opening costs P500. Alexander has given as many as 20 opening shows in a year. The total cost of running the gallery, including rent, fumiture and fixtures, utilities, and a part-time assistant, amounts to P80,000 per year. REQUIRED: 1 2. Assume that the cost driver is number of opening shows. Develop the cost formula t. gallery's costs for a year. uyu U 3. Using the formula developed in Requirement 2, what is the total cost for Alexander in a year with 12 opening shows? With 14 opening shows?

Alexander owns an art gallery. He accepts paintings and sculpture on consignment and then receives 20 percent of the price of each piece as his fee. Space is limited, and there are costs involved, so Alexander is careful about accepting artists. When he does accept one, he arranges for an opening show (usually for three hours on a weekend night) and sends out invitations to his customer list. At the opening, he serves soft drinks and casual munchies to create a comfortable environment for prospective customers to view the new works and chat with the artist. On average, each opening costs P500. Alexander has given as many as 20 opening shows in a year. The total cost of running the gallery, including rent, fumiture and fixtures, utilities, and a part-time assistant, amounts to P80,000 per year. REQUIRED: 1 2. Assume that the cost driver is number of opening shows. Develop the cost formula t. gallery's costs for a year. uyu U 3. Using the formula developed in Requirement 2, what is the total cost for Alexander in a year with 12 opening shows? With 14 opening shows?

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

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 43E

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