MANAGERIAL ACCOUNTING F/MGRS.
5th Edition
ISBN: 9781259969485
Author: Noreen
Publisher: RENT MCG
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Chapter 2A, Problem 2A.1E
1.
To determine
Introduction: Cost volume profit analysis (CVP) is used to ascertain the affect on company’s net income and operating income with respect to change in costs and volume of the production of the company. Break-even point is the level of sales which minimum required to overcome fixed and variable cost of the company. It is the condition of no
1.
Expert Solution
Answer to Problem 2A.1E
Variable cost for electricity per month will be1.56 Fixed cost will be 1395
Explanation of Solution
| Occupancy day | Electrical cost | |
| High Activity Level | 2406 | 5148 |
| Low Activity Level | 124 | 1588 |
| Change | 2282 | 3560 |
Variable cost:
Fixed cost:
Thus, Variable cost for electricity per month will be1.56 Fixed cost will be 1395
2.
To determine
Introduction: Cost volume profit analysis (CVP) is used to ascertain the affect on company’s net income and operating income with respect to change in costs and volume of the production of the company. Break-even point is the level of sales which minimum required to overcome fixed and variable cost of the company. It is the condition of no profits and no loss for the company. The factors affecting the variation in electrical costs from month to month in addition to occupancy day.
2.
Expert Solution
Answer to Problem 2A.1E
Season factors like winter, summer, autumn and rainy season
Explanation of Solution
The factors affecting the variation in electrical costs from month to month in addition to occupancy day are:
- Season factors like winter, summer, autumn and rainy season will affect the variation in electrical costs.
- Factors like guests not switching off the light and fan at the time leaving the room.
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Students have asked these similar questions
QUESTION 13
The Cheyenne Hotel In Big Sky. Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last
year. An occupancy-day represents a room rented for one day. The hotel's business is highly seasonal, with peaks occuning during the ski season and in the
summer
000
Mush
January
February
March
Apri
May
Jure
July
August
September
October
November
December
3,180
2.920
3,780
2,160
650
2,050
4,050
4,070
1,780
570
$1.80
$1.20
1,580
2,680
$1.00
$0.56
None of the other answers is correct
$ 6,510
$ 6.261
$ 7,392
$5.500
$ 1,820
Using the high-low method, the variable cost of electricity per occupancy-day is closest to:
$5,261
$ 7,829
$ 7,806
$ 4,984
$ 1,596
$ 4,424
$5,908
Problem#3
The Bach Company produces office chairs. The price of the chairs is $99.75 and the variable cost per
chair is $49.75 the following fixed cost is incurred:
Depreciation of plant and equipment per year
Property Tax per year
Variable Overhead
$20,000
$12,000
$5,200
Perform breakeven analysis of this company:
d) What is the breakeven point in units in number of chairs?
e) What is the revenue ate the breakeven point?
f) Estimate the profit when 1500 chairs are produced in a year?
g) How many chairs must be sold for the company to make $750000 in a year?
Exercise 5A-1 (Algo) High-Low Method [LO5-10]
The Cheyenne Hotel in Big Sky, Montana, recorded its total electrical costs and number of occupancy-days over the last year. An
occupancy-day represents a room rented for one day. The hotel's business is highly seasonal, with peaks occurring during the ski
season and in the summer.
Month
January
February
March
April
May
June
July
August
September
October
November
December
Occupancy-
Days
3,180
2,920
3,780
2,160
650
2,050
4,050
4,070
1,780
570
1,580
2,680
Electrical
Costs
$6,510
$ 6,261
$ 7,392
Variable cost of electricity
Fixed cost of electricity
$5,569
$ 1,820
$ 5,261
$7,829
$7,896
$ 4,984
$ 1,596
$ 4,424
$5,908
Required:
1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day.
Note: Do not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed cost
element answer to nearest whole dollar amount.
per occupancy-day
per…
Chapter 2A Solutions
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